Let's say I'm spending $5,000 a month on marketing for my business, but I'm ONLY doing it via BTC. Can I write this off as business expenses even though I'm using untraceable crypto and not actual dollars?
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are business expenses via Crypto Legitimate??
- Thread starter joseph15
- Start date
If your country is ok regarding to this : Countries Where Bitcoin Is Legal & Illegal (DISH, OTSK)
Then it's just as if you paid in a regular foreign currency.
Then it's just as if you paid in a regular foreign currency.
But still, I have to mention that some banks block transfers to and from crypto exchanges even if cryptos are legal. They just fear the paperwork and internal revisions they have to do in case some illegal transfers come to them and they have to work together with authorities. That's always expensive for them.
But from a legal tax view what you do is absolutely ok. However you may seem suspicious to them and they therefore audit you.
Your BTCs are not as untraceable as you think as every transaction can be seen in the blockchain. However with the right knowledge you can disguise them very good, mix them and transfer them from some EMI to EMI. Only needed if you want to have your "marketing expenses" in your own pocket in the end
.
(But actually there are better ways instead of using cryptos in case you want to have your marketing expenses in your own pocket...)
But from a legal tax view what you do is absolutely ok. However you may seem suspicious to them and they therefore audit you.
Your BTCs are not as untraceable as you think as every transaction can be seen in the blockchain. However with the right knowledge you can disguise them very good, mix them and transfer them from some EMI to EMI. Only needed if you want to have your "marketing expenses" in your own pocket in the end
.(But actually there are better ways instead of using cryptos in case you want to have your marketing expenses in your own pocket...)
If your BTC is on the company books and you can do a mark to market valuation against fiat at the time of expending expenses then no issue. However depending on your country the tax man make take special interest in your activity surrounding use of crypto.
You want to use an certified accountant or auditor if you bring in crypto to your company. I have been so stupid to do that with one of my companies and had huge troubles with the tax auth. until this accountant I hired finally got them convenience that all is fine.
But still, I have to mention that some banks block transfers to and from crypto exchanges even if cryptos are legal. They just fear the paperwork and internal revisions they have to do in case some illegal transfers come to them and they have to work together with authorities. That's always expensive for them.
But from a legal tax view what you do is absolutely ok. However you may seem suspicious to them and they therefore audit you.
Your BTCs are not as untraceable as you think as every transaction can be seen in the blockchain. However with the right knowledge you can disguise them very good, mix them and transfer them from some EMI to EMI. Only needed if you want to have your "marketing expenses" in your own pocket in the end
(But actually there are better ways instead of using cryptos in case you want to have your marketing expenses in your own pocket...)
Thanks guys. So you're saying that a tax authority might want to actually see the transaction as it happened on the blockchain?
I want to claim that I did not purchase my BTC through an exchange and that I had it sitting in a wallet from many years ago saved up, so no history of purchasing it through an exchange. Don't they just have to believe me in this case? How can they prove I'm lying?
How did the BTC end up on your wallet? Surely it didn't just magically appear. You either mined it, bought it, or received it from someone.
The exact details depend on where you are based and the local tax laws, but typically when it comes to tax fraud and tax evasion, you have to prove that you are innocent not the other way around. It's common to have this reverse burden of proof when it comes to financial crimes.
The tax man is not obligated to trust you. If it were that easy, there would be no tax authorities because everyone would simply say they've paid their taxes even if they haven't.
In case you really mined them and you stored them for years I am quite sure they are tax free anyway. So you actually paid corporate expenses with your "already taxed" personal money?! This would be a super dumb move as you were legally allowed to pay them out to your personal bank account without paying tax.
What is your country you have to pay taxes in? Please ask your accountant asap if he can book the cryptos as personal loan to your company so you can get this money back.
(However I am quite sure your taxman will be super suspicious, so make sure your company is doing all other tax stuff 100% correct)
What is your country you have to pay taxes in? Please ask your accountant asap if he can book the cryptos as personal loan to your company so you can get this money back.
(However I am quite sure your taxman will be super suspicious, so make sure your company is doing all other tax stuff 100% correct)
I want to claim that I received it as a gift from a couple of years ago, from a family member. Back when BTC was not very valuable (2012) and a family member was just showing me. Then I remembered I had a bunch of BTC from way back in the day, and I used it to pay for business expenses.
I really didn't know that you have to prove that you are innocent not the other way around... What kind of system is that? So if I don't have documents/receipts to prove my BTC, they're just going to assume I'm lying? That's so messed up.
I didn't mine the crypto, I received it years ago as a gift when it was only worth $50. Now it's worth thousands and I used it for my marketing expenses but I can't prove it. I never cashed it out into FIAT, I sent the contractor BTC directly, so no receipts were kept.
No
They want to see the BTC on the books of the company as i.e a loan to the company or capital increase etc etc and at a mark to market (MTM) price for the BTC in fiat. If you i.e mined it at what value was it when it entered the company books before you started using it. Keep in mind if it entered your company books at i.e $1 in 2009 and is now valued MTM at $10,000 that is a lot of capital gains tax owed possibly - depending on your tax laws. So be careful what you claim to them.
No
They perform an audit
I thought capital gains taxes aren't paid if you don't sell? Regardless of the increase in value. And when I mean how can they prove I'm lying - I'm talking strictly about the cryptocurrency transaction. The way I see it, it's impossible for them to know whether or not I actually had/spent that Bitcoin, audit or not. Would a tax authority in a first world country really take my money/freedom just cause they don't "believe me" but can't prove anything?
