2022 End of Financial Year Cryptocurrency Tax Checklist

The end of the financial year is 31 March 2022. This article outlines what information we need to prepare your financial statements. We recommend you action this today! It will save you time, costs, and unnecessary complexities.

If you only do one thing today, please complete a stock tack of all cryptocurrency tokens you own and summarise this in an excel spreadsheet. This will prevent a lot of additional work, and prevent significant reconciliation issues.

The financial year is from 1 April 2021 to 31 March 2022. You may not have your financial statements prepared until [say] October 2022 and it could be difficult to remember what transactions, exchanges, or tokens you owned 6 – 18 months ago. Wallet and exchange history are different from bank statements and do not show a closing balance each day. For example, on a bank statement you can see the balance of the bank account on a historical date, however in a cryptocurrency wallet or exchange balance, they will only show today’s balance (which results in unnecessary complexities to work backwards to calculate the tokens owned on 31 March).

This year, we have also introduced a client checklist (further below) which we need you to complete when sending information to us. Even if there are no changes to last year, we still request that you complete this checklist.

To Action: Information we need to prepare your financial statements

A Record of the tokens you own (stock take) on 31 March 2022.

Please provide this in an excel spreadsheet including your full name, and the date of the stock take (31 March 2022). Include a list of tokens owned, quantity held, and where the token is stored (wallet address, or name of exchange, and the username for that exchange). We understand that it may be difficult to prove ownership of digital assets and quantity held at a certain date and time, but it is a fundamental part of the accounting process. This is no different from a normal business doing a stock take at the end of the financial year.

Screen shots of token balances held in exchanges (don’t forget locked tokens), PDF print out of wallet addresses from etherscan provide suitable evidence (should IRD request) to verify closing quantities.

Trading history from exchanges

We prefer read only API’s and CSV/Excel exports from exchanges. We use the API to get receive your transaction history from each exchange.  Please email us your ‘API Key’ and your ‘Secret Key’ for each exchange used. For more information about how to create and API and about what exchanges are compatible click here.

For other exchanges that do not support API’s (such as Easy Crypto*, BitPrime, etc) a CSV/Excel export of trade history is sufficient.

*Easy Crypto ‘swaps’ are not contained in CSV exports.  If you have swapped altcoins on Easy Crypto, please provide this information.  (e.g. Bought 50 XRP for 0.012 BTC on 1/4/20, or screen shot all of your swaps and email to us.

If you are unable to access an exchange, please let us know.  Please describe your activity on that exchange as accurately as you can so we can try and fill in any missing variances.

Your transaction history provides an audit trail of your information and is used to calculate sales, purchases, and closing stock. Every trade is analysed to calculate profit.

Download any bank statements that include deposits or withdrawals used for cryptocurrency activity.

Please email us PDF copies of the bank statements showing fiat deposited or withdrawn from cryptocurrency retailers or exchanges. A summary of the deposits and/or withdrawals may also save us time and you cost. To provide a summary, download the bank statement into a CSV/Excel file from your internet banking, and sort of payee/description to group together all cryptocurrency transactions. The PDF bank statements would still be required by IRD (they will not accept digital excel files as confirmation of transactions due to the editable nature of the file type).

If you use decentralised exchanges (Uniswap, Sushiswap, Pancake Swap, Exodus etc).

Please provide your wallet addresses that are linked to your decentralised exchanges. These trading platforms are difficult to download transaction history (due to their decentralised nature).

Please also include what blockchain the wallet address was used on (ETH, BSC, etc.)

If you use collateral loan positions (Celsius, Binance, MakerDAO, dYdX, Aave, Compound etc)

Please provide us with the contract address where your cryptocurrency is stored (also include in the stock take per 1 above). Please also provide details of the amount of cryptocurrency borrowed (the loan amount), the date of the loan, actions you have taken with the loan, details of full or partial loan repayment, and any amount outstanding.

We will provide further video instructions on this shortly.

If you have received staking rewards (Celsius, BlockFi, Crypto.com, Kraken)

Please include a list of the rewards received (in excel) including, token, quantity, and date (this may be 52 lines of rewards if received every week). If the rewards total less than <$100 NZD, please include a single total of the quantity of rewards received dated 31 March 2022

Details of any expenses incurred to carry on your cryptocurrency activity.

This will depend on if you are in the business of dealing in cryptocurrency (trader) or an investor (holder). Traders are in business, and therefore able to claim business expenses (home office expense, training and development costs etc). An investor is only able to deduct costs directly associated with buying and selling cryptocurrency (exchange fees, bank fees). Accounting fees are deductible for both traders and holders.

NFT Purchases

Please provide details of NFT purchases, wallet addresses. OpenSea’s transaction history etc.

Please complete the below checklist and email to us with your information:

  1. Do you have a list of the quantity of each token you owned on 31 March 2022? Yes or No
  2. Please list all the exchanges you have used:
  3. Have you provided either an API or CSV file of every exchange used? If not, please elaborate.
  4. If you have used decentralized exchanges, if so, have you provided your wallet address, and what blockchain they are on?
  5. If you have used a collateral finance position, have you provided details of this?
  6. Did you participate in any earning, staking, or interest-earning activity and if so, have you provided details of this?
  7. Do you have any other income (apart from PAYE earnings) that needs to be included in your income tax return, and have you provided details of this?
  8. Do you have any other information or comments that you think would make our job easier? This may include missing exchange information (no longer available), gifts of crypto, lost/stolen tokens, ICO’s etc. We need to account for all tokens. Suppose tokens are missing in your transaction history or have no records of the acquisition or disposal of tokens. In that case, this is likely to create time delays, issues in reconciling your portfolio and potential for increased accounting fees.

Please send us this information

Once you have collected and prepared the information, please email it to us. Or please upload to Google Drive or Dropbox and give us access to your files.

Filing Due Date

If you have tax to pay, we recommend getting started on this ASAP to provide you with the certainty of the tax to pay, due date, and any provisional tax payments due.

The deadline for the year ending 31 March 2022, is 31 March 2023: yes 12 months later provided you are registered with us as your tax agent. However, we aim to have all clients returned filed before the Christmas break (December 2022).

Contact Us

Contact Tim Doyle for a call or meeting to discuss any cryptocurrency tax or accounting questions. Our office is in Cambridge, Waikato, or we can arrange a video conference call.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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