Using the Like-Kind Exchange Exception

“Like-kind exchanges don’t apply to cryptocurrency,” Lazzaro says.

The Internal Revenue Code has traditionally permitted investors to exchange real property used for business or held for investment purposes for other business or investment property of the same type, but the IRS released a memorandum clarifying that cryptocurrency exchanges aren’t included in the like-kind exchange exception. The memo addressed Bitcoin, Ether, and Litecoin specifically, but it likely applies to all cryptocurrencies. However, it doesn’t necessarily apply to transactions that occurred before Jan. 1, 2018. The IRS stated that like-kind exchange treatment to cryptocurrency transactions prior to 2018 are left in a “grey area that will be decided on a case-by-case basis.”

Failing to Report Cryptocurrency Exchanged for Goods and Services

More retailers are beginning to accept cryptocurrencies as payment for their goods and services, but anytime you use cryptocurrency for payments, it’s a taxable event.

“The IRS is very clear about that,” Lazzaro notes. “Whatever the fair market value of the cryptocurrency used was at the time you spent it, that’s going to determine your proceeds on that sale.”

Improperly Reporting Cryptocurrency From Airdrops, Forks, and Splits

Airdrops, forks, and splits are some of the more complex aspects of cryptocurrency tax reporting. According to the IRS:

• An airdrop is a form of cryptocurrency marketing in which a developer distributes new tokens to potential users and investors, often for free, to generate attention and build a loyal base of followers.

• A fork is an update (whether minor or major) to the blockchain protocols on which virtual currency transactions are recorded.

• A hard fork is when the blockchain coin/token permanently splits into two, leaving investors with two differently valued, incompatible types of blockchains and tokens.

Moore warns that cryptocurrency holders might’ve received additional coins or tokens from these taxable events without understanding where they came from.

According to a July 2021 IRS notice, recipients must treat newly received cryptocurrency as ordinary income, even if they didn’t have any control over the fork or airdrop, and didn’t intentionally plan for or purchase new coins. The recipient’s basis in the newly acquired cryptocurrency is the fair market value at the time it was received.

Failing to Report Cryptocurrency-toCryptocurrency Transactions

As mentioned before, cryptocurrency is treated as property in most cases for federal tax purposes. Taxpayers who exchange one cryptocurrency that’s held as a capital asset for another cryptocurrency are exchanging property for property and must recognize a capital gain or loss.

“It’s becoming better understood, but for a while most people didn’t realize trading one cryptocurrency for another was a taxable event,” Lazzaro notes. “For example, people weren’t realizing that switching their Bitcoin to Ethereum or some other token was taxable.”

Failing to Take Proper Steps in the Event of Death or Disability

Cryptocurrencies, if not held through a cryptocurrency exchange or broker, are often stored on private digital wallets with unique key codes to access them. Therefore, estate planning is crucial to ensure the information needed to access and take ownership of the cryptocurrency isn’t lost in the event of a death or disability. Simply advising a client to share this information with a trusted spouse or heir may be sufficient to some, but more formal processes may be required depending on where and how the cryptocurrency is stored and how concerned the owner is about security.

Sharing your private keys with another person leaves you vulnerable to that person using your keys to create a wallet controlled by them on another computer or device, which could give them access to all your cryptocurrency, Lazzaro warns.

Moore says some exchanges can allow the family of a deceased investor to gain access through a verification process. Another method she notes is to establish a “time-locked transition,” where one can designate a specific time to transfer their cryptocurrency to someone else.

In some ways, cryptocurrency can be seen as having its own language and accounting system, with so many shifting rules and nuances as regulatory bodies converge on the space. “We work with many CPAs that don’t yet know this side of the practice, and there’s nothing wrong with that. It’s quite a specialized focus,” Gordon says. “If you walk past some of our staff reading the blockchain, it looks like they’re looking at something out of “The Matrix.” Not everyone wants to do that or wants to keep up on all those changes.”

However, there are opportunities for those that do want to truly engage in this space. Lazzaro, who’s been in public accounting for nearly two decades, has completely immersed himself in the cryptocurrency world for the last three years. “I started doing all these other taxable transactions, like staking, looking at the decentralized exchanges, providing liquidity, and buying NFTs so I could understand it and talk to my clients about it,” Lazzaro says. “I felt, if I was able to do it, I’d be a better advisor.”

Importantly, Moore urges CPAs to be direct with their clients: “Don’t be afraid to ask questions and push back to make sure that you fully understand your clients’ cryptocurrency transactions and what is and isn’t being reported by them. It’s really important that you have a good record of having said out loud whether you’re comfortable with their activity, understand their transactions, or if additional information is needed.”

Remember, if the IRS comes to audit a client, you can pretty much guarantee that they’re going to say, “It wasn’t me,” and point their finger right at their CPA.

