Connect with us

Accounting

Cryptocurrency CPAs race to prepare clients for end of universal wallet accounting from IRS rule change

Published

on

Accountants in the cryptocurrency arena have been busy preparing their clients for what they characterize as a seismic shift in digital asset reporting before the safe harbor provision ends in January. 

IRS Revenue Procedure 2024-28, released in June, effectively ends the longstanding practice of “universal wallet” reporting, where people could account for their digital assets, especially cryptocurrency, as a combined pool. Under the new rules, which go into effect at the beginning of next year, people will now need to report their holdings on an account-by-account basis. Zach Gordon, founder of cryptocurrency accounting firm Red Five, called the change “monumental.” 

“You’re talking about going from the universal wallet concept–which is imperfect without a doubt but something we can handle today–to what is, in essence, specific IDs, where every wallet needs to be treated as its own universe for tax purposes. This is a huge change, and considering how a lot of these reporting infrastructures, even on the transactional level, were built out, it’s not ideal,” he said.

Crypto tax

To illustrate, according to Gordon, consider an entity that runs a trading algorithm with many microtransactions, hundreds or even thousands per day and possibly millions per year. Accountants will need to capture all of those transactions, trace their paths through specific wallets, and identify what is and is not taxable through it all, which theoretically can be a very time consuming process. 

The degree of ease or difficulty of helping a client through this, said Gordon, comes down largely to their overall due diligence or “wallet hygiene,” which could best be thought of as maintaining certain habits to security, privacy and effectiveness of one’s accounts. This could include tracking things like which wallets serve which purpose, which assets are held in those wallets, who has custody of them and who controls them. While these things are often on a public blockchain, and so technically auditable, it won’t always be easy. 

Pat Camuso, founder of digital asset-focused accounting firm Camuso CPA, noted that assisting clients through this change is basically a matter of tracking and tracing assets through identifying the relevant data and drilling down at the transaction level on an asset-by-asset basis. This allows them to track the flow of funds so as to, ultimately, map the client’s accounts, everything in them, and what assets are inbound and outbound. He said it’s kind of like being a forensic accountant. 

“It takes a lot of digging, a lot of piecing together, just a tangled mess of a puzzle every time. And now this revenue procedure requires that whole tangled mess to be accurate,” he said, noting that today most just try to determine gains or losses and move on. 

If someone has already been practicing proper wallet hygiene, these engagements won’t be that difficult to get through. Unfortunately, many do not. For instance, both Gordon and Camuso noted that it’s not just possible but common for people to literally forget about a wallet and lose track of just how many they have. 

“I was just looking at an account from before, we’ve been doing their accounting since 2017, and there was a painful reconciliation process that covered maybe 12-13 wallets they didn’t tell us about, and several exchanges as well,” he said. 

Because the new rules increase complexity, the engagements will become more complex, which means they will take longer and cost more. But given the difficulty of navigating the labyrinth of assets held by some clients, Camuso said there’s not much other choice. 

“[You’ll need to be] going asset by asset, down a whole list, and ensuring that everything is allocated right. You may have 25 lots of Ethereum and now we have to snapshot your wallets and allocate them appropriately to each wallet, so with that level of complication, yes, that will increase fees,” he said. As for ongoing maintenance, “it has always been that tangled mess and fees have always reflected that as a result, because there is no way around that.”

Gordon, from Red Five, noted that even just scoping these engagements out have become a little more challenging—while many CPAs are moving away from the billable hour, he said it can sometimes be a struggle to determine a fair estimate for this work. However, he said he is less concerned about the economics of the matter than he is about the timing, as there’s a lot to do and not much more time to do it. 

“It seems like everything takes way longer. There’s way more stuff to do and the deeper you get the more challenging it gets to come up with the right answer. It depends on the platform. There’s the large institutional ones, and they’re going to be okay, they will figure out a way to make sure we’re ramped up and ready to go, but there’s some of the newer [blockchains] out there, the newer platforms are working hard but these standards are very hard to maintain,” he said. 

Camuso added that many of the accounting solutions used for cryptocurrency have been coded with the universal wallet methodology in mind, and many of them have not yet adjusted to the new rules, with a few exceptions. 

