A day of reckoning awaits for both crypto currency traders that have not reported their trading income and tax accountants that have overcharged fees for tax return filings of crypto traders. There are obvious ethical issues with not reporting income, however, it is also a risky proposition. With CRA gaining increased visibility into the records of mainstream cryptocurrencies through recent legislative developments, those who have not reported income through these trading platforms face a significant risk of being audited and paying the costly penalty and interest charges that come with it. On the flip side, I have heard many clients voice concern about the additional fees that accounting firms charge once cryptocurrency trades are reflected in their annual investment or business activities. I would compare these additional surcharges to when you have to pay ATM fees for a withdrawal from a bank outside of your primary banking institution. Is it really that much more complicated for each bank to settle with each other and warrant a $3-4 fee? Not at all, but the average consumer does not know that and feels like they are stuck paying that fee because they burdened the bank with an “out of network” transaction. Fortunately for consumers and crypto traders, there are ATM’s out there that do not charge out of networks fees and accountants who do not charge excessive premiums on cryptocurrency transactions.
Sure, cryptocurrency can get complicated. From blockchain technology, to mining algorithms, to the various types of Airdrop, Fork, Mining, and Staking income that one can earn, it is quite clear that very few people understand the nuances of this largely ungovernable and complex phenomena. However, existing international accounting and tax frameworks are very good at defining the very nature of an asset and the various types of income that said asset my earn (business, investment, & capital gain/loss). This is why in my opinion, additional surcharges for cryptocurrency trader tax filings are not necessary and simply exploit the general public’s unfamiliarity with the complex background and technology involved in crypto trading.
Again, a crypto wallet can involve a significant number of transactions that are complex and would make calculating income and gains/losses a very tedious task. However, with the various crypto tax software that are available such as CryptoTaxCalculator, Koinly, or Accointing.com, a few steps can integrate your crypto wallet into the software and generate a tax report that will provide your accountant with everything they need to prepare your tax return. This should translate to no additional work for your accountant, and hopefully, no additional fees or surcharges. For advice on how to integrate your crypto wallet with the right accounting software, reach out to Taylor Roberts, CPA.