Consult An Accountant - Crypto Taxation

Since crypto can be a decentralized and private form of banking and wealth storage, governments and banks have a natural animosity concerning it. The pressure is great for regulators and governments to clarify their positions on cryptocurrencies, defi, and other crypto earning endeavors. Rising to the challenge are tax professionals now specializing and striving to keep current in the tax treatment of cryptocurrency earning and investing, no easy task. Speaking to one of these professionals regarding your tax preparation can provide clarity, save you money, and prevent unpleasant dealings with the government.

Crypto is an encrypted transaction making exchanges difficult to track. This makes taxation of them more a matter of trust than provable fact in tax situations. In the past few years there has been a big push by the Canadian government to crack down on day-traders and cryptocurrency investors and earners. This may create issues for crypto users if audited by the CRA from an income tax perspective, as earning, mining, staking, or investing in cryptocurrency vary in forms of income. In Canada, the CRA reports cryptocurrency gains as a capital gain, which can be an inaccurate classification due to a lack of specific regulation. An example is that long-term and short-term crypto holders have not been able to keep track of losses or gains because purchasing crypto is not the only way they have come out owning it, and there is no clear entry value. In other cases, holding crypto for a time periods before and after the addition or removal of regulations, because even today the rules are still in progress.

The best advice is to consult with a tax professional, one that is specializing in crypto, and plan for the most reasonable way to report crypto investments and earnings. Operating under the proper tax guidelines clients can remain protected against scrutiny from both governments and regulators. Make sure you offer your tax professional a complete picture of your portfolio and work with them to achieve an honest and accurate appraisal of tax obligations.

John Harfoush

Palm Financial Solutions

palmfinancialsolutions@gmail.com