Ledgible, a cryptocurrency solutions provider, is one. CEO Kell Canty noted that users have always been able to select either a universal wallet or account-by-account approach, meaning that the only real change that had to happen was disabling the former option. Making the shift, though, may not necessarily be as easy as clicking a button. Canty said that the difficulty and complexity of the operation depends entirely on the user, there is no one size fits all. Some have exhaustive books and records and rules on how they document and approach allocations, and so won’t have much difficulty; others are a little less fastidious, and so may have a more difficult time. 

Canty added that another major challenge is that there are a lot of people, some of whom may not be as sophisticated as others, who either know very little about the change or don’t even know about it at all. Something as big as this, he said, you’d think they’d be more aware, but many don’t really think much about taxes and how they’re calculated until around April or October. It’s been a tumultuous year and people’s attention is being pulled in a lot of direction, he said, and this is a very intricate and complex change, so those who aren’t professionals won’t necessarily know to look into the implications of this. 

“It will be an education process. Not just among our own users but universally for the [professionals] and platforms to educate what it will mean on a going forward basis and how the safe harbor only exists up until January 1,” he said. 

As for Ledgible itself, he said they’re gearing up for customer service because they think they will soon be getting a lot of requests from users who suddenly become aware of the change. He noted this is more complex for the average used, and what’s more they’ll have to learn about it in a compressed timeframe, which he said might cause more confusion. Ledgible is also planning for an information campaign to help users understand what is happening and why. 

“It’s a little difficult to get casual users interested in the intricacies of tax regulations, but we will try,” he said. 

Compounding the challenge is the fact that while the shift from universal wallet to account-by-account reporting is the most prominent new rule, it’s not the only one. Another big change is first-in-first-out now becoming the default methodology. For years, many cryptocurrency holders preferred a highest-in-first-out methodology, which tended to produce better tax outcomes. Switching to a FIFO default methodology could have tax consequences for those who have meticulously structured their assets the other way, said Gordon. But he added that this will be a difficult thing for the IRS to enforce and wondered whether it might later permit other methodologies like last-in-first-out. 

“If you’ve been around this industry long enough, you know that enforcing something like this is challenging because you’re dealing with a lot of unique transactions … For certain groups or individuals, LIFO might make more sense for those who are very detail oriented while specific identification might make more sense [in others],” he said. “FIFO being the law of the land is potentially a big deal and I can see there being pushback from those who are trying to file compliantly, and at the same time there are also potential tax consequences as well.” 

Camuso noted that this will also require users with multiple wallets to be more meticulous in how they structure their assets. 

“Now in 2025 they’re creating a scenario where you can’t just plug your transactions in and pick the highest cost and call it a day–you must manage funds appropriately and flow of funds must match capital gains calculations. … It is to eliminate this idea of cherry picking the highest cost basis,” he said.  

When asked about the best practices they’ve found in helping clients through this situation, both Camuso and Gordon had similar advice: maintaining accurate records, both on the part of the client and the firm. Camuso noted that making sure the calculations are accurate up to that point is really half the battle, if this is covered then the allocations will not be very complex. Meanwhile, Gordon said it’s vital to understand all the wallets involved, what transitions are related to each of them, and making sure records are updated regularly. Preparation, overall, is key. Of course, this might be a tall order in October. Stil, Camuso said it’s important to make clients aware of this and to impress upon them it’s much better to do this before the Jan. 1 deadline. 

“To the degree that someone does not follow up with me before Jan. 1, the big thing is that deadline. It’s not even Jan. 15, it’s Jan. 1. If someone is lackadaisical and overlooks that, it won’t be a good sign. Then there becomes the question of what we will do next year,” he said. 

Continue Reading

Accounting

Texas court halts Corporate Transparency Act in another lawsuit

Published

on

A federal court in Texas has issued another preliminary injunction and stay halting enforcement of the Corporate Transparency Act and its beneficial ownership information reporting requirement, which were already on hold following a recent reversal by a federal appeals court.

