Tax implications of darknet transactions

So, if I declare my bitcoin on taxes, could I face issues for having spent some on the darknet? What if I transfer the bitcoin to a separate wallet and then swap it for Monero? I'm guessing this wouldn't be a big deal unless I got audited, right? Just to clarify, I'm in the USA.

You report the profits/income you did with your BTC not how many bitcoins you own, and it can only be in fiat. Even if your government asks the citizens to report how many bitcoins they own, it concerns those stocked on exchanges and alike. They don't ask what's your BTC address and start to track what you do with it and anyway it still needed to get evidence it was to do something illegal An audit is to show when/how you bought xxx BTC and when/how you sold xxx BTC and where the funds have been transferred (your bank account). An investigation is different

^ Let me explain my opinion. No, it will not give you a headache or put you in jail if you report bitcoin on your tax. It will only identify how many bitcoins you have but not with the activities you did on your bitcoins. Surely they will not investigate all your transaction because of the law for privacy but nevertheless, you don't have to worry that much on your tax report but definitely, you will have one if you chose not to report at all.

Anybody else have any thoughts on this? I'm not convinced

OakBarn, I think LeGaulois gave you a pretty clear answer, and to be completely sure I advise you to seek the advice of a local expert on such issues in your country. Since you live in the USA, and the tax laws there are very strict, I understand that you are worried about not taking the wrong step and that you end up paying dearly for it. Bitcoin is not the ultimate solution to anonymity as some think, especially in darknet transactions, so if you are already going in that direction to use BTC on darknet, maybe you should start by considering some other ways to buy coins. In other words, try to find a somewhat anonymous way to buy BTC (without KYC) and then you won't have to pay taxes and worry about paying on the darknet.

the IRS doesnt care if you're doing drugs. In fact they expect drug dealers to report income regardless of if its legal. In your case, they care about did you pay capital gains. -if you bought bitcoins and then immediately  bought drugs with it = the there is no taxable event and even in a IRS audit you are fine. -if you bought bitcoin waited for the price to moon and then bought drugs, you are supposed to pay tax on the capital gain.   >For example you bought bitcoin at $1 and then when bitcoin reached $1000/btc you bought $100 worht of drugs. You were supposed to report $99 gain in capital gains.     >> So if the IRS were to audit you they dont care that you bought drugs, in fact you dont even have to mention it was drugs,  just simply say "purchased a item" without saying what. They dont give a fuck what you bought.       >> of the $99 taxable dollars, you'd only owe depending on your tax rate mayeb $10 in taxes, so its really not a big deal.

If you want to report Bitcoin to a government that receives tax, it will have a useless effect and you only spend uncertain time, including (US), already knowing Bitcoin how it works. The reason: the problem is; at the moment there is no definite international policy on cryptocurrency / Bitcoin tax regulation, specifically for each country and internationally, although there are some countries that are considered as Bitcoin properties that benefit the country regarding tax ownership such as; Japan, Germany, the United States, Russia, Canada, Israel, Singapore and many others,they have their own reasons for Bitcoin taxation decisions for pph income. For example: