WEBVTT 1 00:00:00.120 --> 00:00:03.399 This is a very significant tax here for crypto investors. 2 00:00:03.759 --> 00:00:08.119 It marks a big shift in how the IRS approaches 3 00:00:08.320 --> 00:00:11.880 crypto traders and understands their trading behavior. If you're someone 4 00:00:11.919 --> 00:00:14.919 who has been not reporting, get into compliance so you 5 00:00:15.000 --> 00:00:17.600 can call our offices. You're allowed to amend the up 6 00:00:17.679 --> 00:00:20.079 to the last three years of tax return, so amend 7 00:00:20.079 --> 00:00:23.519 those to make them correct. Report your past gains. Then 8 00:00:23.960 --> 00:00:26.600 be consistent and report everything going forward. 9 00:00:26.440 --> 00:00:29.960 So to confirm. These centralized exchanges in the United States 10 00:00:30.359 --> 00:00:34.079 will provide you with these forms and it's your responsibility 11 00:00:34.119 --> 00:00:35.719 to then file it with your taxes. 12 00:00:35.880 --> 00:00:36.479 It's correct. 13 00:00:41.960 --> 00:00:44.399 This episode is brought to you by Treasure. Treasure makes 14 00:00:44.439 --> 00:00:48.039 beautifully crafted hardware wallets that allow you to easily and 15 00:00:48.119 --> 00:00:51.159 safely store your crypto assets. Treasure has been in the 16 00:00:51.200 --> 00:00:54.119 game for a very long time since twenty thirteen. They 17 00:00:54.119 --> 00:00:58.000 were the pioneers of hardware wallets in the seed phrase setup, 18 00:00:58.200 --> 00:01:01.679 and their hardware wallets are open. In fact, my favorite 19 00:01:01.799 --> 00:01:05.239 is the Treasure Save five. It's a beautifully designed and 20 00:01:05.400 --> 00:01:08.439 easy to use hardware wallet guys, and it's my go 21 00:01:08.480 --> 00:01:11.439 to and they support a variety of coins, all your 22 00:01:11.480 --> 00:01:14.760 top crypto tokens, your big coins, your x rp Ethereum, 23 00:01:14.879 --> 00:01:18.640 Solana and much more and even new coins even black 24 00:01:18.719 --> 00:01:22.319 Rocks Biddle token, so they support coins on the institutional 25 00:01:22.400 --> 00:01:26.319 side where you have tokenization of different assets and much more. 26 00:01:26.519 --> 00:01:29.159 And they even offer a great service that helps you 27 00:01:29.200 --> 00:01:31.560 to get your treasure device set up. You get one 28 00:01:31.599 --> 00:01:34.359 on one customer support from their team, so you can 29 00:01:34.439 --> 00:01:36.640 check that out as well. So once again, I'm a 30 00:01:36.640 --> 00:01:38.959 big fan of this hardware wallet. So if you'd like 31 00:01:39.040 --> 00:01:43.079 to learn more, visit the link in the description. Hey, folks, 32 00:01:43.120 --> 00:01:46.040 welcome into the Thinking Crypto Podcast. I'm your host, Tony 33 00:01:46.120 --> 00:01:48.719 Edward and joining me today is Clinton Donnelly, who is 34 00:01:48.760 --> 00:01:51.079 the CEO of Crypto tax Audit. 35 00:01:51.359 --> 00:01:51.760 Clinton. 36 00:01:51.799 --> 00:01:52.840 Great to have you back on. 37 00:01:53.280 --> 00:01:55.959 It's awesome to be with you again, Tony. Yeah. 38 00:01:56.000 --> 00:01:57.760 Clinton. I think it's a very good time for us 39 00:01:57.799 --> 00:01:59.560 to be talking because we're approaching the end of the 40 00:01:59.599 --> 00:02:02.480 year and whether you have you have crypto gains or 41 00:02:02.480 --> 00:02:06.879 crypto losses, we need to start thinking about and planning 42 00:02:06.959 --> 00:02:09.840 for tax season. And I think you're the you're the 43 00:02:09.919 --> 00:02:12.879 expert here and we've talked many times over the years, 44 00:02:13.319 --> 00:02:15.960 so let's start about you know, what are some tips 45 00:02:16.039 --> 00:02:19.800 folks need to should have or know for prepping for 46 00:02:19.840 --> 00:02:21.080 the upcoming tax season. 