The U.S. District Court for the Eastern District of Texas, Tyler Division, issued the preliminary injunction and nationwide stay yesterday. The same district court’s Sherman Division, had issued an earlier injunction last month in the case of Texas Top Cop Shop v. Garland. A panel of judges on a federal appeals court temporarily lifted the injunction late last month, but another panel of judges on the same court reinstated it only days later. The Justice Department filed an emergency request last week with the U.S. Supreme Court to lift the injunction.

The decision on Tuesday involved a case with a pair of plaintiffs, Samantha Smith and Robert Means, suing the U.S. Treasury Department. They had formed LLCs under Texas law to hold real property in the state. In an opinion, Judge Jeremy Kernodle held the law likely exceeds federal authority, finding that the government’s theory of government power was “unlimited” and its actions were probably unconstitutional.

“The Corporate Transparency Act is unprecedented in its breadth and expands federal power beyond constitutional limits,” he wrote. “It mandates the disclosure of personal information from millions of private entities while intruding on an area of traditional state concern.”

He noted that the LLCs do not buy, sell or trade goods or services in interstate commerce or own any interstate or foreign assets. 

The CTA passed as part of the National Defense Authorization Act in 2021 and requires businesses to disclose their true owners as a way to deter shell companies from carrying out illicit activities such as money laundering, terrorist financing, human trafficking and tax fraud. Businesses are required to file beneficiai ownership information reports with the Treasury Department’s Financial Crimes Enforcement Network. FinCEN has since announced that companies are not currently required to file BOI reports with FinCEN and are not subject to liability if they fail to do so while the court order remains in force. However, they can continue to voluntarily submit BOI reports. New businesses began filing the reports when the CTA took effect on Jan. 1, 2024, but existing businesses weren’t supposed to be subject to the requirement until Jan. 1, 2025. However, that requirement is currently on hold. An earlier decision in a separate lawsuit had exempted members of the National Small Business Association from the requirement.

The Texas Public Policy Foundation is representing the two property owners challenging the CTA, arguing that the law violates federal Commerce Clause powers under the Constitution and undermines the principles of limited government and individual liberty. 

“The court’s decision affirms the principle that federal government power is not unlimited,” said TPPF general counsel Robert Henneke in a statement Wednesday. “This ruling is a powerful reminder that our Constitution limits federal power to protect individual rights and economic freedom.”

“The government’s theory of power in this case was effectively unlimited,” said Chance Weldon, director of the Center for the American Future at TPPF, in a statement. “The district court’s opinion is not only a win for our clients, but ordinary Americans everywhere.”

Continue Reading

Accounting

FAF seeks nominations for leadership, advisory roles

Published

on

The Financial Accounting Foundation today formally opened the search for several leadership roles.

The FAF Board of Trustees’ Appointments Committee is seeking nominations for these positions, which include chair and members of the Board of Trustees, the FAF’s executive director, Financial Accounting Standards Board member, and chair of the Financial Accounting Standards Advisory Council.

FAF executive director

Current FAF executive director John Auchincloss announced in December 2024 that he will retire from his post on Sept. 30, 2025. 

The executive director leads a team of 45 who provide support services to the FASB and the Governmental Accounting Standards Board, including communications and public affairs, legal, IT, human resources, publishing, financial management and administration. The role supports the FAF Trustees, who ultimately oversee the FASB and GASB Boards and their advisory councils. The executive director, in collaboration with the FAF chair, also sets the organization’s U.S. and international outreach strategies.

A full description of the FAF executive director role can be found here. Nominations should be submitted to executive search firm Spencer Stuart at a confidential, dedicated email address [email protected] by Feb. 24, 2025.

FAF Board of Trustees chair

The chair of the FAF Trustees is involved in all major Trustee decisions related to strategy, appointments, oversight and governance, and in representing the organization with high-level stakeholders and regulators.

The new chair will be appointed for a three-year term beginning Jan. 1, 2026, through Dec. 31, 2028, and can stand for reappointment to a second three-year term beginning in 2029.

A full description of the FAF Board chair role can be found here. Nominations should be submitted to executive search firm Spencer Stuart at [email protected] by Feb. 24, 2025.