Like it or not, accounting is more than just numbers. Whether growing your firm, gaining new clients, or maintaining long-term business relationships, networking is a crucial component to a CPA’s success. Three experts weigh in on the ‘how’ and ‘why’ of networking.

BY KRISTINE BLENKHORN RODRIGUEZ

Mention “networking” to a group of colleagues and reactions immediately vary—some love it, some accept there’s value in it, and others simply dread it. This is especially true among CPAs (exceptions aside) who usually don’t choose a numbersbased field because they were born extroverts.

“I see it in accounting more than in any other industry,” says Elise Gelwick, a communications skills and networking consultant, as well as founder of Eleview Consulting. “People say, ‘I chose to be an accountant so I wouldn’t have to talk to people.’ But developing trust and relationships applies in any field today.”

While avoiding people is a comfort zone some professionals naturally lean into, many experts, including Gelwick, don’t recommend it as it hinders many aspects of career growth. Statistically speaking, most professionals wouldn’t be where they are today without networking. According to research from Zippia.com, 70% of employees landed their current positions because of networking, and 85% of jobs are filled via networking through personal and professional connections. And, to the dismay of the introverts among us, 95% of professionals agree that face-to-face connections are key for successful long-term business relationships.

Former Illinois CPA Society Board of Directors Chairperson Daniel F. Rahill, CPA, JD, LL.M., CGMA, managing director of Wintrust Wealth Management, agrees with this assessment. Despite being born a natural introvert, Rahill credits his successful, longstanding career to networking. In fact, he remembers a time when his early introversion made it difficult for him to consider networking in any formal way: “My managing partner at KPMG must have seen something in me that I didn’t, because I was shy and tentative in front of large groups. But he asked me to do a three-month rotation as a United Way speaker, from the factory floor to the boardroom.” Through this, Rahill became very comfortable networking a room and hasn’t looked back.

“I certainly wouldn’t be where I am today without networking,” Rahill adds. “If I can do this, all introverts can do this. It’s a skill that just takes practice.”

Rahill, who often coaches young professionals on the networking skills that used to trip him up, says there are some practical, microskills you can learn, like how to gracefully enter—and exit—a group conversation: “No matter where you are in your career, there’s no reason to leave an event feeling like you never got into it. Working on these skills will ultimately give you the confidence you need for the situations that used to make you uncomfortable.”

No matter your comfort level, here are six ways you can polish your networking skills, add purpose behind them, and create meaningful connections that add value to your career.

1. Do the Inner Work, Start With Your ‘Why’

Many professionals begin networking without taking their emotional and mental temperature first.

Megan Walls, an executive career coach and founder of Walls Career Coaching, believes you must first do some inner work before you start the outer work of networking. “You’re not the same person you were five years ago, or possibly even a year ago. You have to begin with who you are today,” she says. “The inner work is really hard for some people because it can make them uncomfortable. But it’s the foundation for networking and career success.”

Walls has her clients first complete a values assessment, evaluate strengths versus skills (skills are learned, strengths tend to be innate), identify passions, and take stock of accomplishments. “This is usually where the ‘aha’ moment comes in,” she explains. “If you have all of this before you dive headfirst into networking, it’ll save you so much time and wasted effort.”

“It’s so important to start with the ‘why,’” Gelwick adds. Networking has evolved from the days where people mainly used it to move up in an organization. Now, with career paths and work-life balance changing dramatically—particularly post-pandemic—networking can serve multiple purposes, and everyone has their own reason for doing it, whether it be launching a side gig or landing a plum promotion. Gelwick asks her clients, “Are you looking for mentors? Are you wanting to explore another career path but unsure what it entails? Are you dying to work for a particular company but don’t know how to get in the door? These are important questions that’ll guide you on what you do.”

2. Treat Networking as a Two-Way Street

Networking has gotten a bad rap over the years. Some people associate it with glad-handing at a cocktail party over bad appetizers. But that view is outdated, Walls says. “Networking isn’t a dirty word. It’s really about creating and maintaining relationships—and it goes both ways. Sometimes networking is making a call to find out what you could do for someone else.”

The key is to start networking before you even really need the relationships. “The biggest misconception about networking is that you do it when you need a job,” Gelwick stresses. “You should really do it when you need nothing, because taking time to build up relationships will serve as a launch pad when you do need something.”

What holds many back, Gelwick believes, is that we’ve all become so accustomed to instant gratification. But networking can take years to realize returns, as it doesn’t always reap immediate rewards. You need to contribute without expecting anything from others to build up a bank of trust—and a group of people willing to help you when you do need it.