47 00:02:21.759 --> 00:02:24.840 Well, this is a very significant tax year for crypto 48 00:02:24.879 --> 00:02:29.319 investors and it marks a big shift in how the 49 00:02:29.360 --> 00:02:34.039 IRS approaches crypto traders and understands their trading behavior. And 50 00:02:34.439 --> 00:02:36.360 this is the year that if you have not been 51 00:02:36.400 --> 00:02:39.039 reporting your cryptos in the past, you need to take 52 00:02:39.120 --> 00:02:41.719 serious plan to get current. Let me tell you what's 53 00:02:41.719 --> 00:02:44.560 happening with the IRS this year. They've had a twenty 54 00:02:44.639 --> 00:02:47.400 five percent head count reduction, so a lot of the 55 00:02:47.439 --> 00:02:50.879 people that were let go were new employees, so the 56 00:02:50.960 --> 00:02:53.919 older employees are all retiring. So you know, the IRS 57 00:02:54.000 --> 00:02:55.919 is facing a lot of manpower and a lot of 58 00:02:56.000 --> 00:03:00.639 backlog because of the missing people. Secondly, they have had 59 00:03:00.800 --> 00:03:04.400 seven Commissioners of the IRS this year. At this point 60 00:03:04.439 --> 00:03:09.240 in time, the Commissioner of the IRS is the Secretary 61 00:03:09.240 --> 00:03:13.560 of the Treasury, Scott Bennett. Then, and this is highly irregular, 62 00:03:13.639 --> 00:03:17.360 they appoint he appointed the Commissioner of Social Security to 63 00:03:17.560 --> 00:03:21.400 act as the CEO, which is a new position in 64 00:03:21.439 --> 00:03:24.560 the IRS, basically managing the day to day. So you 65 00:03:24.680 --> 00:03:27.680 got that guy's wearing two hats, you know, and so 66 00:03:28.479 --> 00:03:30.919 very strange things happening at the top. I think they're 67 00:03:30.919 --> 00:03:33.879 basically keeping a tight rain at the Treasury on the IRS. 68 00:03:34.520 --> 00:03:38.240 The next big thing that's happening is the broker dealer 69 00:03:38.439 --> 00:03:42.039 reporting right, and this is a bill that went into 70 00:03:42.479 --> 00:03:45.599 regulations that went into play started last year and they're 71 00:03:45.599 --> 00:03:48.199 going to see it at a taxpayer level this year. 72 00:03:48.400 --> 00:03:51.879 Come late January February, everyone's going to start to receive 73 00:03:53.039 --> 00:03:56.360 a tax form a ten ninety nine DA. DA stands 74 00:03:56.360 --> 00:03:59.080 for Digital Asset. You're going to get it from your 75 00:03:59.319 --> 00:04:03.120 centralized exchanges that you use on the in the US, 76 00:04:03.719 --> 00:04:06.800 so you will not get these from foreign exchanges. You 77 00:04:06.840 --> 00:04:10.639 will not get these from decentralized and these forms are 78 00:04:10.680 --> 00:04:13.120 totally new. We've maybe seen forms in the past and 79 00:04:13.120 --> 00:04:16.480 they were kind of like a bottom line number from 80 00:04:16.480 --> 00:04:19.120 the exchange in terms of how much your transactions were. 81 00:04:19.160 --> 00:04:21.959 But now with the ten ninety nine DA, they're getting 82 00:04:22.279 --> 00:04:27.879 transaction level detail, every sale, every exchange, every transfer, both 83 00:04:27.920 --> 00:04:31.199 the whether it's two or from your your online wallet, 84 00:04:31.560 --> 00:04:34.680 and it's also going to include the address that you 85 00:04:34.759 --> 00:04:38.480 transferred to or from. This is explosive information for the IRS. 86 00:04:38.839 --> 00:04:40.560 They're going to see now they're not going to know 87 00:04:40.560 --> 00:04:43.360 how much you paid for those things that you sold 88 00:04:43.399 --> 00:04:45.519 in exchange, but they will see how much you sold 89 00:04:45.519 --> 00:04:48.240 it for. They'll see like if you say I sold 90 00:04:48.279 --> 00:04:52.360 one bitcoin and I got twenty ethereum for it, that's 91 00:04:52.399 --> 00:04:54.720 exactly the information they'll get. They'll get the time and 92 00:04:54.839 --> 00:04:58.519 date stamp as well. So it was transfers. They're going 93 00:04:58.600 --> 00:05:01.959 to say, you know, to you bitcoin came in and 94 00:05:02.079 --> 00:05:04.920 here's the wallet address which it came from. Now what's 95 00:05:04.920 --> 00:05:07.279 going to happen is they can start to look at 96 00:05:07.319 --> 00:05:12.120 these wallet addresses and they can start to reconstruct all 97 00:05:12.160 --> 00:05:15.319 the other addresses that you're using because they're connected to 98 00:05:15.639 --> 00:05:17.800 the addresses that they know about. This is this is 99 00:05:17.959 --> 00:05:22.720 significant influx of information for the irs, and you need 100 00:05:22.800 --> 00:05:26.160 to take it's coming tougher and tougher to hide. If 101 00:05:26.199 --> 00:05:28.439 you're one of the seventy five percent of crypto traders 102 00:05:28.439 --> 00:05:29.639 that aren't reporting your crypto. 