FAF Board of Trustees at-large member

The FAF Board of Trustees oversees and supports the FASB and the GASB, and exercises general oversight of the organization except regarding technical decisions related to standard setting.

The FAF is recruiting several “at-large” trustees — individuals with business, investment, capital markets, accounting, and business academia, financial, government, regulatory, investor advocate, or other experience.

A full description of the FAF trustee role can be found here. Nominations should be submitted to executive search firm Spencer Stuart at [email protected] by Feb. 24, 2025.

FASB member

FASB members develop financial reporting standards that result in useful information for investors and other financial-statement users. The FASB member roles are full time and based in Norwalk, Connecticut. 

“These are senior and prestigious appointments, demanding not only a high degree of technical accounting expertise but also a high level of understanding of the global financial reporting environment,” the FAF announcement reads.

The official start date for the position would be July 1, 2026, but the newly appointment member would be expected to start some time earlier than year to ensure a successful transition. The five-year term extends through June 30, 2031, at which time the member would be eligible to be considered for reappointment. 

A full description of the FASB member role can be found here. Nominations should be submitted to executive search firm Spencer Stuart at [email protected] by Feb. 24, 2025.

FASAC chair

The chair is the principal officer of the FASAC and advises the FASB on projects on the FASB’s agenda, possible new agenda items and priorities, procedural matters that may require the attention of the FASB, and other matters. The chair is responsible for guiding discussion at FASAC meetings and for implementing and directing the broad operating processes of the FASAC. 

The chair may be appointed for up to a four-year term, or a shorter period of time as agreed upon, and may be eligible for reappointment. 

A full description of the FASAC chair role can be found here. Nominations should be submitted to FAF human resources at a confidential and dedicated email address [email protected] by Feb. 24, 2025.

Headquarters of the Financial Accounting Foundation, Financial Accounting Standards Board and Governmental Accounting Standards Board

Courtesy of the FAF, FASB and GASB

Continue Reading

Accounting

Grant Thornton CEO steps down

Published

on

Top 10 Firm Grant Thornton announced that its CEO, Seth Siegel, is stepping down from his position after 30 years with the firm, though will still remain involved as a senior advisor.

“I have called Grant Thornton home for almost three decades and am proud to have been part of this amazing team and organization, which has solidified its standing as the destination of choice for clients and talent alike,” said Siegel in the firm’s official statement. He felt that, with Grant Thornton positioned for what he said was strong continued growth, it was the right time to step down. In a LinkedIn post, Siegel said the move will allow him to pursue other ambitions, focus on his health and spend more time with his family.

The new CEO will be Jim Peko, current chief operating officer of Grant Thornton Advisors LLC.

“I thank Seth for all he has done to help transform Grant Thornton so adeptly for the future. He has been a colleague, mentor and friend to so many of us, and a tireless advocate for the firm’s best interests. As CEO, my priorities will focus on accelerating our current business strategy and solidifying our standing in the marketplace as a unique global platform, driven by quality, culture and differentiated capabilities. We will continue to be the employer of choice for the industry and always capitalize on compelling opportunities before us as we drive meaningful growth,” said Peko.

Siegel expressed his confidence in Peko, saying he has worked closely with him for many years.

“Jim and I have worked closely together for many years, and he is the right leader for this new chapter — one who knows Grant Thornton well and has been integral to our many recent accomplishments and our quality-focused delivery,” he said.

Siegel became a partner in 2006, became managing partner of South Florida in 2020, and became CEO in 2022.

The announcement comes shortly after the completion of the merger between Grant Thornton Advisors LLC in the U.S. and Grant Thornton Ireland. At the time it was said that Grant Thornton Advisors CEO Seth Siegel would continue in his leadership role at the combined firm, while former Grant Thornton Ireland CEO Steve Tennant would become a member of Grant Thornton Advisors’ executive committee.

Grant Thornton laid off about 150 employees in the U.S. last November across the advisory, tax and audit businesses after the deal was announced. Its U.K. firm also received private equity investment last November from Cinven, which acquired a majority share of Grant Thornton U.K.

Continue Reading

Trending