Wise and Stripe Multi-Currency Balances in the Books

Is a multi-currency account one account or one per currency in my books?

One per currency. A multi-currency account is a single provider account that holds a separate balance in each currency, so the books keep one account per balance, in that balance's currency, each tied to its own statement. Add one clearing account for payouts that have left the platform but not reached the bank, and keep sales, fees and exchange differences in their own accounts. "Home currency" below means the currency the books and the return are kept in: usually Canadian dollars for a Canadian business, US dollars for a US one (a Canadian corporation reporting in US dollars: see the end of this page).

If your software ties each account to one currency, keep one clearing account per currency.

Two shapes use the same accounts. A processor pays out into a multi-currency money account, which is a bank account in your books; sending money on from it to your own bank is a transfer, not income. Or customers pay straight into the money account: there is no payout, so the payment is the sale.

A case is not simple with balances in three or more currencies, balances that will not tie or months never tied, hours of manual entry each month, a provider in another country than the owner, business money received in a personal or home-country account, or an owner who is a US person or a Canadian resident with accounts abroad (foreign account reports, below). Each needs more than routine bookkeeping.

Gather first: the monthly statement for each currency balance, the provider's payout report, a confirmation for every conversion (amount sent, amount received, fee), the bank statement for each deposit, and the source of the exchange rates you will use.

How do I stop a payout in transit from counting as income twice?

Count each sale once. If you book sales when invoiced, the platform payment settles the invoice; if you book them when paid, the payment reaching the platform balance is the sale. Your return sets which: the CRA requires the accrual method, the invoiced path, for most self-employment income (Canada; US choice). Either way the payout and the bank deposit move money between your own accounts. A rate change between invoice and payment is an exchange gain or loss, not extra sales. The steps show the paid path; on an invoiced sale, step 1 settles the receivable.

1. Sale: debit the balance for the full amount customers paid; credit sales.
2. Fee: debit fees; credit the balance.
3. Payout leaves the platform: debit payouts in transit; credit the balance.
4. Deposit reaches the bank: debit the bank account; credit payouts in transit.

The clearing account is zero whenever every payout has landed; a balance left at month-end is a payout still in transit or a deposit that never arrived, so chase it before closing. If the deposit is in another currency, step 4 is also a conversion (below).

Three traps cause most double counting: booking the net deposit as sales, which hides gross sales and fees; booking the payout as a sale on top of the sale itself; and accepting a feed's payout deposit as a new sale instead of matching it to the payout in transit. Matching deposits to sales reports is covered in reconciling sales and payouts.

How do I record a payout that lands in a foreign-currency balance?

Record three amounts in the payout's own currency: gross sales (what customers paid) to sales, the platform's fees to fees, and the net, gross less fees, as the increase in that balance. Value the sales and fee lines in home currency at the day's rate (next section).

Sales are the gross figure, not the net. In the US, Form 1099-K reports the gross amount without regard to fees or refunds, so gross figures can tie to it and net deposits cannot. The form converts foreign-currency payments at the transaction-date spot rate or a consistent convention, so expect a small rate difference. Fees, refunds, disputes, negative balances and the 1099-K match are in payouts, fees and negative balances.

Which exchange rate do I use in Canada and in the US?

In Canada, use the Bank of Canada rate for the day the amount arises. In the US, use the rate prevailing when you receive, pay or accrue the item; the IRS has no official rate and generally accepts any posted rate used consistently. In both countries, keep the original foreign amount beside the home-currency amount.

Write down the source you use for each currency pair and keep using it from year to year. A provider's confirmation shows what a conversion returned, so record the amount that arrived; that is separate from the rate you use to value a sale or an expense.

How do I record converting one balance to another, and the conversion fee?

A conversion between your own balances moves money; it does not earn any. Each balance has a book value: the home-currency amount it was booked at when it arrived.