103 00:05:30.360 --> 00:05:33.839 So to confirm these centralized exchanges like your coin base, 104 00:05:33.920 --> 00:05:36.040 your upholds, your cracking and so forth in the United 105 00:05:36.040 --> 00:05:40.279 States will provide you with these forms, have all the transactions, 106 00:05:40.279 --> 00:05:43.319 and it's your responsibility to then file it with your taxes. 107 00:05:43.519 --> 00:05:48.600 It's correct now they will not be reporting purchases. Okay, 108 00:05:48.639 --> 00:05:51.079 So if you went from cash and purchase something. 109 00:05:51.120 --> 00:05:54.680 They're not going to report that. They'll report exchanges one 110 00:05:54.720 --> 00:05:57.759 coin for another, but they're just focused on the revenue. 111 00:05:57.839 --> 00:06:00.759 Here is this is big for the IRS because a 112 00:06:00.759 --> 00:06:03.279 lot of people have been hiding and eventually, even if 113 00:06:03.279 --> 00:06:07.399 you're trading off on decentralized platforms, at some point in time, 114 00:06:07.839 --> 00:06:12.000 you know you're going to you want to off ramp 115 00:06:12.040 --> 00:06:14.639 something and you're going to expose to the I r 116 00:06:14.759 --> 00:06:16.120 S addresses that you have. 117 00:06:17.160 --> 00:06:21.319 Oh yeah, yeah, because I've heard I've seen reports of 118 00:06:21.639 --> 00:06:23.680 the IRS. To your point, they're going to be able 119 00:06:23.680 --> 00:06:26.079 to plug into these major exchanges. They're also going to 120 00:06:26.079 --> 00:06:28.920 be able to plug into blockchain explorers and see all 121 00:06:28.959 --> 00:06:32.519 the transactions and it's it's all there, right Clinton. Yeah, 122 00:06:32.560 --> 00:06:34.800 So you got to stay on top of what you're doing. 123 00:06:35.360 --> 00:06:37.399 Very big. The I r S has for many years 124 00:06:37.399 --> 00:06:41.480 been using software from Palenteer, and they have the Palenteer 125 00:06:41.519 --> 00:06:45.040 software called Foundry and this allows Foundry allows it to 126 00:06:45.120 --> 00:06:51.040 read blockchain information, et cetera. So there's I think this 127 00:06:51.160 --> 00:06:53.480 is very scary information. And I'll also let you know 128 00:06:53.720 --> 00:06:55.720 of something this is this is going to this is 129 00:06:55.800 --> 00:06:56.399 very shocking. 130 00:06:56.839 --> 00:06:56.959 Uh. 131 00:06:57.600 --> 00:07:00.800 The White House is in the process of looking at 132 00:07:01.240 --> 00:07:05.759 and possibly signing a recommendation from the Treasury Department to 133 00:07:05.879 --> 00:07:12.480 join the what's called the Crypto Asset Reporting Framework or 134 00:07:12.680 --> 00:07:17.319 CARF as we call it c ARF. And this reporting framework, 135 00:07:18.399 --> 00:07:21.240 the best way I can describe it is it's basically 136 00:07:21.319 --> 00:07:24.519 a ten nine to nine DA from every other country 137 00:07:24.560 --> 00:07:27.279 that's signed them this treaty, and they're going to all 138 00:07:27.319 --> 00:07:30.920 start to report information back to the IRS about US 139 00:07:31.079 --> 00:07:36.519 traders on foreign centralized exchanges. Think about that. You can't 140 00:07:36.600 --> 00:07:38.319 hide it used to be a lot of trade offshore. 141 00:07:39.000 --> 00:07:41.279 Now people are saying, right, well, now you can say, well, 142 00:07:41.480 --> 00:07:44.959 I'm going to trade a decentralized exchange. Okay, great, but 143 00:07:45.000 --> 00:07:47.240 at some point in time, you're going to want that 144 00:07:47.319 --> 00:07:50.519 one coin that's only offered over on finance, and you're 145 00:07:50.560 --> 00:07:53.720 going to expose an address to finance, and finance eventually 146 00:07:53.839 --> 00:07:56.639 is going to have to report that back to their 147 00:07:56.680 --> 00:07:59.519 local tax authority, which passes it on to the IRS. 148 00:08:00.720 --> 00:08:03.360 Along with these addresses, these all become input to the 149 00:08:03.360 --> 00:08:04.920 I r S. They start to see it, and their 150 00:08:05.000 --> 00:08:08.439 Palenteer software will allow them to start to reconstruct people's 151 00:08:08.839 --> 00:08:11.199 portfolios even at a point of time. 152 00:08:11.439 --> 00:08:16.519 Yeah, so you can send your uncle Jerry in some 153 00:08:16.639 --> 00:08:19.759 other jurisdiction. Some bitcoin here traded for me on leverage, 154 00:08:19.839 --> 00:08:22.720 make some money, then send me back more bitcoin. You're 155 00:08:22.720 --> 00:08:25.800 going to have to uh, oh, that's going to be tracked, right. 