If you’re a cryptocurrency trader who hasn’t reported your profits from trading, you have reason to be worried.
The Canada Revenue Agency is going after taxpayers who failed to properly report profits from cryptocurrency transactions. This is a large scale audit led by the CRA’s Cryptocurrency Section.
How will they find me, you ask, since cryptocurrency accounts are generally operated anonymously? Good question. Although cryptocurrency accounts have been under the radar for some time, the CRA recently obtained a Federal Court order against Coinsquare Ltd., – Canada’s largest cryptocurrency exchange – requiring Coinsquare to provide the CRA with the names and details of all customer accounts, both active and inactive, either alone or jointly held with any other person(s) or businesses. The information that Coinsquare is required to produce includes customer bank accounts, transactions, cryptocurrency types, trading activity, “know your customer” documentation and addresses.
The CRA said that it would use the information to determine whether Coinsquare customers have filed required income tax returns, payroll remittances and GST/HST returns.
The audit covers the time period from January 1, 2013 to the date of the order (March 19, 2021). This doesn’t mean that you don’t have to report income for transactions prior to January 1, 2013. It just means that Coinsquare isn’t required to turn over any customer information prior to January 1, 2013. You still have to self-report. And since there is no time limit for the CRA to assess someone for failing to report, they can audit you at any time.
The CRA did a similar thing a few years ago against eBay. They were targeting eBay PowerSellers and obtained a Federal Court order requiring eBay to provide its client records to the CRA ,including records that were held on servers outside of Canada.
Since this is an ongoing project of the CRA’s Cryptocurrency Section, I anticipate that the CRA will seek similar orders against other cryptocurrency exchanges in the future.
So if you are one of those persons who have been fortunate enough to make money on cryptocurrency but haven’t reported your profits, then it’s time for you to retain a tax litigation lawyer to discuss your options.