1. Read the confirmation: amount sent, amount received, fee.
2. Credit the sending balance for the amount sent, at its book value.
3. Debit the receiving balance for what landed in it (the amount received less any fee taken from it), valued in home currency at the day's rate, and debit fees for that fee.
4. The difference between total debits and total credits is the exchange gain (a credit) or loss (a debit).

If the fee is built into the rate, the amount received is simply lower: record what arrived. US books leave the gap in the exchange gain or loss. Canadian books put the gap between what you sent and what arrived, both at the day's Bank of Canada rate, in a conversion-cost account and any remainder in exchange gain or loss (transfers between CAD and USD accounts). If the sending balance holds amounts that arrived at different rates, the gain depends on which of them counts as leaving; settle one method with your preparer and use it every time.

The same entry applies when the provider or bank converts for you (a payout sent in one currency into a bank account in another) and when you pay a bill from a foreign balance: record what landed, or the expense at the day's rate, reduce the balance or payouts in transit at its book value, and put the difference on the exchange line.

How do I reconcile each currency balance to its monthly statement?

Reconcile each balance in its own currency first, then look at home-currency values. A balance that matches its statement in pounds is right even if its dollar value moved. The IRS advises reconciling a business account each month so that the books reflect every charge and errors surface.

1. For each balance, opening balance plus money in, less money out, equals the statement's closing balance in that currency.
2. Match every payout on the platform report to a bank deposit. A payout with no deposit yet stays in the clearing account.
3. Match every conversion to its two sides: one out of one balance, one into another.
4. Only then check home-currency values. A difference that exists only because a rate moved is a revaluation, not a missing entry.

If a balance does not tie, the gap points to the cause:

Year-end revaluation is covered in foreign exchange gain or loss on a USD account (Canada) and foreign-currency accounts in US books (US).

Where do exchange gains and losses show up, and when is that a tax question?

In the books, on one foreign exchange gain or loss line, apart from sales and fees. Small differences still go on the line, and a small net figure is normal; a large or growing one usually points to a rate-source or entry error, so look there before the tax question. For tax, the label does not decide the treatment: each country has its own rule for a gain or loss realized when currency is converted or spent.

• US: Section 988 says foreign currency gain or loss on a section 988 transaction is computed separately and, except as the section provides otherwise, treated as ordinary income or loss. Disposing of a currency other than your functional currency (generally the dollar, per the IRS) is such a transaction, and that currency includes a demand or time deposit denominated in it at a bank or other financial institution. So converting or spending a foreign-currency balance can create a gain or loss; whether a given platform balance counts as such a deposit is a question for your preparer.
• Canada: Section 39(2) treats a currency gain or loss as capital only to the extent it would not otherwise be included in or deducted from income, so which side a gain falls on depends on the facts. The individual exemption for small gains and the corporation question are in transfers between CAD and USD accounts.

Does a balance held outside my country trigger an FBAR or a T1135?

It can. What decides it is where the account is held, not the currency of the balance. For the T1135 it also matters whether the company that owes you the balance is a non-resident, because a debt owed by a non-resident can count wherever the money sits. A US-dollar balance held in Canada is not automatically foreign for Canadian purposes, and a euro balance held in the US is not automatically foreign for US purposes.

The FinCEN instructions list no FBAR exception for an account used only for business, while the T1135 leaves out property used or held exclusively in an active business. A balance that also holds personal money or investment cash may not be "exclusively" business.

A US individual, including a sole proprietor, may also have to file Form 8938 with the income tax return once foreign financial assets pass its own, higher thresholds (IRS comparison; reporting foreign accounts).

No official page says which providers hold balances in which country, or whether a platform balance is a financial account: check on your account statement which institution or company holds the balance, and in which country. Which accounts count, the more-than-50% company rule, how amounts are measured and the penalties are in FBAR for company accounts abroad and foreign property and affiliate reporting.

What records tie a payout, a conversion and the bank deposit together?