3. Define and Build Your Personal Brand

“It can be hard to stand out from the crowd, so being really intentional about your personal brand matters,” Gelwick says. “Tell your story. If you and I talked at an event and all I told you was that I owned a company covering networking and branding, that’s not very memorable. But if I told you that I grew up in a family with parents who felt so strongly about personal interaction and likeability that they made me converse with adults from a very young age, you’d probably remember that.”

Your personal brand should also reflect what you’ve done. Walls recalls a client who delivered results but, as an introvert, was often quiet about painting a picture of the collective good she’d done for the company. To help the client through this, Walls asked her to compile her accomplishments into a cohesive picture and story of what she’d done for the firm over time. She then shared it with the CEO in their first meeting, which led to her being seen as a valuable resource.

“We often assume bosses and other influencers know all we’ve done,” Walls explains. “They don’t. They’re busy. You need to be known and it’s up to you to make that happen. It’s a form of networking within your own organization.”

4. Use Body Language and Nonverbal Cues

Alison Henderson, founder of Moving Image Consulting, teaches advanced body language and soft skills to leaders. She believes nonverbal cues are far more important in networking than most professionals realize. Research supports this claim, as a study by “Silent Messages” author, Dr. Albert Mehrabian, found that only 7% of any message is conveyed through words.

As one of only 26 certified movement pattern analysts in the world, Henderson helps clients be intentional about how they impact others based on their movement and presence, as well as helping them read what others’ body language might be saying.

“The way you move is actually brain-based,” she explains. “It comes from thought.” Therefore, changing your thoughts might change your presence. Henderson recalls trying to help a pharmaceutical sales team increase their success with physicians. “They were using open-ended questions with doctors and emphasized listening. But when we role-played, I realized they weren’t listening with their eyes. They were taking things at face value without digging deeper.”

According to Henderson, knowing just a few tips about body movement and patterns can help. For example, when people tip their shoulders one way or another it indicates they’re evaluating. She adds that this might be the time to offer more information to sway their decision, tipping the scales. When shoulders return to a level position, they’ve likely made their decision. “It’s a commitment signal,” Henderson explains. “Think of it as a sigh of relief from the body, equivalent to leaning forward or leaning back.”

In Henderson’s experience, posture also plays a key role in networking—it’s the best way to give yourself an executive presence. “We’ve crouched or rounded our posture over time, likely from all the time spent staring at a computer,” Henderson says. “I usually tell people to think about where their sternum is and lift an inch. You’ll look more executive, more like a leader, and you suddenly feel that way too. It’s a signal to your body and it responds accordingly.”

Standing from a position of strength and stability is an area that women especially need work on, Henderson stresses.

“Women often stand with one foot in front of the other, crossing their ankles,” she details. “Many say they do it to look thinner. When it comes to looking like a leader, it doesn’t help. Ground yourself. Feel the earth under your feet and stand with feet apart. That not only conveys good posture, but it also conveys strength and knowledge.”

5. Don’t Overlook Networking Boosters

Despite LinkedIn having over 850 million users around the globe, the most overlooked aspect of networking that Walls routinely sees is an outdated LinkedIn profile. “Don’t blow it off,” she cautions. “Keep adding to your network, adding accomplishments and jobs, and checking your feeds. If you wait until you’re looking for new opportunities, you’ll find it much harder to recall all your accomplishments and join in online conversations.”

Another omission she feels hurts professionals is neglecting an informational interview—an informal conversation with someone working in an area of interest to you. “You can’t beat getting advice from someone who is doing something you’re considering. They can share what you need to know and recommend other people you should talk to.”

Walls urges restraint, however, if you’re tempted to ask for a job or ask what the other person can do for you during an informational interview. The objective isn’t to find job openings, it’s to learn from the other person and to become aware of what you might be able to do to help them in the future.

6. Apply the Basics

Ensuring your basics are covered is another important piece to networking, Gelwick suggests. “Be assertive,” she says. “Ask to go to client calls and lunches so you can see how successful rainmakers in your firm navigate these situations.”

Gelwick also likes lists: “Keep track of who you interact with in a running list. Keep them apprised of where you are and what you’re doing—and make sure you know the same about them.”

Preparation and follow-up are just as important as ever, too, Gelwick adds: “Do your homework beforehand so you can have an intelligent conversation and send them a thank-you note later.”

Whether CPAs are ready or not, networking is making a comeback as we emerge from pandemic-driven social distancing and inperson events bring us back together. But rather than taking the traditional, comforting route of being introverted, it’s time to change our mindsets. Doing so may just change the trajectory of your career.

“What if I hadn’t moved out of my comfort zone?” Rahill asks. “I wouldn’t be where I am today.”

Jon Lokhorst, CPA, PCC Executive Leadership Coach, Lokhorst Consulting jon@lokhorstconsulting.com