Digital Asset & Crypto
Tax and Audit Services

Organizations holding digital assets face distinct tax requirements because the IRS classifies these assets as property rather than currency. For alternative investment funds structured as pass-through entities, any disposition, including token-to-token trades, fiat conversions, or utilizing assets within smart contracts, triggers a realization event resulting in a capital gain or loss passed along to investors. Additionally, operational events such as protocol staking rewards, airdrops, or validation of incentives generally create immediate ordinary income based on the fair market value of the token at the exact time of receipt.

Yes, crypto tax preparation is significantly more complex than traditional asset reporting. A primary driver of this complexity is the fragmented nature of blockchain transactions, which frequently occur across multiple decentralized protocols, centralized exchanges and self-custodial wallets. Consolidating this high-volume data to establish accurate cost-basis tracking and calculate capital gains presents a steep operational hurdle. Furthermore, evolving regulatory requirements, such as the mandatory implementation of IRS Form 1099-DA reporting for digital asset brokers, require exhaustive transaction reconciliation to maintain accurate tax positioning. 

Working with dedicated audit and tax professionals provides the deep institutional rigor necessary in the ever-changing world of digital assets to be tax compliant, maintain proper accounting records and present accurate financial statements. Our specialized focus centers on investment funds operating within established centralized exchanges, such as Coinbase and Kraken, as well as vehicles utilizing other platforms like Circle and Copper. Rather than conducting raw blockchain extractions, our team is experienced in auditing and reconciling sophisticated third-party custodial reporting and exchange ledgers. This targeted approach safeguards fund compliance with both evolving IRS mandates and the latest FASB fair-value accounting rules under ASC 350-60, providing clear direction for sophisticated allocators.

The cost of digital asset tax and audit services depends on transaction volume, the structural complexity of the fund, the number of trading exchanges utilized and the current state of the back-office records. A fund with straightforward buy-and-hold strategies on a single centralized platform requires less extensive testing than a vehicle engaged in high-frequency trading across multiple platforms or complex cross-border offshore structures. Accounting teams scope engagements based on data complexity and the hours required to execute comprehensive data reconciliation, existence verification and fair value testing, offering tailored fee structures that reflect the exact operational footprint of your fund. 

Audit engagements for digital asset funds center heavily on three primary pillars: existence, rights of ownership and valuation. Auditors verify that digital assets exist on the distributed ledger and that the fund holds clear rights to the exchange accounts maintained directly in the name of the fund, rather than auditing assets held in un-hosted cold storage devices that require private keys. From a valuation standpoint, accounting teams evaluate the fund's adherence to ASC 820 and ASU 2023-08 standards, closely examining the pricing sources, market liquidity, and methodologies used to value volatile or thinly traded tokens at the fiscal year-end. 

The most common risks in digital asset auditing surround the existence and ownership of each individual digital asset.