Keep one chain for every payout: the platform's payout line, the conversion confirmation if there was one, and the bank line, joined by one reference written in the memo of each entry. Beyond the statements and confirmations listed at the top, keep:

• The exchange rates you used, with their source and date.
• If an FBAR or T1135 could apply: the highest balance in each currency during the year (FBAR) and the Canadian-dollar cost of the funds held, at its highest during the year (T1135). FBAR records are generally kept for 5 years (IRS).

Keep everything with the entries it supports; the IRS names sales slips, invoices, receipts and deposit slips as supporting documents. Save copies yourself rather than relying on the provider's website: the CRA says records kept outside Canada and accessed electronically from Canada are not considered records kept in Canada. How long to keep them differs by country: see how long to keep business records (US) and the Canadian guide.

Example

Illustrative rates and amounts; each scenario states its currencies. Assume no GST/HST, sales tax or VAT, and that each customer pays the day the sale is booked.

Toronto freelancer: a sale, a fee and a conversion

A freelancer books in Canadian dollars. A client pays US$5,000 on a day when US$1 is C$1.34. The platform keeps US$150. Later she converts US$4,000 when US$1 is C$1.35, receiving C$5,400 less a C$20 fee. Those US$4,000 arrived at C$1.34, so they carried C$5,360.

Sales are US$5,000 at the day's rate, C$6,700, not the C$5,380 that reached the CAD balance. The USD balance keeps US$850.

Austin LLC selling to UK buyers: a pound balance

An Austin LLC books in US dollars. UK customers pay £2,000 into a GBP balance when £1 is US$1.25, so sales are US$2,500 (fees ignored here). The month-end GBP statement shows £1,200 because £800 was converted to dollars at £1 = US$1.28, giving US$1,024. The GBP balance in the books shows £1,200, the same figure as the statement, before any dollar value is applied. The £800 carried US$1,000, so the conversion leaves a US$24 exchange gain, and the remaining £1,200 carries US$1,500.

Vancouver corporation: US$30,000 at year-end

A Vancouver corporation books in Canadian dollars. On December 31 it holds US$18,000 in one platform's USD balance and US$12,000 in another's. It ties each balance to its own statement in US dollars, clears payouts in transit, and only then values the US$30,000 at the year-end rate. At an illustrative US$1 = C$1.36, that is C$40,800; if the balances stand in the books at C$40,200, the C$600 difference is a revaluation on the exchange line, not a missing entry. It is unrealized; whether it is taxed depends on the item (foreign exchange gains on a corporate return). Whether a foreign property report is due depends on where each provider holds the account, whether the balances are held exclusively for its active business, and the total cost of all the corporation's specified foreign property, not these balances alone.

Different for you?

• Manual entry takes hours a month, or balances in three or more currencies will not tie to their statements: the accounts and clearing entries need setting up once and checking monthly. See bookkeeping help.
• Months of foreign-currency activity were never reconciled: rebuild from statements first. See the Canadian and US guides, then get bookkeeping help.
• You are a US person, a Canadian resident with accounts held abroad, or moving between the two countries: an FBAR, Form 8938 or T1135 may be due on top of the books, which should keep the figures those reports need (highest balance, cost). A move changes which apply: an individual who first becomes resident in Canada files no T1135 for that year (CRA). See bookkeeping help, the guides on company FBARs and T1135, and, for an FBAR itself, FBAR help.
• Business payments land in a personal account, or an account in your home country, or personal and business money share one balance: the business share needs separating first, and a foreign account report may apply. See business income in a personal account (US), corporate income in a personal account (Canada) and bookkeeping help.
• Your Canadian corporation keeps US-dollar books or may elect to, or you are unsure which rate rule your return follows (Canadian, US or both): a corporation resident in Canada can elect to work out its tax in a qualifying currency such as US dollars on Form T1296, filed by 60 days after the first day of the tax year (ITA s. 261). See US-dollar sales and marketplace payouts and foreign-currency accounts in US books, then bookkeeping help.
• You are choosing which currency the books use, or turning on multicurrency: see software and home currency for a two-country business and multicurrency before you turn it on.