You don’t need an accountant to report crypto, but some situations make one worth the fee. Business-style trading, large foreign holdings, years of missing records and a letter from the Canada Revenue Agency (CRA) are the main ones. A few purchases and one or two sales can usually be handled on your own.
This article helps you decide, and it explains what to bring if you do hire someone in Toronto. It doesn’t recommend any firm or software, and it doesn’t quote fees, because those vary and we haven’t verified any. What it does cover is the tax rules a professional would apply, taken from CRA guidance, so you can follow the conversation.
Cases that usually justify paid help
Start with the honest test: how many transactions did you make, and how complicated are they? A person who bought coins twice and sold once has a short calculation. A person with hundreds of trades across several platforms has a data problem before a tax problem.
Here are the situations where a professional pays for themselves most often.
- Your activity may count as a business, because you trade often, hold for short periods and spend real time on the markets.
- Your foreign property might cost more than $100,000 in total, which triggers Form T1135.
- A gap in your records, or an exchange that has closed, leaves costs unknown.
- You’ve received a notice, a request for information or a reassessment from the CRA.
- You’ve missed one or more years and want to file them properly.
Even one of these can change the tax result by a lot. If none applies, a spreadsheet and the CRA’s pages may be enough, and the capital gains tax calculator lets you check a single sale against your own arithmetic.
Business income or capital gains
This is the question where professional judgment matters most. The CRA says crypto activity produces either business income (or loss) or a capital gain (or loss), and the answer is decided case by case. Its indicators of a business include frequent transactions with short holding periods, market knowledge and a lot of time spent analyzing markets, use of debt financing, and advertising of trading services.
The money at stake is large. If the CRA accepts capital treatment, you include half of each gain as a taxable capital gain. If it sees a business, the profit is fully taxed as business income, and you may also have to think about GST/HST. Here is the difference on a $10,000 profit for someone at a 30% combined marginal rate, used only for illustration: capital treatment adds $5,000 to income and costs about $1,500, while business treatment adds $10,000 and costs about $3,000.
An accountant can review your pattern, explain how the CRA’s indicators apply to it, and help you take a consistent position from year to year. What nobody can do is promise how the CRA will view it. Be wary of anyone who does.
The rules a professional will apply
Knowing the basics lets you check the work and ask better questions. Four ideas cover most files.
First, dispositions. Selling for dollars, trading one crypto for another and spending crypto on goods or services are all dispositions, and so is giving crypto away. Moving coins between wallets that you own is not.
Second, the adjusted cost base (ACB). For identical units bought over time, the CRA’s capital gains guide says to calculate the average cost of each property in the group at the time of each purchase. You add the acquisition expenses, such as commissions, to the cost.
Third, the 50% inclusion rate. Half of a capital gain is taxable, and half of a capital loss is deductible, but only against taxable capital gains.
Fourth, the superficial loss rule. When you sell at a loss and buy identical property within 30 days before or after the sale, and still hold it at the end of that window, the loss is generally denied and added to the cost of the replacement. A good professional will check the windows before claiming any loss.
The definitions come from the CRA pages listed in the sources below. To see how a taxable gain changes your bill, add it to your other income in the income tax calculator.
What to bring to the first meeting
Preparation is where you save the most money. Professionals typically charge for their time, so the less time spent chasing data, the smaller the job. The CRA’s own list of records is a good guide to what a preparer will ask for.
For each transaction, you should be able to show the number of units and the type of crypto-asset, the date and time, the value in Canadian dollars at that time, and a description of the transaction and the other party. You should also know the addresses of the digital wallets you used, and the opening and closing balances with costs for each year.
In practice that means exporting the full trade history and transfer history from every exchange, in the original file format, and saving copies somewhere safe. The CRA specifically encourages regular exports because a platform may stop operating. Add your wallet addresses, bank statements showing deposits and withdrawals to exchanges, and prior years’ returns.
A one-page summary helps as well. List each platform and wallet you have used, roughly when you used it, and what you think happened. Note any gaps you already know about. It sets the scope of the work and stops surprises.
Questions to ask before you hire
Any professional worth hiring will answer these plainly. Ask whether they’ve prepared returns for crypto clients before, and how they treat your case: business or capital. Ask how they’ll value your coins in Canadian dollars, since the CRA wants a reasonable method applied consistently from year to year.