156 00:08:26.079 --> 00:08:29.279 You're gonna be exposed. Hey, this is this is super 157 00:08:29.319 --> 00:08:33.200 super big and uh, it's just because people have become 158 00:08:33.279 --> 00:08:36.240 very much aware of it because of the Roger verb 159 00:08:36.279 --> 00:08:41.720 prosecution for tax evasion. And in there the indictment the irs, well, 160 00:08:41.759 --> 00:08:46.519 the prosecutors described how they took blockchain addresses and used 161 00:08:47.519 --> 00:08:50.639 basically tools to wander the blockchain and discover all the 162 00:08:50.679 --> 00:08:54.399 other addresses, and they used an advanced technique called cluster analysis, 163 00:08:54.600 --> 00:08:57.759 and they could identify which addresses were Rogers and which 164 00:08:57.759 --> 00:09:00.679 were somebody else's just because of the behavior, and they 165 00:09:00.679 --> 00:09:04.080 were able to reconstruct the values of his portfolios. And well, 166 00:09:04.360 --> 00:09:06.200 that case settled at the end of what at the 167 00:09:06.240 --> 00:09:11.120 beginning of October. Coincidentally, this is when the price of 168 00:09:11.159 --> 00:09:15.679 bitcoins started to drop. And if you've heard, you know, 169 00:09:15.759 --> 00:09:19.960 and most recently this came to people's attention from videos 170 00:09:19.960 --> 00:09:22.000 from Andrew Tate. Have you have you seen some of 171 00:09:22.000 --> 00:09:26.159 his most recent videos about factions? Yeah, okay, so this 172 00:09:26.200 --> 00:09:30.399 is this became explosive. People realized that KARF and ten 173 00:09:30.480 --> 00:09:32.679 ninety nine DA are going to start to report addresses 174 00:09:32.720 --> 00:09:35.799 people who have never been reporting their crypto gains for 175 00:09:35.799 --> 00:09:38.279 a long time. Whales who have big lots amount at 176 00:09:38.320 --> 00:09:43.320 stake are trying to hide these accesses, basically distance themselves 177 00:09:43.679 --> 00:09:48.559 from all their addresses by taking their assets, exchanging it 178 00:09:48.720 --> 00:09:53.120 for z cash and which is a zero knowledge proof 179 00:09:53.159 --> 00:09:57.200 privacy coin, and then later take that z cash and 180 00:09:57.480 --> 00:10:00.279 rebuy the positions that they want to have now with 181 00:10:00.399 --> 00:10:03.399 new addresses and new wallets not associated to the old 182 00:10:03.519 --> 00:10:05.559 They kind of like, you know, the technical name for 183 00:10:05.600 --> 00:10:07.879 this is called money laundering. Yeah, you know, from a 184 00:10:08.039 --> 00:10:10.519 from a lower point of view, you know. But they're 185 00:10:10.559 --> 00:10:12.639 trying to hide the old addresses. And I think this 186 00:10:12.679 --> 00:10:18.200 is a bad strategy because when you exchange to z cash, 187 00:10:18.360 --> 00:10:22.039 you're that's a capital gains events, okay, and then but 188 00:10:22.240 --> 00:10:25.919 maybe that's not discovered, but later people discover that you 189 00:10:26.000 --> 00:10:28.039 have all of a sudden, this is a big chunk 190 00:10:28.039 --> 00:10:29.720 of let's say head bitcoin. All of a sudden, a 191 00:10:29.720 --> 00:10:32.320 big chunk of bitcoin appears on your address. Where did 192 00:10:32.320 --> 00:10:36.879 this come from? Will that'll be treated as you know, 193 00:10:37.000 --> 00:10:39.720 income at as wages, and you'd be taxed at at 194 00:10:39.799 --> 00:10:43.080 your ordinary tax bracket, which is much higher than long 195 00:10:43.159 --> 00:10:46.080 term capital gains, So you really set yourself up for 196 00:10:46.559 --> 00:10:49.440 a higher tax rate. Plus you've you've engaged in a 197 00:10:49.519 --> 00:10:52.799 transaction which have discovered would look to the court like 198 00:10:52.919 --> 00:10:56.600 money laundering. And I don't think it's the best way 199 00:10:56.639 --> 00:10:59.279 to protect yourself. I'll give you a strategy for protecting yourself, 200 00:10:59.279 --> 00:11:01.159 but I think this decash strategy is bad. 201 00:11:01.320 --> 