Bitcoin Tax and possible audits - are you prepared!

LittleIndian · 2024-05-30 18:10

This may be of interest to many here.

I am looking into tax implications when one day I sell my crypto with my possible millions. Big amounts in a Tax return might trigger an audit.

I have added personal money to a hardware wallet as an investment account which has been pretty much separate and I can see the amounts I have bought from the exchange and mapped to entries on the wallet.

But from the same Exchange account I have used crypto to buy Dark Market stuff over the years which has gone to an Exodus wallet and then to mainly Tor Market vendors. All my Monero ones have gone to Incognito and the new one (forget the name)

When I eventually sell I will declare the tax. If IRD decides to they can request more information or even a start an audit. If they looked hard enough they would see transactions that have gone off to random BTC accounts. Now days I use Monero.

I would be able to prove that date / time and BTC address for those legit Tax declared transactions. The 'other' transactions - well you know where they go.

Would IRD get sent and maybe ask ab out other transactions? Any thoughts or information, experience? Anyone ever had to answer questions from the Tax man?

Last edited by LittleIndian (2024-05-30 18:10)

JohnsCob · 2024-05-30 18:40

You shouldnt have an issue as long as you aren't trying to claim those as expenses

They will be marked to market against your cost basis at the time of sale iirc

The issues will come if you cant prove the original source of the funds

to everyone else here PAY YOUR TAX theyll get you eventually

LittleIndian · 2024-05-30 18:50

Thank you for your message.

'The issues will come if you cant prove the original source of the funds' ... meaning what I used to buy the investment crypto in the first place?

If so those funds are legit.

Sorry for my ignorance... could you explain this, They will be marked to market against your cost basis at the time of sale iirc.

Thanks for your time.

JohnsCob · 2024-05-31 15:10

Yes as long as you can show hey I bought it from here on this date here is the receipt including the current price of the asset etc
and hey I sold it here on this date here is the receipt

Ok so there are two examples and ill simplify

One. You bought the crypto and the price was 20k. Its now 70k.
Your profits will be based on the price difference when you sell. Eg 50k

Two. You received it as income when it was 20k.
Its now 50k
You will pay tax on that whole amount. PLUS any difference in price between. So in this instance you'll be liable for paying tax on the 50k

In both of these cases you can also offset your income tax if you are selling at a loss.

Some terms worth looking up. Cost basis, mark to market IRD has some decent information on there aswell.

There are a few decent crypto accountants in nz so I would suggest engaging one of those if you need to navigate this properly

Things get very tricky when you have been trading since each transaction is classed as a sale lol

JohnsCob · 2024-05-31 16:40

And remember guys Al Capone got taken down for tax evasion not other crimes.

The piper always gets paid

LittleIndian · 2024-06-05 22:20

Thanks for the info. This has got me a long way. I am using Koinly to do the imports of all my wallets so getting there.

Any thoughts on what I could tag those 'other' transactions as just to keep to a story?

So in other words what would you use crypto for in the real world that 'seems' legit?

Gambling? Crypto Credit Cards? What other random purchases could I tag these transactions as?

JohnsCob · 2024-06-06 20:20

Depends what the wallets are that the coins are sent to are tagged by chainalysis as.
If you went directly wallet to market via btc this will be obvious and easily tracked these funds are now forever tainted and linked directly to you

You will NOT have an issue for paying tax on these since you arent claiming expenses even if it is obviously illicit when looked at by an investigator

You COULD have an issue if you get investigated for drugs or other dnm related activities and youve declared these wallets and they decide to look into them

In saying that the chances are slim even if you went btc to market that this would cause an issue
This is why XMR is the only coin people should use for markets

If you are looking for a reason dont use gambling as this could(unlikely) effect you negatively in the future

There is a huge distinction here in how you should move forward

Last edited by JohnsCob (2024-06-06 20:20)

LittleIndian · 2024-06-06 22:40

Thank you for reaching out and helping here. I really appreciate it. Makes sense.

This is really awesome information! I hope others are getting valuable information here too.

I've been using Monero for a long time now which is a bonus.

Question... Is "to market" deemed a DNM market address or just a purchase to any individual address in general. With Tor market it was independent addresses not linked to a market from what I understand. I might be caught up on terminology here.

Anyway... great information!

Pay your taxes

JohnsCob · 2024-06-07 15:50

No worries I find crypto fascinating and I try encourage people to not screw themselves over by not paying tax and also not making their clean wallets dirty.

