A month ago I published a newsletter explaining the process of how I am calculating my cryptocurrency taxes. I just finished this week. All in all, it took me somewhere in the neighbourhood of 25-30 to complete my cryptocurrency tax report. Some of my private readers have reached out to me in the last couple of weeks with the sentiment of “I should have started this earlier”.
In the end, I’m left with one question. Was it worth it?
Is Cryptocurrency Worth It?
It is times like this that I feel like just having a well paying job at a big tech company would make my life easier. I could hire a professional accountant to take care of my vanilla tax situation. Most of my taxes would have been deducted at source from my employer, and in the end I would either owe a bit, or get a little bit back.
The situation I’m finding myself in now is that I owe a good chunk of money to the government this year because of how well cryptocurrencies performed in 2021. Since I do all sorts of balancing of my portfolio throughout the year, I made 13,582 transactions.
7,854 deposits (income, staking rewards, airdrops, etc)
2,282 withdrawals (spending, disposals, losses)
2,351 trades
763 transfers
Every one of those transactions carry with it some sort of taxable event. Not all of them increase my taxes, some of them will decrease it. But in the end, I owe the government a non-trivial amount of money.
To answer my earlier question… is it worth it? I think so.
My Koinly Tax Report
I’ve decided to give my private subscribers access to a redacted version of my tax report.
You can download/find that here — DOWNLOAD NO LONGER AVAILABLE [ May 1st 2022 ]
My hope is that you can pass it to your accountant so that they know the sort of figures they need to be generating with your cryptocurrency transactions. That, or Koinly looks useful enough for you to generate your tax report.
Gains Summary
This is the most important page of the report. As far as I can tell, the numbers that Koinly gives me here are an accurate portrayal of reality. That’s why I’ve redacted them.
These are the numbers that your accountant will find most useful when reporting the figures to the CRA (or whoever your tax agency is).
The reason why this page is useful to accountants is because they can basically plug in the above values into your tax form. Ultimately, they should also do their due diligence and make sure they understand where those values came from, but thats for them to decide.
Income, Expenses, and Other
As far as I can tell, this page is neither correct, nor used anywhere else in my report to derive numbers I will be reporting to the CRA.
I’m honestly not sure where Koinly got these numbers from, so if you use Koinly, be prepared to see inaccurate numbers on this page.
I wouldn’t spend a lot of time trying to get this page to come out correctly because as I said, I don’t think the figures factor into what you report to the CRA.
IMAGE NO LONGER AVAILABLE [ May 1st 2022 ]
Asset Summary
The rest of the report is 230 pages long for me. It consists of a list of assets I own and a list of taxable transactions I made in 2021. It would be nice if this information came out correctly as well, but there are lots of errors in the absolute amounts of what Koinly thinks my balances are.
IMAGE NO LONGER AVAILABLE [ May 1st 2022 ]
Give the Best Effort
This is not tax advice.
Paying taxes on your cryptocurrency is not necessarily about getting the right numbers. If you took your portfolio and exports of your transactions to 10 different accountants and the CRA, they’d all conclude different figures.
What the CRA wants to see at the end of the day is that you’ve given your best effort in trying to reconcile the amount of money you owe them.
I think by using a software like Koinly and spending 30 hours putting together my tax history, this satisfies me giving my “best effort”.
I’m pretty confident that I’m actually going to be paying much more taxes than I probably should. But at this point, I’d rather pay more and avoid being audited, than be audited and pay interest later.
Tax Deadline Approaching
At least for Canadians, the tax deadline is approaching. If you need help reconciling your crypto transactions, let me know and I can perhaps point you in the right direction, or give a bit of clarity.
This is my 7th year of doing crypto taxes, so I’m basically a self proclaimed professional at this point.
Happy Tax Season,
Keegan
Resources
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