00:11:05.799 Oh absolutely. I don't understand why people would do that 202 00:11:05.840 --> 00:11:08.080 in the first place. You know, I don't think it's 203 00:11:08.200 --> 00:11:10.799 smart to go do those things. With the irs getting 204 00:11:10.799 --> 00:11:14.000 more sophisticated, they're going to use AI in different technologies. Now, 205 00:11:14.639 --> 00:11:18.000 this is not twenty seventeen or twenty sixteen or beyond 206 00:11:18.120 --> 00:11:21.320 before that. It's much more sophisticated. So I think people 207 00:11:21.399 --> 00:11:24.320 have to be aware and get their taxes in order 208 00:11:24.320 --> 00:11:25.039 and do the right thing. 209 00:11:26.159 --> 00:11:29.159 You're absolutely right. I mean, the news is tightening, and 210 00:11:29.200 --> 00:11:31.519 if you're going to try to hide in a dark corner, 211 00:11:31.559 --> 00:11:34.759 that corner is getting smaller and smaller, and eventually you're 212 00:11:34.799 --> 00:11:38.000 going to be blocked from engaging. And basically you're making 213 00:11:38.000 --> 00:11:39.200 a lot of money, but you won't be able to 214 00:11:39.240 --> 00:11:40.559 do anything with it because you're going to have to 215 00:11:40.879 --> 00:11:43.559 unload it at severely discounted prices to get anything out 216 00:11:43.559 --> 00:11:45.679 of it. You might as well pay taxes. All right, 217 00:11:45.879 --> 00:11:48.000 it's not that bad to come in from the cold. 218 00:11:48.240 --> 00:11:49.960 Let me tell you a better strategy I have. If 219 00:11:50.000 --> 00:11:54.360 you're someone who has been not reporting and you're terrified, rightly, 220 00:11:54.559 --> 00:11:58.279 for sure, here's what I suggest doing. Get incompliance and 221 00:11:58.360 --> 00:12:00.639 you can call our offices. We can have a confidential 222 00:12:00.679 --> 00:12:05.519 discussion about your situation. But get into compliance. You're allowed 223 00:12:05.519 --> 00:12:07.679 to amend the up to the last three years of 224 00:12:07.759 --> 00:12:10.639 tax return, so amendos to make them correct, to report 225 00:12:10.919 --> 00:12:16.679 your past gains, and then be consistent and report everything 226 00:12:16.720 --> 00:12:20.879 going forward. Here's what happened. Here's how the IRS thinks 227 00:12:21.000 --> 00:12:24.360 and decides who to audit. They looked at certain data points, 228 00:12:24.399 --> 00:12:27.639 and the key data point is did you report on 229 00:12:27.679 --> 00:12:31.720 your tax return all the income that the IRS knows 230 00:12:31.759 --> 00:12:33.960 about you? Well, this income is coming from ten ninety 231 00:12:34.039 --> 00:12:37.480 nine forms and in the future year it will be 232 00:12:37.519 --> 00:12:39.759 a car forms as well. They're gonna see what was 233 00:12:39.799 --> 00:12:42.600 the total sale values of all that? Now, did you 234 00:12:42.720 --> 00:12:45.480 on your tax return report at least that many that 235 00:12:45.559 --> 00:12:48.960 much in sales on your tax return, right, because if 236 00:12:49.000 --> 00:12:52.559 you didn't, then obviously you didn't report everything. You're hiding, 237 00:12:52.720 --> 00:12:56.879 they'll auditude. If you report more than that they know about, 238 00:12:57.000 --> 00:12:59.720 then auditors go like, well, this guy's being honest. He's 239 00:12:59.720 --> 00:13:02.000 telling is tell us about everything, So they're not going 240 00:13:02.080 --> 00:13:06.919 to spend time going after the accurate and truthful tax return. Now. 241 00:13:08.000 --> 00:13:11.399 If you hide, then you're gonna get set yourself up 242 00:13:11.440 --> 00:13:16.679 for a correspondence or even an IRS human audit, in 243 00:13:16.720 --> 00:13:19.879 which case they will start to engage the palanteer tools 244 00:13:20.080 --> 00:13:22.960 to look for past behavior like this and catch you. 245 00:13:23.360 --> 00:13:26.720 All right, So if you want to prevent that from happening, 246 00:13:27.039 --> 00:13:29.759 get current and stay current on your taxes now, and 247 00:13:29.879 --> 00:13:32.120 they will look past you as they start looking at 248 00:13:32.120 --> 00:13:34.320 who to go after. There's so much low hanging fruit 249 00:13:34.360 --> 00:13:37.639 for the IRS that they're not going to spend time 250 00:13:37.720 --> 00:13:43.840 looking for the person who's being honest. Yeah, And the 251 00:13:43.879 --> 00:13:46.240 second thing you do is you get our tax shield product, 252 00:13:46.279 --> 00:13:49.399 which is on our website eighty nine dollars a month, 253 00:13:49.440 --> 00:13:51.840 and we monitor IRS records. We can see six months 254 00:13:51.879 --> 00:13:54.320 in advance if the IRS is auditing you, and we 255 00:13:54.399 --> 00:13:57.120 can set up a chance to repair the tax return 256 00:13:57.159 --> 00:13:59.879 before the audit begins and keep it from ever happening. 