Why crypto audits are increasing — the big picture

Tax authorities worldwide have prioritized crypto transactions. In Canada, the CRA has published specific crypto guidance, emphasizing that crypto disposals are taxable events and that taxpayers must keep adequate books and records to support each transaction. The agency now receives more data from regulated platforms and is working to implement the OECD’s Crypto‑Asset Reporting Framework (CARF), which will dramatically expand the volume and granularity of exchange-supplied data available to tax authorities. If you don’t keep clear records, reconciling your tax position during an audit becomes difficult and costly. citeturn0search0turn8search0

How Canadian regulators collect crypto data

• FINTRAC registration and reporting: crypto exchanges and service providers that deal with Canadians must register as Money Service Businesses and report large virtual-currency transactions (thresholds and reporting rules apply). FINTRAC enforcement has already led to large administrative penalties where compliance failed. citeturn1search2turn1search1
• CRA-directed information: domestic exchanges are being asked to provide records and, under the CARF proposals, will report annual transaction totals and customer identification information to the CRA, which can then exchange data internationally. citeturn8search2turn8search1
• Data-matching and international exchange: the CRA uses third-party data and international information-sharing agreements to match reported exchange activity against tax returns. Mismatches commonly trigger reviews. citeturn3search5turn3search3

Practical audit preparation — a step-by-step checklist

1) Gather and centralize all transaction records

Export and store transaction histories from every exchange and wallet you’ve used. These should include trades (buys, sells, swaps), deposits, withdrawals, staking rewards, lending interest and fees. The CRA explicitly recommends keeping exchange-ledgers, transfer records and wallet addresses — and retaining supporting receipts for at least six years. If your crypto activity involves foreign assets, be prepared to retain records for up to ten years for voluntary disclosures. citeturn0search0turn7search0

2) Maintain Adjusted Cost Base (ACB) calculations

In Canada, capital gains and losses are generally calculated using the Adjusted Cost Base (average cost) method for identical properties — track and document the ACB per coin/token type and include transaction fees when computing cost. This is fundamental for accurate gain/loss reporting. Many Canadian tax tools and exchanges (for example, Wealthsimple Crypto and other platforms) provide CSV export and realized gains reports to help. citeturn2search4turn6search0

3) Reconcile internal transfers between wallets/exchanges

Label transfers as “internal” and reconcile timestamps and transaction IDs so the CRA doesn’t view an internal move as a taxable disposal. Keep CSVs from both sending and receiving platforms and maintain a clear mapping file that ties deposit IDs to withdrawal IDs. Export and store blockchain TXIDs where possible.

4) Capture fiat conversion evidence

The CRA requires values in Canadian dollars at the time of each transaction. Save screenshots or historical rate logs (exchange rate provider CSVs) that show the CAD value when you executed trades. Good tools and tax software can compute and include these conversions, but keep raw evidence in case of questioning. citeturn0search0

5) Keep supporting documentation for income-class transactions

If a transaction is business income (e.g., mining, running a yield program, or providing liquidity professionally), retain invoices, screenshots of platform reward pages, contracts, and receipts for expenses. The CRA treats mining and staking income differently from capital gains — documentation proves your position. citeturn0search1

If you’re contacted for an audit — immediate steps

1. Respond promptly and professionally — don’t ignore CRA notices.
2. Assemble the records requested using the file structure above and provide an index mapping the records to the CRA’s request.
3. If numbers don’t match, prepare a reconciliation that explains differences (internal transfers, fees, or timing differences).
4. Contact a tax professional experienced in crypto tax if the amounts are material or if the CRA questions your accounting method (ACB vs. business income). A professional can negotiate timelines and help coordinate any voluntary disclosure if needed. citeturn7search0

Voluntary Disclosure — when to consider it

If you discover unreported crypto income or capital gains, the CRA’s Voluntary Disclosures Program (VDP) offers a pathway to correct returns and obtain relief from penalties (and sometimes interest) if the disclosure meets program conditions. The VDP can be particularly valuable for crypto taxpayers because the CRA treats foreign-sourced omissions differently and may require up to ten years of corrected filings where applicable. If you’re unsure, consult a tax professional before the CRA contacts you. citeturn7search1turn7search3

Practical day‑to‑day compliance routine for active traders

• Weekly: export CSVs from active exchanges and back them up (local + encrypted cloud).
• Monthly: run ACB reconciliation and note any trades that change tax character (e.g., converting to fiat or spending in CAD).
• Quarterly: snapshot wallet balances, save blockchain TXID history, and reconcile internal transfers.
• Annually: produce a consolidated realized gains/losses report and store it with supporting evidence for at least six years (10 years for foreign-sourced issues). citeturn0search0turn7search0