ASK AN ACCOUNTANT: 4 Common Cryptocurrency Questions & Concerns

4 common cryptocurrency questions and concerns

 

Bitcoin, Ripple, Dogecoin, Etherium, Litecoin, Tether– in most cases you will either know all of these titles… One of them… Or none at all! Most people have at least heard the term “cryptocurrency,” but their grasp on the real definition might be limited. It is complex at first glance, but the cryptocurrency market works most like investing in a stock market. If you have questions or concerns about “crypto,” read our FAQ below and then contact or visit Liu & Associates!

 

Q: “Do I have to claim cryptocurrency earnings on my income tax return?”

A: Yes; the Canada Revenue Agency treats cryptocurrency as property, just like any other investment portfolio. Depending on your gains or losses, your cryptocurrency investment will be taxed as income or capital gains (see below). If you invest in high volume and trade on a daily basis, you may have to report your cryptocurrency earnings as business income.

Q: “Are investments in cryptocurrency taxed as capital gains?”

A: Yes, any added value earned through investing in cryptocurrency qualifies under the CRA’s definition of capital gains. This typically means you will pay taxes on an amount equal to 50% of these earnings at the same rate as your income. As stated above, high volume investors or “day traders” may be subject to different regulation and taxation.

Q: “Can you refer me to an accountant that specializes in cryptocurrency?”

A: There are very few financial professionals who practice exclusively in cryptocurrency, but it is indeed a budding industry. A service that advertises cryptocurrency specialty more than likely has the same amount of experience as any other modern accountant– regardless, it is always wise to verify these claims with practical solutions. Liu & Associates is happy to handle investment portfolios of all varieties, including those that include cryptocurrencies.

Q: “Cryptocurrency is anonymous, why should I report my investment?”

A: Cryptocurrency is a secure, anonymous investment in most cases, but each source has a finite amount that influences its trading value. In order to benefit from a high valuation, you have to withdraw some or all of your investment– converting it into dollars or another chosen currency. At this point, the anonymity is over and the CRA has every right to seek out these records to prove a case of tax evasion against you. Liu & Associates says… Always report all of your investments!

The four questions above are some of the most commonly asked of financial professionals operating in Canada today. We here at Liu & Associates are on the bleeding edge of business management and financial investment, so you can rely on our ever-growing expertise for your cryptocurrency needs. Make an appointment today!