257 00:14:00.039 --> 00:14:02.759 We also will defend you for that price if you 258 00:14:02.840 --> 00:14:05.039 do get audited. So this is there's no other service 259 00:14:05.120 --> 00:14:08.399 like it. Those two things are the best strategy for 260 00:14:08.480 --> 00:14:09.360 protecting yourself. 261 00:14:09.759 --> 00:14:13.519 That's really great that you can proactively monitor, you know 262 00:14:13.679 --> 00:14:15.799 if you're someone's about to get an audit. Is it 263 00:14:15.879 --> 00:14:19.000 like an API type setup where you are able to 264 00:14:19.039 --> 00:14:19.320 see that. 265 00:14:20.240 --> 00:14:22.879 In effect, that's how we pull the data from the 266 00:14:22.919 --> 00:14:25.879 IRS as an API structure. Every week, we pull all 267 00:14:25.919 --> 00:14:29.519 your tax returns the last twenty years and all the 268 00:14:29.519 --> 00:14:32.320 the records and flags that the IRS has put on 269 00:14:32.360 --> 00:14:35.639 your account, which there's lots of minute administrative, but we 270 00:14:35.720 --> 00:14:38.279 pull it and we can detect if there's an underreporting 271 00:14:38.320 --> 00:14:41.919 condition which I discussed, or if they've actually flagged your 272 00:14:41.960 --> 00:14:44.639 tax returns for an audit. It's flagged, and then it 273 00:14:44.679 --> 00:14:47.679 goes over to the auditors, which are backlogged about at 274 00:14:47.759 --> 00:14:49.720 least a six month backlog at this point, and that 275 00:14:49.720 --> 00:14:53.159 gives us a chance to keep you from having me 276 00:14:53.200 --> 00:14:54.960 get to the audit. If the auditor sees you've already 277 00:14:54.960 --> 00:14:56.480 fixed the return, he's not going to start it. 278 00:14:56.840 --> 00:14:59.240 Now, I did want to ask you about staking rewards 279 00:14:59.240 --> 00:15:02.679 and taxes because we've seen staking has been gotten, has 280 00:15:02.679 --> 00:15:05.879 gotten to clarity from the SEC. Many exchanges are offering 281 00:15:05.919 --> 00:15:09.399 staking again. So let's say people earned a certain amount 282 00:15:09.519 --> 00:15:13.159 of rewards, whether they're taking ethereum, salona, whatever else, right, 283 00:15:13.759 --> 00:15:16.279 how do they report that for their taxes? 284 00:15:17.399 --> 00:15:21.000 The IRS came out with a revenue procedure which is 285 00:15:21.399 --> 00:15:25.519 fairly well down in terms of guidance, and they said 286 00:15:25.600 --> 00:15:29.960 that staking rewards would be taxed upon receipt at the 287 00:15:29.960 --> 00:15:34.240 fair market value and US dollars when you received it. Now, 288 00:15:34.759 --> 00:15:41.600 there is a proposal from that Senator Citia loomis put 289 00:15:41.600 --> 00:15:47.080 into place called the Digital Taxation Act Digital Asset Taxation Act. 290 00:15:47.120 --> 00:15:51.840 It's in the Senate and it proposes to change taxation 291 00:15:51.919 --> 00:15:55.840 of staking rewards and mining rewards until to be when 292 00:15:55.960 --> 00:15:59.159 you actually sell it later, so you will not be 293 00:15:59.240 --> 00:16:03.679 taxed upon resus but it'll be sold later. And that's 294 00:16:03.759 --> 00:16:07.559 in Congress. It's a bill that the White House supports. 