Question clients thoroughly about their cryptocurrency holdings, as many don’t understand the tax implications of digital asset transactions, accountants say, and it could come down to the bite.
Speaking ahead of his session at the Accountants Daily Strategy Day 2022 On the crypto crackdown, co-founder and CEO of software provider CryptoTaxCalculator Shane Brunette said it’s the job of accountants to make sure clients report all of their activities because clients might not know clearly. which constitutes a taxable activity.
They might believe, for example, that only the withdrawal from your bank account is the tax point.
“Clients might have transacted in the crypto economy and didn’t think they were taxable events,” Mr. Brunette told Accountants Daily.
“So it’s not enough to ask if the customer has made any money in crypto. You really need to ask them if they’ve made any transactions in crypto. If there’s a ‘yes’ to that question, then you have to dig much deeper.
“You can’t really rely on the customer themselves to come forward and say they won or lost something in crypto and help them with the tax. You actually have to proactively ask the question, “Have you done anything in the crypto space?” »
Even if the client signs that everything is correct, it is the accountant’s obligation to verify that everything is correct, Mr. Brunette insisted.
“You have to work with the client to make sure there’s no missing data and it’s really best to use software on the accounting side so you can see the same view as the client. If there are problems, the accountant must identify them and take action,” he said.
At Accountants Daily Strategy Day 2022Mr. Brunette and Matt Crofts, CryptoTaxCalculator Product Manager, will answer your burning questions about how crypto is taxed in Australia, what the ATO is looking for, and how accountants can prepare their crypto-trading clients for the Christmas period. taxes.
Once an accountant has a complete view of their client’s trading activity, they can use software tools to import that data and identify inconsistencies, missing portfolios or trades, Brunette said.
This should provide a view of funds flowing to another account, which would allow the accountant to ask the client if the wallet or exchange is his or a counterparty’s and for more details on the nature of the transaction.
“There is actually a process of reconciliation.”
“It’s not enough to connect your bank feeds and cross your fingers and hope the numbers are correct.”
Mr Crofts said customers may not be providing all the information needed to fulfill their tax obligations, including the cost basis.
“Accountants usually say that when they get an individual tax return through their tax filing software, they see that the client has crypto, but usually that’s only from the data reported by the exchange, so it’s not not very reliable,” Crofts told Accountants Daily.
“That’s really a big part of the problem. It might just say $2,000 in crypto prefill, but that might be what they have on the exchange. You should see all the data moving, not just one. This is where many accountants rely solely on this exchange report, which may contain incorrect data or is not linked to other important data.
Along with this, there is a misperception among some unsophisticated investors that activity occurring in the decentralized economy is invisible to the ATO, and as such they do not need to report it because it’s not taxable, but that’s not true, Mr. Brunette pointed out.
“Blockchain data is an open, immutable public ledger, and anyone can enter and view the audit trail.”
“Everything is taxable, so the accountant needs to ask the right questions to make sure the full transaction history is there and the numbers add up. It’s just traditional accounting. You need to be able to make it clear that you know there is double-entry bookkeeping and you can actually see the flow of the transaction as it goes from buy to sell and bank records .
To learn more from Shane Brunette and Matt Crofts about how cryptocurrency is taxed in Australia and the strategies available to those navigating losses and volatility, come to Accountants Daily Strategy Day 2022.
It will be held on November 29 at the Grand Hyatt Melbourne and December 1 at Parkroyal Parramatta, Sydney.