Test Yourself With These Questions from Canada's Tax Agency
The Canada Revenue Agency (CRA) confirmed that there are currently over 60 active audits related to cryptocurrency. The federal tax agency is also asking those who have been targeted dozens of crypto activity-related questions.
Audits are run by the CRA's dedicated cryptocurrency unit, established in 2017, the agency confirmed to Kyle Torpey, Bitcoin writer and researcher. The report was published on Forbes.
The agency declined to comment on the specific information or criteria they use to select files for audit.
"However, we use a combination of advanced analytics and business intelligence activities to ensure that we pick the highest risk files to audit while promoting a fair tax system for all Canadians", the CRA explained.
The author of the report has also uploaded the CRA's questionnaire on Scribd. Below are some of the questions the agency is asking:
General questions with regards to cryptocurrencies:
1. When did you start getting involved in the cryptocurrency space and how did you get involved?
2. Do you invest in cryptocurrencies, trade cryptocurrencies, and/or mine cryptocurrencies? Are you involved within the space in any other way (i.e. advisor, running an exchange)?
3. Do you use any cryptocurrency mixing services and tumblers? Can you please provide us with the tracing history, along with all the cryptocurrency addresses you "mixed"? Why do you use these services?
4. Do you use Shapeshift exchange or Changelly? If so, please provide us with the cryptocurrency addresses you've used to trade with, along with the dates you made these particular "swap" trades.
5. Have you received any gifts in the form of cryptocurrencies?
6. Who filed the tax returns for the period under audit?
Individuals personally investing or trading cryptocurrencies:
1. Can you tell us about all the cryptocurrencies that you own? Provide us with a timeline of when you made each purchase from fiat to crypto.
2. Where did you purchase these cryptocurrencies (exchanges or private individuals)?
3. Do you store cryptocurrencies on wallets other than custodial wallets (i.e. third-party exchange wallets)?
4. How do you fund your cryptocurrency exchanges accounts? Do you use the same methods to transfer cryptocurrency holdings back to fiat?
5. Do you share wallets with other people? If so, who are they?
6. Do you maintain any records, spreadsheets, documentation related to cryptocurrencies that helps you track your cryptocurrency transactions?
7. Have any of your wallets ever been compromised, making you the victim of cryptocurrency theft?
8. Have you invested in any ICOs (including pre-sales, private sale and other sales prior the exchange listings)?
9. Which ICO did you invest in?
10. How frequently do you engage in cryptocurrency transactions?
11. How much time do you spend studying the cryptocurrency market and investigating potential purchases?
12. How do you finance your investing and/or trading activities?
13. Do you invest on the behalf of other people? What do you receive in return for your services? Do you control your private keys? If so, can you please provide us with the names of these individuals.
14. Do any of your cryptocurrency investments provide you with a form of passive income (ex. Node, Masternodes, Supernodes, etc.)?
The agency is also asking cryptocurrency mining-related questions and wants to know more about businesses accepting cryptocurrencies for payment. There is also a section of questions for businesses involved with crypto ATM machines.
However, CRA stressed that the questions are not exhaustive and the agency may require additional information during the audit.
The CRA's educational material regarding the tax treatment of dealing in digital currency can be found here.