295 00:16:07.799 --> 00:16:09.600 I think there is a high likelihood that don't get 296 00:16:09.600 --> 00:16:14.399 tasked probably next year. But you know, so some people 297 00:16:14.480 --> 00:16:16.879 have taken some people are taking a position to say 298 00:16:16.879 --> 00:16:18.960 I don't want to pay taxes on a receipt. I 299 00:16:18.960 --> 00:16:21.279 would rather pay later. So you know, we actually work 300 00:16:21.320 --> 00:16:23.639 with people and we just disclose it and we take 301 00:16:23.720 --> 00:16:27.159 the more aggressive tax position for the client. We disclose 302 00:16:27.200 --> 00:16:29.320 it to the IRS, which is that's a way to 303 00:16:29.360 --> 00:16:31.879 make sure you don't get dinged by the IRS. On that. 304 00:16:32.720 --> 00:16:35.480 Yeah, I'm of the mindset. I love that bill, by 305 00:16:35.519 --> 00:16:38.919 the way, I think the stakeing rewards like, I often 306 00:16:39.039 --> 00:16:41.960 don't sell it. I just keep it because it cruise 307 00:16:42.000 --> 00:16:44.240 over time and it gains in value. But I'm not 308 00:16:44.600 --> 00:16:46.840 changing it for US dollars, so I don't feel there's 309 00:16:46.840 --> 00:16:49.360 a taxable event. But the RS may be treating that 310 00:16:49.399 --> 00:16:53.000 as income all right, even though it's not being sold 311 00:16:53.000 --> 00:16:54.000 for dollars. 312 00:16:54.320 --> 00:16:56.600 It's an interesting bill. I think that's good. I think 313 00:16:56.639 --> 00:16:59.840 the mining rewards thing is good. I mean the argument 314 00:16:59.840 --> 00:17:03.080 on is, hey, you don't tax a baker on making 315 00:17:03.159 --> 00:17:05.319 a loaf of bread until he sells it to a customer. 316 00:17:05.359 --> 00:17:07.079 Just because it comes out of the oven it looks 317 00:17:07.079 --> 00:17:08.839 like a loaf bread, he hasn't made money. I mean, 318 00:17:08.839 --> 00:17:12.079 that's kind of the argument. There are some things I 319 00:17:12.119 --> 00:17:14.240 don't like about it. I don't like about the bill. 320 00:17:14.359 --> 00:17:17.799 I do not like the wash sale rule, and the 321 00:17:17.920 --> 00:17:20.960 wash sale rule Section ten ninety one of the Tax 322 00:17:21.000 --> 00:17:24.079 Code says if you buy back and ask if you 323 00:17:24.119 --> 00:17:26.480 sell an asset for a loss and then buy it 324 00:17:26.559 --> 00:17:30.119 back either thirty days before or after that sale, then 325 00:17:30.240 --> 00:17:34.480 you are denied the claiming that loss on your tax return. 326 00:17:34.519 --> 00:17:37.400 That's a very harsh penalty. And it happens to you 327 00:17:37.480 --> 00:17:40.039 once you find out about it, and then it never 328 00:17:40.079 --> 00:17:41.880 happens again because you figure out how to You know, 329 00:17:41.960 --> 00:17:44.559 you basically buy on different exchanges and you don't report that. 330 00:17:45.000 --> 00:17:48.839 It's a stupid tax. The only argument they have is 331 00:17:48.880 --> 00:17:50.759 like they say, this is what happens to stocks, we 332 00:17:50.799 --> 00:17:53.720 should do it for crypto, which is how about this argument, Hey, 333 00:17:53.720 --> 00:17:55.880 it didn't make sense for stocks, and why do it 334 00:17:55.880 --> 00:17:58.640 to crypto. It's a tax on being young and stupid 335 00:17:58.640 --> 00:18:01.079 and how to do taxes. The other thing I don't 336 00:18:01.160 --> 00:18:03.279 like is the deminimous rule. I think it's a just sep. 337 00:18:03.400 --> 00:18:06.440 I think it's I think it probably The dominionist rule says, 338 00:18:07.119 --> 00:18:10.720 up to five thousand, you can exclude from your tax 339 00:18:10.759 --> 00:18:14.599 reporting transactions where you only had three hundred dollars of 340 00:18:14.640 --> 00:18:17.559 gain or less. For a total of five thousand for 341 00:18:17.640 --> 00:18:19.519 the entire year, and you don't have to report that 342 00:18:19.599 --> 00:18:21.839 on your taxes. Well, guess what, you still have to 343 00:18:21.880 --> 00:18:24.960 account for all your transactions to be able to identify 344 00:18:25.000 --> 00:18:26.880 which ones had three hundred dollars a gain. I mean, 345 00:18:26.920 --> 00:18:29.160 it didn't save you any labor in the tax preparation. 346 00:18:30.440 --> 00:18:33.759 And you know, an auditor, this is what happens with 347 00:18:33.799 --> 00:18:36.759 the IRS. They don't want to audit that all right, 348 00:18:36.839 --> 00:18:40.160 because it's a maximum exclusion of five thousand dollars in taxation. 349 00:18:40.680 --> 00:18:43.079 With the IRS, I believe will do is create what 350 00:18:43.119 --> 00:18:45.480 they call a safe harbor, and they basically say, if 351 00:18:45.519 --> 00:18:48.200 you report this, we're never going to audit it. An 352 00:18:48.240 --> 00:18:51.319 auditor has very high targets to how much money he 353 00:18:51.359 --> 00:18:53.000 has to bring in, and he's not going to make 354 00:18:53.039 --> 00:18:56.480 it by going after people's deminimous amount. I just think 355 00:18:56.759 --> 00:19:00.279 I think it's just stuff for politicians to talk about. 