Crypto Investors Get Warning About Being Audited by the Canada Revenue Agency (CRA)
Every country is still trying to figure out how cryptocurrency plays into their tax laws, including Canada. While some countries have simply based this decision on the definition given to the crypto asset, the Canada Revenue Agency is taking it one step further by auditing investors involved with cryptocurrencies, according to a report from Forbes.
Speaking with sources who are close to this matter, investors have already been sent questionnaires from the CRA which asks these individuals to disclose information about crypto activities. The document is an extensive and invasive 14 pages long, containing 54 questions that include sub-questions below them as well. While speaking with Forbes, the CRA expressed that they would not be releasing details on the criteria that qualifies certain files to be audited, since it would compromise the honesty of the risk assessment system.
The Forbes report states that the investors have had to answer questions about their investments specifically, including details on where the assets were originally purchased and their engagement in mixing services. Two of the exchanges that the CRA specifically ask about are ShapeShift and Changelly, regarding if the investor has bought or sold assets through either one. Other topics covered include a listing of personal crypto addresses outside of their custodial wallet and any involvement with previous theft.
Cryptocurrency in Canada has actually been taxed by the CRA since 2013, though it took four more years before they established a unit that was specifically geared towards cryptocurrency. This new unit was created with the intention of conducting audits and collecting intelligence to focus on crypto risks. Despite the fact that the CRA already monitors these activities, research and development tax incentives have already been developed at a federal and provincial level of the government.
The CRA stated,
“The CRA’s enhanced efforts in this space stem directly from its broader Underground Economy Strategy, which includes a commitment to monitor emerging platforms and new business models, with a special focus on the sharing economy and digital currencies.”
Tax partner Laura Gheorghiu of the Gowling WLG law firm commented to CoinTelegraph in the past that the cryptocurrencies are specifically classified as commodities. In doing so, crypto trading is considered a barter transaction, which is then considered a capital gain or business income. Tax returns must be filed before April 30th for most Canadians, while the deadline is not until June 15th for individuals who are self-employed.
In the United States, the deadline is April 15th, and there have been multiple companies that have created programs that figure out exactly how much the user has to pay on their taxes for their holdings. TurboTax even added an algorithm that allows users to import their trading information directly to make the process less complicated. Right now, the website allows the trading data to be imported from Coinbase, Gemini, and Poloniex, among others.
Ernst & Young, a Big Four auditing firm, launched their own tool to help with the calculation of taxes involving crypto holdings. The tool, which is being called EY Crypto-Asset Accounting and Tax, is geared towards both institutional and retail investors and allows for the calculation and preparation of crypto-related taxes.