Yes. The CRA is actively conducting audits of those investing and trading in crypto-assets. In a 2020-2021 report, the CRA confirmed that it is continuing to improve its crypto-related compliance efforts by implementing specific measures.

Canadian cryptocurrency firm, Coinsquare, has been ordered by the CRA to release its user records.  The CRA will verify compliance with the ITA and the Excise Tax Act. The pattern of the CRA’s audit activity points toward a continued increase in compliance measures surrounding crypto-assets.

The CRA also:

• improved how it traces cryptocurrency transactions through the use of surveillance software to establish a comprehensive picture of a taxpayers’ cryptocurrency activities
• obtained an unnamed persons requirement on a large Canadian Cryptocurrency Exchange, the information from which will be used to verify compliance with the Income Tax Act (ITA) and/or Excise Tax Act (ETA)

Yes.  How though?

- Every crypto transaction is recorded on the blockchain
- The blockchain is an open ledger whether they are built on Bitcoin or Etherium 
- The government could track transactions from conversion from FIAT by tracing along the blockchain
- Since 2023 all exchanges operating in Canada are required to register and to disclose their clients with the government in order to operate (also known as KYC)
- When you signed up at an exchange, before or after, they may have asked for your driver's license or other ID. 

Please be aware that since as of June 2021, every cryptocurrency exchange in Canada must register with FinTRAC (the Financial Transactions and Reports Analysis Centre of Canada).

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For all crypto exchanges, please provide us with: 

- All API keys for all exchanges you have used
- If no API keys are available, please provide a download of all transactions in CSVs or Excel formats

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Yes, we will. Alternatively, we can work with your present accountant. If you don't have one, you can work with ours. 

If you want to file your own taxes by using Ufile, TurboTax (or alternate), we will provide a report with the required numbers.

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We can adjust your prior tax returns up to six years.  If you haven't filed any tax returns, we can file that, too. 

Please note that since 2016, and if your total invested capital is at least CA$100,000, you are required to file form T1135 Foreign Income Verification Statement. 

Form T1135 must be filed on or before the due date of your income tax return. Failure to file a return is $25 per day for up to 100 days, up to a maxium penalty of $2,500.  More information can be found on the CRA website. 

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The regulatory framework regarding crypto assets and crypto asset trading platforms is developing and evolving. This can leave purchasers, speculators, and investors confused about when and if securities regulations apply. 

If you are a long term investor, the best way to protect yourselves is to store your crypto in a cold storage wallet.  If you're a trader, deal with crypto exchanges that are stable and are registered with the government. If an exchange is based in a country like the Bahamas where crypto regulation is lax to non-existent, it is like you are rolling the dice. We all know what happened with FTX when it imploded overnight losing investors their lifesavings. 

When you lose all or part your investment capital, it means that you have lost your money.  Thus, it can trigger capital or business losses for tax purposes. Please keep records showing the circumstances and situation that gave rise to said loss. If a recovery is possible, an adjustment can be filed.

Similarly, the Canada Revenue Agency has strict rules on keeping records should you be picked for a review or audit.

Feel free to contact us to calculate and report the correct amount for crypto tax purposes

You need a crypto tax accountant if you are a noble crypto trader, or involved in doing business using crypto, for example, DeFi, trading with bots, node income, staking, NFTs, and others.

It'll be a far worst outcome to overpay or underpay taxes.  Software may sound good and inexpensive, but it is surely not the most ideal choice. Sometimes, technical support will not be much help for your own and unique situation.

Contact Us for a free 30-minute consultation