Especially when its only for personal use its easy to get complacent because you arent gonna get done for domestic you aint Pablo

So with TOR market you have this chain of events
- Deposit directly from your wallet into the market wallet
- The market then moves this deposited money around into hot wallets
- Withdrawals - come from hot wallet

Most of the time these hot wallets are profiled by big firms such as chainanalysis as being owned by the market.
Guess what those coins you deposited to an individual address eventually ended up in one of these hot wallets
So by the science of deduction you can assume that you bought or at least deposited something at X date
If this correlates with a postage stamp timing then this hugely reduces plausible deniability

Now, are the NZ police going to do this for personal use? No lol but it's all theoretical and fun to think about

Ok great you use monero now but what about in the past

Imagine this scenario.

- TOR market was storing all the information for years and the feds got the data eventually
- A vendor didn't PGP tracking to you once OR relied on auto-PGP which was stored in plaintext by the admins
- NZ Police get bored and work with the feds to mine any low hanging fruit in NZ marketplace transactions
- They see your tracking number and look up the photo of the package
- They check your financial history with IRD and see you declared a sale of $XXX 1 day before that package was shipped - FLAG 1
- Funnily enough that transaction was worth $XXX aswell - FLAG 2
- This $XXX ended up in the known TOR market wallets - FLAG 3
- You finalized the marketplace transaction the day the tracking says it was delivered - FLAG 4

Now they know your
Real Name
Tormarket Name
Crypto Transactions (You handed this on a silver platter)
Marketplace Transactions

Hmm okay lets go digging how many transactions has this person done that correlate (Timing and $ amount) with a TOR market purchase under your assumed username

Moral of the story

Use PGP
Name and shame vendors who send sensitive info without PGP
Use Monero
Keep your legit funds clean
Never send direct to market
And the biggest one overall. Stop overthinking this, if you are personal user ordering domestically you will be fine.
Police cant even get ram raiders

Thanks for keeping me busy during a boring work meeting

imhavingalovelytime · 2024-07-16 16:40

what about buying large amounts with funds you cant verify?
so much they are saying they will no longer allow my account to trade?

JohnsCob · 2024-07-17 13:30

Couldnt quote your msg but

Face to face is available in any of the larger cities and would even be worth flying or driving to your closest to facilitate this

Last edited by JohnsCob (2024-07-17 13:30)

imhavingalovelytime · 2024-08-06 18:20

what exchange offers F2F?

will look into that.

Xar777 · 2024-08-07 14:10

Just a warning for F2F, in the EU this is a common vector for getting jacked. Make sure you do it in a very public space and keep your wits about you. Otherwise yeah it's a good way to exchange XMR both ways and remain anon.

Another method if your looking to cash out on a regular basis is to setup a legit business and just pay the tax man as others here have said. NZ is actually pretty crypto friendly for now so long as you pay the tax and your not doing anything overtly illegal then all is well from the IRDs point of view.

Regarding outgoing crypto payments, I would just say I blew it all on dice games (which is somewhat true anyway) or the ol famous "boating accident" excuse.

Plausible deniability is something inherent to XMR and cryptography in general.

beepboop69 · 2024-09-14 09:40

ird literally has a dedicated team to process tax for illegal income so im sure youll be absolutely fine. they dont give 2 fucks where the money is coming from aslong as your paying them

NZ Darknet Market Forums

#1 2024-05-30 18:10

Bitcoin Tax and possible audits - are you prepared!

#2 2024-05-30 18:40

Re: Bitcoin Tax and possible audits - are you prepared!

#3 2024-05-30 18:50

Re: Bitcoin Tax and possible audits - are you prepared!

#4 2024-05-31 15:10

Re: Bitcoin Tax and possible audits - are you prepared!

#5 2024-05-31 16:40

Re: Bitcoin Tax and possible audits - are you prepared!

#6 2024-06-05 22:20

Re: Bitcoin Tax and possible audits - are you prepared!

#7 2024-06-06 20:20

Re: Bitcoin Tax and possible audits - are you prepared!

#8 2024-06-06 22:40

Re: Bitcoin Tax and possible audits - are you prepared!

#9 2024-06-07 15:50

Re: Bitcoin Tax and possible audits - are you prepared!

#10 2024-07-16 16:40

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#11 2024-07-17 13:30

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#12 2024-08-06 18:20

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#13 2024-08-07 14:10

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#14 2024-09-14 09:40

Re: Bitcoin Tax and possible audits - are you prepared!

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