My First Date With My New Accountant

A couple days ago, I posted about Dating a New Accountant. Briefly, circumstances require me to switch from my long-time CPA to a new one who is also up to speed with cryptocurrency taxation. Yesterday, I visited the new CPA's office.

First, the guy is roughly my age. My previous CPA was a little older. This alleviates concerns about the guy retiring before I do. Let's call the new guy Bob. Every story needs a Bob. Right. So, Bob mentioned that he reviewed my last three tax returns and says that it should be no problem. My tax returns are simple, according to Bob. In my mind, my tax issues are not simple. There is earned income, dividends, capital gains, side hustles, crypto, and family issues that have tax implications. One does not simply walk into Mordor. But, according to Bob, one does. So, that's a relief.

Regarding my crypto activities, he was more interested in if I am doing trading or mining. Each has different tax treatments. Mining profits minus mining costs is considered earned income (or loss). Whereas trading is taxed as capital gains or losses, which are further subdivided into short-term and long-term. So far, Bob and I are in sync.

My BIG concern, and the reason why I haven't pumped more money into Hive, is that Hive doesn't have a way to export transaction data, unless you're the dev type and can rig something up. HiveBIT is potentially in the works. The site did not make the transition from the last Hive fork, requiring updates. Potentially, that may offer transaction data useful for preparing taxes. But, what do we do in the meantime, just in case HiveBIT doesn't update in time? I explained to Bob that Hive pays out rewards daily. There are a ton of micro-transactions. It would be maddening to try to calculate all this manually. And, on top of that, Hive has inflation, which as far as I know, does not have a ledger entry. Your Hive value simply creeps up slowly and relentlessly without fanfare.

Bob put my mind at ease. Bob says that I have make a 'reasonable effort' to pay taxes. The IRS is going on the honor system, when it comes to reporting crypto earnings. So long as I make a truthful and reasonable effort to calculate taxes owed, that is all they ask. Therefore, the solution we have come up with so far is for me to take monthly snapshots of my Hive account balances. I can then add up how much Hive I earned from my activity. This would be earned income. Then, I can subtract from the next snapshot to determine how much Hive is a result of inflation. This could be considered interest income.

The challenge, however, will be figuring out cost basis if I ever want to sell any Hive. At the moment, I am happy to simply hodl Hive. In Hive terms, being a Dolphin is nice. But, in financial terms, the value of the Hive is hardly life-changing. The income is hardly life-changing as well. So, it's reasonable for me to expect that I won't be selling any Hive any time soon.

Another mess that I need to unravel is LEO. I have no clue where to get LEO historical prices and find the cost basis for the LEO I am earning. Of course, no transaction export option either.

And, what do I do with all these other Hive tokens that may or may not have any value? How far down this rabbit hole do I go? I didn't throw these questions at Bob. I could see his brain starting to melt already. I agreed to send him some info about crypto. Although he has managed the tax aspect of crypto, I don't think he ever looked at it as a serious investment. I think what impressed him is that I got serious about Crypto this past year after the market crash, particularly Bitcoin.

I explained to Bob that I've always been broke. For the first time in my life, I have significant savings thanks to crypto. I don't intend to sell my cypto under current conditions. I say that; but, I was willing to spend CRO for an Unstoppable Domain the other day for a 10% cash back reward. I had not bought CRO with the intent to sell it. But, if a good opportunity crops up, I could be convinced to trigger a taxable event.

Another concern, at the moment, is that some of the crypto tax software I use is completely ignoring ERC-20 tokens. They see all my ETH transactions, yet ignore ERC-20. I don't get it.

I related my long-term goals and current financial picture. Then we came to cost. My previous CPA was charging around $390 to prepare my taxes. Bob will charge about $475. Last guy was solo practice. Bob works for a partnership. In terms of prestige, it's a little step up doing business with Bob.

I think I got lucky and found a good Accountant on the first date. I'm going to go set up a spreadsheet where I'll track account values, now. I'll keep you posted on what I'm learning.

I would, however, appreciate your input on how you manage your crypto taxes. It's possible I'm on the wrong track and you have a more efficient method.

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