As an accountant in the 21st century, you should expect to interact with technology on a regular basis. There are many digital tools at every accountant’s disposal which are all designed to streamline the profession and accommodate the digital turn in the economy. As more of our day to day life – from shopping to banking to investing – goes fully online, accountants must redefine accounting concepts, reconsider the accountant’s relationship to clients, and become comfortable with digital accounting products. This guide will help you understand some of the terms and concepts that are becoming common in this digital age of accounting and finance.
What are the Tax Implications of Digital Currency?
Physical currency – what we conventionally think of as money – refers to notes and coins that are regulated and issued by a central bank. Digital currency, on the other hand, only exists online, protected and accounted for by blockchain technology. While digital currencies are still only of value online, artificial scarcity and speculation have made values explode. However, the Wild West days of digital currency are quickly coming to an end. While the IRS may not have cared about Bitcoin or Ethereum when it was the province of nerds and the Dark Net, now that cryptocurrency has hit the mainstream, accountants are going to have to learn at least the basic fundamentals of blockchain technology for accounting.
Tax accounting for digital currency is complicated, and it depends on whether you are using the currency as a currency (paying or receiving payment for goods or services) or as an investment (holding with the hope of selling for profit once it increases in value). If you receive digital services for goods or services rendered or use it to pay, then it has to be declared as income or expenditure. The ‘real’ currency value of the digital currency will be used. If however, you are holding it as an investment, then any increase or decrease in value has to be reported as capital gains or losses. In such cases, tax accounting for digital currency considers it to be an asset, and not a currency.
Are There Accounting-Related Digital Currency Careers?
The short answer is, yes and no. The Big 4 accounting firms are busy creating R&D programs, hiring blockchain and cryptocurrency experts by the dozens, but digital currency is still decentralized, unregulated, and not quite solidified. Digital currency accountants, per se, are still few and far between, and if you’re interested in specializing in a digital currency Accounting degree, you may be out of luck right this very minute. However, blockchain and bitcoin courses are beginning to pop up on college campuses globally. As far as jobs go, sites like Crypo Jobs List can help you find like-minded accountants, and begin putting together a digital currency career.
Until blockchain technology is fully integrated into the accounting field, there are other accounting information systems careers to consider, like cloud-based accounting. Cloud-based accounting software refers to any accounting software that does not store your records on the computer terminal you are using. Instead, it stores it on cloud storage infrastructure which allows it to be accessible from any computer terminal (with the right security credentials, of course). Cloud-based accounting software is a more secure form of storage since any damage suffered by your computer will not lead to the loss of accounting records that probably span back for years.
Most digital accounting products on the market today, and that current accounting students will be trained in, are still not ready to account for digital currency. However, there is no shortage of startups, organizations, and obsessive tinkerers working on creating technology that will completely harness the potential of digital currency. If they succeed, it’ll mean more work for you, the digital currency accountant of the future.