The price needs explaining too, so ask what it includes. Some quotes cover a review of the records, the calculations and the return, and others cover only the return, with the calculations left to you. Find out whether the fee changes if your records turn out to be incomplete, and whether they’ll represent you if the CRA follows up.
Check credentials, too. In Canada, professional designations are issued by regulated bodies, and you can verify a person’s status through the body that regulates the designation. A firm’s website is not proof of anything. And ask how they will keep your data safe, because you are handing over transaction histories and account details.
Finally, get the scope and price in writing before work starts. If the quote is well above what your file seems to justify, ask why, or get a second opinion.
How much of it you can do first
You can carry out a lot of the groundwork without any fees. Export the data, sort it by date and time, and mark which rows are purchases, sales, swaps, transfers and spending. Transfers between your own wallets should be tagged as such, so they don’t appear as sales.
Then build the pool for each coin. A tiny example: you buy 1 unit for $2,000 and later 1 more for $3,000. The pool is 2 units with a cost of $5,000, so the average is $2,500. Sell 1 unit for $4,000 and the gain is $1,500, with $750 taxable. The remaining unit carries an ACB of $2,500.
If your tagged file and the pools agree with your platform balances at year end, you are most of the way there. A preparer can then review your work instead of building it, which usually costs less. And if they disagree, you have found the issue that the professional would have spent billed hours finding.
Mistakes to avoid when handing over your file
Sending only the year-end summary from an exchange is the most common one. It reflects one platform, and it doesn’t know what your coins cost elsewhere. Send the full transaction history in its original form.
Leaving out an old account is the next. A small wallet from a few years ago can hold coins that later moved elsewhere, and their cost matters. Include every platform and wallet you can remember, even the ones you closed.
Don’t guess at values and present them as facts. If a number is an estimate, say so and describe how you made it. And don’t hold back bad news. A trade that lost money, a year you didn’t file, a letter from the CRA: the preparer needs to know early, because these change the plan.
Lastly, keep your own copy of everything you send. The obligation to hold the records is yours, not the preparer’s.
Foreign holdings and Form T1135
The T1135, the Foreign Income Verification Statement, applies when the total cost of your specified foreign property is more than $100,000 at any time in the year. It is filed with your return and is due on the same date.
The open question for many crypto owners is whether coins held on a foreign platform count as specified foreign property. Plain wording on that is missing from the CRA pages we reviewed for this article, so it isn’t settled here in plain terms. This is one where an accountant’s view is worth having if your total is anywhere near the threshold.
The test uses cost, not market value today. Keep purchase records for that reason. Late or missing foreign reporting can carry penalties, so it isn’t the item to postpone.
Deadlines and late filing
The filing deadline is April 30. Self-employed filers have until June 15, but any balance owing is still due April 30. If you report crypto as business income, the self-employed date may apply to you, and the self-employed tax calculator can show the tax and CPP you might owe.
A late return costs 5% of the balance owing, plus 1% for each full month late, up to 12 months. For $3,000 owing and a return 4 months late, that is $150 plus $120, so $270, and interest is added.
Taxpayer relief exists for extraordinary circumstances. You can apply with Form RC4288 or through CRA My Account for periods within the past 10 calendar years. Our late filing penalty relief guide explains the process. If you haven’t filed for several years, tell the professional up front, since it affects the order of the work.
If the CRA writes to you
Don’t ignore it. A letter asking about crypto activity, or a reassessment that changes your numbers, has a deadline for a reply, and the deadline is printed on it. Read it, note the date, and gather the records that answer the specific questions asked.
Should you disagree with an assessment, a notice of objection is usually due within 90 days. This is a case where representation is worth considering, because the way you describe your activity can decide the outcome. Our guide to CRA notices and unfiled returns explains the common letters.
Keep everything. The CRA requires you to hold books and records for at least six years from the end of the last tax year they relate to, and a preparer’s file doesn’t replace yours. For your own numbers, try the Home Sale Net Proceeds calculator, or browse the tax calculators.
Sources
- CRA, Guide for cryptocurrency users and tax professionals
- CRA, Reporting income from crypto-asset transactions
- CRA, Keeping books and records of crypto-assets
- CRA, T4037 Capital gains guide
Common questions
Do I need an accountant for crypto taxes in Toronto?
Last reviewed: . Figures come from the official sources listed above. How we check the numbers and our editorial policy.