Cryptocurrency is an emerging market that has taken the world by storm. A cryptocurrency is a type of digital money designed to be secure and is often anonymous. There are over 1,000 cryptocurrencies that people can use to transfer coins, buy goods and pay for services.
There are a few major reasons why cryptocurrencies are so popular. One is because it is completely decentralized and an independent monetary system. All of the transactions on their system are anonymous and the parties don’t know anything about each other except for a few lines of generated digital code. There are also small commission rates to transfer the cryptocurrencies.
Tax regulations are evolving as the cryptocurrencies mature because they are used to pay wages, trade on exchanges and buy products. We stay up to date with these changes and manage our clients’ complex cryptocurrency investments and activities.
Important Activities to Report in Cryptocurrency Accounting
Canada Revenue Agency has characterized cryptocurrency as a commodity and not a government issued currency. Even though the value of each cryptocurrency constantly fluctuates, it’s important to track any transactions you make whether you are an individual or business for tax purposes.
But what should you track?
These are just some of the important activities you should monitor so we can properly prepare for your tax filings and maximize your tax benefits:
- If you pay a vendor for goods or services for your business
- Any gains or losses that occurred while you traded cryptocurrencies
- If an employee receives cryptocurrency
- Gifted cryptocurrencies to a qualified done
Reporting on relevant cryptocurrency transactions is similar to reporting government issued dollars. As an individual, you must report income, capital gains or losses from cryptocurrency at fair market value. As a business, if you used cryptocurrencies to buy services or goods for your company, you can claim eligible business expenses at fair market value for your taxes at the time of the transaction.
Contact us if you have any questions about how we can help you efficiently manage and account your cryptocurrency investments and activities.