Reporting sales of crypto that was received for freelance payment

[Goltax]

Hello!

I did some side hustle last year and received crypto in payment, which i proceeded to sell in multiple transactions (through Wealthsimple, so i got those records). Now, I did not ask for any kind of documentation regarding the work I did, nor did I produce any kind of receipts about them neither.

So, how should I report this? Should I just enter the transaction lines as Capital Gain/Losses? Should I report that through the Self-Employment Business section, should I do both...?

The total amount in CAD that I received for the crypto was around 18K

 

Thanks!

[Goltax]

Hi again!

Sorry if this is a bother, just wondering if someone might know something about this or not

[Geo123]

Hello Goltax,

Report the crypto currency payment at the FX rate, you already booked (as stated above), as revenue in your, for example,

>>T2125 Income Statement (in $CAD)

IF you incurred capital gains / losses on the actual crypto currency FX changes you incurred, if you kept the crypto currency : 

>>Capital gains and ABIL

  >>Virtual currency transactions

[ParkerHarrison]

Hey there! Reporting crypto earnings can be a bit tricky, but here's a general suggestion. Since you received crypto as payment for your side hustle, it's likely considered self-employment income. You can report it as such, including the total amount in CAD. As for the capital gains/losses, that would typically apply when you sell or exchange crypto. By the way, Quantum AI provides valuable insights on crypto trading if you're interested in maximizing your gains.

[GeanVertigo]

Since you sold the crypto, it's considered a capital gain/loss. You'll need to report each transaction individually using the records from Wealthsimple. Make sure to calculate the gains/losses for each transaction and report them accurately.
As for your work, if it wasn't formal employment, you don't need to report it under the self-employment section. The capital gains reporting already covers the earnings from your side hustle.
If you need further assistance, consider consulting a tax expert to ensure everything's in order. By the way, have you checked a white label crypto exchange? It might be useful for your future crypto endeavors.

[AustinsJfBellm]

Since you did work for the crypto, it’s considered income from self-employment. You should report it in the Self-Employment Business section of your tax return.

[borsambeg]

I was in a similar situation last year with some side gigs and crypto payments. You should report the earnings as self-employment income, which involves filling out the T2125 form (assuming you’re in Canada). Since you received around 18K, it's crucial to report it accurately. Your transactions through Wealthsimple can be entered under Capital Gains/Losses, but the income itself should be part of your business income.

I've found tools like immediate edge, which use AI for trading, super helpful for managing my crypto assets. They made tracking everything so much easier and stress-free.

[Geo123]

Hello,

Crypto payment(s) can impact both T2125 Self-employment earnings and Capital gains / losses :

T2125

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1. On the "Left-side menu of the Interview tab", select "Interview setup".
2. On the screen that appears on the right, go to the "Self-employment" group, check the box "Self-employed business income", also if you paid tax by instalments. Then go to the "Tax paid by instalments and tax transfer" group and check the box "Tax paid by instalments and tax transfer" and click "Next" at the bottom of the page.
3. Return to the "Left-side menu on the Interview tab", click on "Self-employment income" and select the option "T2125 - Business income" on the right-hand side page.
4. On the "Business identification" page, enter the name of your business on the line "Business name (or your own name, if the business does not have one ", then enter the other information in the mandatory fields marked with a red asterisk.
5. On the field for "6-digit code from the North American Industry Classification System", enter the NAICS code that best describes your industry. If you do not know the NAICS code, click on the tool tip (the question mark) (?) on the right-hand side of the box to access a list of NAICS codes.
6. On the line "Products or services and their respective percentage (%) in the total income (mandatory for a Quebec return) ", in the field on the right, enter your main service or product and enter the percentage (%). If you have other products or services, click on the "plus sign +" icon on the right to generate another field.
7. Subsequently, after identifying your company, a submenu will appear on the "Left-side menu of the Interview tab" to allow you to enter the "Income & expenses", "Motor vehicle expenses", "Home office expenses" and so on.
8. On the next page ''Income, expenses'', on the line ''Gross sales, commissions or fees'', you must enter a value, if you have no income, enter $0, 00 as this is a required field. NOTE: for expenses, if your company is registered for GST and HST (QST), these expenses must be entered before taxes to reflect the ITRs (input tax refund) and ITCs (input tax credit) you claimed.
9. If you had partners, choose the subsection "Partners" and if you want to claim capital cost allowance for your office furniture and equipment, choose subsection "CCA" and select on this page the classes that apply to your profession.
10. For residents of Quebec, if you wish to pay your registration fee for Quebec, return to the "Left-side menu on the Interview tab" and choose the option ''Q438 - Quebec annual registration fee for the enterprise register''.
We recommend that you read the T4002 guide published by the CRA, for more information on what qualifies as a business expense.
For more information, please visit the following link:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4002.html
For Quebec residents, we suggest that you consult the "Business and Professional Income" guide, published by Revenu Québec. You can visit the following link:
https://www.revenuquebec.ca/en/online-services/forms-and-publications/current-details/in-155-v/
The program will also generate federal form T2125, as well as Quebec form TP-80 if applicable.
The gross and net amounts will be reported by the program on lines 13499 and 13500 of the federal return and, for Quebec   residents, on lines 12 and 22 of Quebec Schedule L.
 

 

Crypto Capital Gain / loss :

===================

Go to Interview >> Interview setup (right hand of screen)
>>Go to  the section [Investment income and expenses}
>>Capital gains (or losses) and capital gain history - - >(click blue arrow)
>>Capital gains and ABIL
  >>Virtual currency transactions”+”
*Name of the virtual currency [see Cryptocurrencies list]
*Number of units sold  <- - - optional
* Date of disposition (dd-mm-yyyy)  [31-12-2023]
*Method of alienation :[Counter / Platform / Peer to Peer]   <- - - optional
*Total proceeds from the sale of the property [TOTAL $amount from worksheet]
*Adjusted cost base of the property [TOTAL $amount from worksheet]
* Expenses incurred in making the disposition [TOTAL $amount from worksheet]

>>In Quebec also answer the question : Revenu Québec questions
  >>Virtual currency
       >>Did you receive virtual currency?
      
>>Report as Foreign Property – T1135  < - - - CHECK with crypto exchange and / or CRA
Report T1135 Foreign Income Verification as Either Simplified methods (if original cost if original cost over $100,000 and under $CAD250,000 OR Detailed if over $CAD250,000)