The extreme volatility and massive growth in Bitcoin’s value has made it very attractive to some people looking for the next dot.com or get-rich-quick opportunity, but don’t think digital currency is exempt from CRA’s reach. Despite the relative anonymity of digital currencies, you are still required to report all income and gains involving cryptocurrencies to the CRA. Here are 5 of the most common questions to consider:

If cryptocurrency is anonymous, why should I report it?

Although cryptocurrency is generally considered anonymous, the reality is that they are what’s known as ‘pseudonymous’, meaning that it is not tied to an actual person, but rather to a specific set of keys. This means that the Bitcoin holder is not identifiable, but all transactions are publicly available.

Cryptocurrency Exchanges are usually required by law to collect a certain level of personal information from anyone registering as a user. In Canada, there is still no law in place that forces exchanges to reveal the identity of the holder, but at some point you will eventually cash out or purchase something with your digital currency, and that is when your transactions can be tracked.

What about purchases made with cryptocurrency?

Purchases made with any form of cryptocurrency are viewed the same as a bartering transaction in the eyes of the CRA. That means that any product or service you may exchange your bitcoin for can be subject to GST/HST, and you may also have a requirement to collect GST/HST on the digital currency you traded. Additionally, if you trade your cryptocurrency for a good or service at a higher value than you paid for the cryptocurrency, a gain is realized and income tax must be paid on this profit.

How should I report the sale of my Bitcoin?

If you cashed out on any of your cryptocurrencies last year, you are required to report any of your profits or losses to the CRA in the same manner you would report any investment in property (similar to stocks), meaning treating your profits or losses as business income or capital gains, depending on your specific situation.

What about trading one cryptocurrency for another?

An exchange of cryptocurrencies is viewed as a barter transaction for the purpose of taxation. The exchange is considered as a disposition of property, and each currency is assessed at their respective fair market value at the time of the transaction. Similar to a sale, the exchange can be treated as either business income or capital gains, depending on your specific situation.

What about the process of “mining” cryptocurrency?

If you have set up an operation to contribute to the “mining” or processing of Bitcoin transactions, or have invested in a company who is involved in these transactions, you are most likely being rewarded with Bitcoin or one of the many other cryptocurrencies, and these rewards need to be declared as income. You should also note that any losses or expenses incurred during this process can be claimed as deductions against the income being generated.

Final thoughts

As cryptocurrency is a relatively new concept, the laws around taxation are continuously being revised. The best approach right now is to talk to an accountant or lawyer knowledgeable in the study of cryptocurrency for your best advice on handling your specific taxation matters.

The post 5 Things You Should Know About Cryptocurrency Taxation appeared first on Nanaimo Accountant.

The current Working Income Tax Benefit is calculated at a rate of 25% of earned income over $3,000 with a reduction rate of 15% on income over $12,016 for singles and $16,593 for families, to a maximum benefit of $1,059 for individuals or $1,922 for families. To claim the Working Income Tax Benefit you currently need to complete a Schedule 6 and claim the calculated amount on line 453 of your return.

The new Canada Workers Benefit increases the basic rate to 26% of earned income over $3,000 as well as raising the reduction threshold to $12,820 for singles and $17,025 for families, while lowering the reduction rate from 15% to 12%, for a maximum benefit of up to $1,355 for individuals and $2,335 for a family. The CRA is also making claiming the benefit easier by automatically calculating the claim for anyone eligible to receive it so nobody will miss out on the benefit now.

This new program will come with a considerable price tag attached that the federal government has allocated an additional $500 million dollars per year on top of the current funding for the Working Income Tax Benefit. The goal is to encourage greater participation in the work force, boosting productivity and reducing reliance on other social programs, which should help offset the added costs of the program. So far economists are having mixed feelings about the changes and several have suggested that the increases are not significant enough to have any real impact on the labour market, but only time will tell. For the roughly 2 million Canadians who will see more money in their pockets at the end of the year, it’s a welcome change.

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Who is it for?

The ReFILE service is for individuals who have filed their returns online through NETFILE  and you must have already received your Notice of Assessment. If your return has not yet been processed, you must wait for your Notice of Assessment before taking advantage of ReFILE. If you did not file electronically, then you must send in a paper Form T1-ADJ, T1 Adjustment Request, to the CRA. The ReFILE is designed for making changes to your claim amounts and cannot be used for changes related to your personal information like: Marital Status, Address, Direct Deposit Details, etc., changes to this information can be made through your My Account link.

The ReFILE service is a very handy option for making quick changes, but it is limited to no more than 9 changes per tax year for each individual. For a complete list of details and exclusions, please visit the Canada Revenue Agency’s ReFILE online information page.

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