You had a crypto asset that increased in value and your planning on spending it to cover business fees right. So if I have a Nestle stock in my company and it increased in value and I used the stock to pay for a service....how will your taxman deal with that gain you made before disposal? What country is your company in btw as this is all subjective.
The bitcoin enters your companies books as loan, capital or income etc and it leaves your companies books when you spend it. If you are saying authorities are too stupid to trace the actual movements in the blockchain etc and you feel you can just lie to them then go ahead. You can let us know how it works out.
Yes, confiscation is real. However which country is your company in as you might be worrying about nothing.
Not really because most countries don't consider Bitcoin a currency. They consider it a commodity or an intangible and fungible asset. Yes, you can pay with intangible assets but it is not the same as with paying with US dollars. You can pay with your old socks if someone values them but it is not a currency (NB: I'm a big fan of Bitcoin, I'm just pointing out that from law and tax perspective it is NOT the same)
It doesn't need to be on a blockchain, that would be ridiculous (after all e.g. some invoices are paid in cash with no proof of payment) - it would be impossible e.g. due to exchange transactions, 2nd layer transactions, lightning network etc. However, you should have some document proving that you really paid it. Most of the time it won't be a problem but if it is a really large amount or there is VAT and cross-country payments involved, you'd better have some document for it.
This is probably the biggest problem. You will put something into expenses and you will have very little evidence of what it actually was and whether you really paid for it. Some countries (think USA, Germany, Sweden...) are very strict about this and they may not like it at all. In some countries it may be acceptable (if you have e.g. invoice from the service provider saying the amount in both USD and BTC).
You must remember that they do not have to prove you are lying, it is actually the opposite. In many situations there is a "innocent until proven guilty" principle - e.g. you are accused of murder and the police and prosecutor have to come up with evidence that you really did murder someone. In tax-related situation if you get audited there is a "guilty until proven innocent" principle unfortunately in many countries. The tax authority doesn't have to prove anything to you, you have to come up with documents and evidence. If you won't have them, you can go to court which can rule in their favour so you will pay extra taxes plus interest plus a fine. If it would be large amounts, it could be considered a fraud so it may not be only an administrative court but also a criminal court (both at the same time).
Of course I'm describing the worst possible situation. Your country probably won't "take away your freedom" as you describe because it is in noone's interest. However if you will have very large expenses in Bitcoin without any documentation, it may cause you an administrative hell in the future.
It totally depends on your country of business. Be prepared for audits and scrutiny as per the satisfaction of tax man. Also, look at if you are not breaking any AML regulations because payment via btc has some level of anonymity attached to it. Tax man would also look into the company you made the payment to and the purpose. Also, if in the future the company you made payment to does something illegal or involve in AML or other crime (terrorist funding, organ trading, human trafficking, drug money, etc) they might investigate you back depending on the amount you expensed.
If you don't want such unwanted attention to you then best is to convert your BTC to Fiat via exchange and make regular digital payments (wire transfer or credit card) to expense.
Always remember the golden rule with most of the law enforcement agencies that onus of proof is on you and not them. Ignorance is no excuse.
Appreciate the response. Again, I'm pretty shocked to find out that the tax man can just confiscate funds/take you to court even when there's no proof of anything illegal. Kind of shocking to be honest, at least for the 21st century. I don't wanna specify which country exactly but I can say it is under the Australia/NZ/Canada/UK umbrella - I imagine it's probably similar to the United States but I could be wrong.
Appreciate the response. Yeah I never put the BTC on the company books - I just wanted to show an invoice showing my transactions (rather large though) and say I paid out of my own pocket my expenses with Bitcoin i had from years ago. Again, I really thought that if I never converted crypto -> fiat, then those funds wouldn't be eligible for taxation.
I'm guessing that an invoice and nothing else is probably not enough evidence when we're talking about transactions greater than $50,000. I'm really curious to know how somebody would actually handle a situation like this one. On another note, I think it's absolutely ridiculous that our governments can just assume that we're guilty without proof when for pretty much every other crime out there, we have the whole "innocent until proven guilty". Seems like someone needs to start an uprising over this lol.
In tax matters the burden of proof tend to be inverted in what you call "first world country", so be prepared to prove your innocence ... or risk your money/freedom if they do not believe you
Often it's not that they take your money. The basic principle in accounting and business taxation is that you can deduct your expenses. However, you can only deduct expenses that you can document. Thus, when you cannot document something, you cannot deduct the expense.
That is true even if the expense is real. So what you're risking is simply that the tax man will ignore your BTC-related expenses. That simply increases your profits and you will be taxed on your assumed profits ignoring your expenses.
Now if you did not pay any tax and declared those illegal expenses (illegal as you didn't have proper documentation), then there will be fines etc. It's not magic and it's quite logical.
So "inverted burden of proof" is mostly just sound accounting. You cannot put things into your accounting that you cannot document.
This is just plain wrong. It is no problem to do so from an accounting point of view ... it is just that the gubmint will not accept any expenses that you cannot prove with documentation.
This has nothing to do with accounting ... and everything to do with taxation.
Accounting should be relevant, and a faithful representation of the substance of an economic phenomenon.
Yes, you're right. It is possible that the dog ate the cash in the cash registry and there is no documentation of it except through close examination of the excrements which you might not have included in the books.
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