356 00:19:00.319 --> 00:19:03.519 It doesn't save anything on taxes, and it's just it's 357 00:19:03.519 --> 00:19:07.279 just the waste. Oh I like the bill, Yeah, yeah 358 00:19:07.319 --> 00:19:09.559 for sure. And maybe there's some more fine tuning to 359 00:19:09.640 --> 00:19:11.839 your point. You know, the points are brought up before 360 00:19:11.920 --> 00:19:16.359 that gets past. Do you think Trump has floated a 361 00:19:16.359 --> 00:19:18.240 lot of ideas. You know, we don't know what's going 362 00:19:18.279 --> 00:19:20.720 to actually come to fruition. Like he's right now talking 363 00:19:20.759 --> 00:19:24.240 about eliminating income tax. I don't think that's gonna happen, 364 00:19:25.000 --> 00:19:27.200 But you know, I wonder if they would do a 365 00:19:27.400 --> 00:19:33.839 flat capital gains tax fee on on, you know, not 366 00:19:33.920 --> 00:19:36.720 based on your income level, but maybe something lower. I 367 00:19:36.720 --> 00:19:40.279 think Japan just did something like that for crypto transactions. 368 00:19:40.480 --> 00:19:43.440 I think that's a really important discussion. Lots of countries 369 00:19:43.519 --> 00:19:48.039 do different things. Some countries hardly tax crypto. Some of them, 370 00:19:48.039 --> 00:19:49.519 if you hold it more than a year, they won't 371 00:19:49.519 --> 00:19:52.039 tax it. In the US, if you hold it more 372 00:19:52.039 --> 00:19:55.039 than a year, you can tax that lower rate. That's nice. 373 00:19:55.720 --> 00:19:58.799 But both those rates are high enough rates that it 374 00:19:58.880 --> 00:20:03.480 drives people in to hiding income. It puts the average 375 00:20:03.519 --> 00:20:08.079 person into a risky tax position, I think. And I 376 00:20:08.119 --> 00:20:11.640 actually wrote a letter to Donald Trump and Secretary of 377 00:20:11.640 --> 00:20:13.920 Bennett a couple of months ago, and I said I 378 00:20:13.960 --> 00:20:17.519 did not like the Working Group recommendations on tax. I said, 379 00:20:18.119 --> 00:20:23.240 you know, the IRS has significant difficulties auditing crypto tax returns, 380 00:20:23.720 --> 00:20:27.279 and my recommendation was to completely eliminate the capital gains 381 00:20:27.319 --> 00:20:30.839 tax If you do that, you eliminate all that complexity. Further, 382 00:20:31.880 --> 00:20:36.440 they want to use regulations to make the US the 383 00:20:36.480 --> 00:20:40.079 crypto capital of the world. And if you eliminate capital 384 00:20:40.119 --> 00:20:44.960 gains tax along with adding in taxi, you know, tokenizing 385 00:20:45.079 --> 00:20:48.720 all real world assets, the US will become the center 386 00:20:48.839 --> 00:20:52.960 of assets worldwide. Every asset in the world eventually would 387 00:20:52.960 --> 00:20:56.160 be tokenized in the US because it has a zero 388 00:20:56.240 --> 00:20:58.559 capital gain tax. One of my main arguments for this, 389 00:20:58.680 --> 00:21:04.720 or except with arguments, but one is presently foreigners are 390 00:21:04.720 --> 00:21:08.480 not taxed on capital gain activity in the US, right, 391 00:21:08.519 --> 00:21:12.240 so if a Frenchman invests in stocks in the US 392 00:21:12.920 --> 00:21:16.799 sells it for a gain, he experiences no capital gain tax, 393 00:21:16.880 --> 00:21:20.640 whereas the American does. And my argument was, hey, this 394 00:21:20.759 --> 00:21:24.680 is the same argument as tariffs. Why should foreigners get a 395 00:21:24.720 --> 00:21:28.279 better rate than Americans. Let's eliminate it for everybody, because 396 00:21:28.279 --> 00:21:32.559 it's because if we look down the road with tokenization 397 00:21:32.960 --> 00:21:37.079 of assets and the tokenization of virtually everything on the blockchain, 398 00:21:37.559 --> 00:21:41.960 when we're taxing every little minutia of life, it's the 399 00:21:42.079 --> 00:21:46.279 data aspects of it are just phenomenally overwhelming, and we 400 00:21:46.400 --> 00:21:50.039 don't need to be rolling in this taxation complexity if 401 00:21:50.039 --> 00:21:52.640