 Great welcome digital asset news pick a top stories in crypto and break them down to bite-sized pieces today instead of talking about the news I Think we should talk about something a little more important Which is also the most tedious and boring that for some people, but it's not for me and she hand its taxes so if you don't know this is she hand Shantra karra he is a Legitimate CPA that specializes in crypto and digital assets she hand welcome back to the channel Yeah, thanks for having me good to good to be a participant this time. I Know I know you're busy because everybody's gearing up for taxes and things like that you can find follow she hand over at At the crypto CPA. There's a link in the description also, but I want to show you These are the the outline of what we want to talk about Today so first of all, let's go over this. There was a Portugal article and When you actually get taxed for crypto, it's gonna be like a general 50,000 foot overview then we're gonna talk about Staking and taxes and this recent lawsuit that came out. That's being fought right now We're gonna talk about and this is what I was curious about Virtual land versus physical land can we use depreciation 1031? How is that get taxed because I don't want the IRS to be on my door? And this is you know for a lot of different people also you wrote a great piece on Web 3 so I want to talk to you about web 1 web 2 web 3 and how that relates to taxes And is the government really ready to tax us in this wallet based society like what you said? And then lastly we'll talk about tax forms programs and of course everybody's favorite How the heck do I minimize my taxes for the plan? Legally, you can tell us the illegal stuff she had if you want to but we'll take the legal stuff And then lastly we'll do a little Q&A. So hold your questions and tell the end please It's hard to go through everything. So Let's start off my man with this There was an article and it was pretty good It was with you and Diddy from the Bitcoin family about Portugal for 0% taxes and the thing that you wrote Right here. I you must get like Like asked a ton of different for to be on ton of different pieces because you're like the only one of the few Like CPAs that that that delve in this. So you must be like super busy, you know Yeah, I mean lately, you know, they have been so many reporters asking Questions about, you know, US taxes and even you know overseas taxes and especially now we're in the tax season This is a hot topic. So yeah, it's been busy lately Yeah, I got you so look we're gonna go over all this stuff, but I know some people I'm just perusing on the comments real quick. You guys are scared about taxes. I understand We've got a couple of programs for you. That'll help you out make it super easy One is a coin trader once crypto trader. So we'll talk about that very end super simple So here's the thing. So here's what you you had said Portugal views crypto as a form of payment this that distinction as a game changer And you said capital gains resulting from crypto transactions such as cashing out and Crypto to crypto trades are not subject to personal income taxes Did they quote you correctly? So capital gains from crypto transactions such as cashing out and Crypto to crypto trades are not subject to personal income taxes that correct Yeah, I mean Portugal is one of those countries that has you know, super friendly crypto rules So yeah, you can cash out your crypto. You can convert one cryptocurrency to another And you can accumulate ton of belt and it's not subject to their personally come tax code. So Yeah, so Portugal are truly a crypto tax element. So we should all move to Portugal. Is that what you're saying? No, I mean, obviously it depends on the facts and circumstances of you know, each and everybody I would again, you can talk about this in a tax-saving strategy scenarios I would first kind of see if it makes sense for you to to do anything in the first place And if you really have to save taxes I think one of the easiest thing you can do is to kind of go to like a state with no income taxes Before kind of moving your entire time. They do like a overseas country Yeah, so so here's the thing. So in Portugal when you cash out It's you're not subject to income tax, right? But let's take the us And for the most part a lot of different countries if you let's say you've got you bought bitcoin at 100 bucks Now it's what is it today? $44,000 Somebody let's say you need the cash you cash out. You have it in cash. Is that Is that taxable? Yeah, that is taxable event. So you pay the difference between The sales price and the cost by cost basis. That's the profit on beach. Yeah to pay taxes on Perfect. Here's another question. I got bitcoin. I bought it for 100 bucks I went to 44,000 then I take bitcoin and I put it into usdc, which is a stable coin. Is that taxable? It is tax. Uh, taxable No, it's kidding. Okay, go ahead. This is a question that that I get all the time I'm pretty sure off you get it as well like I never cashed out anything. I just went from bitcoin or ethereum to like a stable coin Unfortunately these stacks because of the way that the iris treats cryptocurrencies iris treats cryptocurrencies as a property So in your example, I don't remember the exact numbers but let's say you got a bitcoin with 10,000 and At $40,000 you you didn't cash out you converted that bitcoin to a stable coin Right, you would pay taxes on $30,000 worth of gains Oh No, that's awful. Okay. So now you now, you know So everybody so if you want to stable coins like everybody talks about you could get potentially taxed Depending on where you're from if you're in portugal. No big deal Abu Dhabi, I think you're okay Puerto Rico we were here at prac 60 no problems But the rest of the places different various attacks is an off you go So so there's that here's another question. I get uh, let's say that tesla brings back The opportunity to buy a tesla with bitcoin. Let's hope so, right So I buy bitcoin for 100 bucks now 44,000 I buy a model x a very cheap one. I would add Uh, I'm just buying for a good. So my tax on that one or am I good away with it? Uh, it is it is absolutely Because uh, you know, you're uh Expensing an asset and receiving another type of asset And the trick here is that at the time you expense that asset that asset as appreciated So iris wants you to pay taxes on that Appreciated gains now that you're realizing by getting a car which is worth 40 to 45 thousand dollars Okay, this is what we were talking about before everybody says the same thing about Taking profits. They're like, I don't want to take profits. I don't want to pay taxes, right? So let's just say for example, you buy bitcoin for 100 bucks It is now Hold on. Let's say you buy 10 bitcoin at $100, right? You you spent a thousand bucks Now you have $440,000 Okay Would you would you take some profits out out of that or actually no, that's actually a pretty bad example Let's say like this. You bought xyz coin. It's a hundred bucks, right? It goes up 25 in a week Right, and it's very unstable. You know, it's gonna crash or you think it's gonna crash So now you've got a hundred and twenty five dollars Let's just say Would you take out any kind of like profits off that? Yeah, you personally sheen and and this is not investment advice. Just investment opinion. How would you do it? I I wanted to say the same but this is not investment advice or tax advice It all depends on your goals. I mean rob this is but I've been a you know, listen up the show It all depends on on your goals, right? Yeah, personally speaking I would only cash out if if I have something Else better that I can do with that cash, right? What's the point of you know converting into to cash and kind of You know costing yourself because there's inflation and stuff like that So that that's number one I mean if you were to cash out first, is that going to move the needle for you or do you have anything else to do with that cash Yeah And then the other criteria that I think is that like let's say, you know You could send them out of money and bidding. I don't know maybe a couple of days or very Like a very short period of time. It goes like in the 50 60% gains In my opinion, I would cash out because it's those are, you know Very aggressive returns for the amount of time that you kept your capital in So in my mind Yeah, it's it's worthwhile kind of taking that, you know a little bit out of the table and just just invest that money in some other coin So that's how I got you and just just a little de-risk type of action Maybe not the whole thing just take it off I guess that was a pretty bad example 125 bucks and you're going to pay 40% of short-term capital gains on $25 So you're going to get like 13 whatever it is. All right. So that's answers that So let's move on to staking and taxes because this is the this is the big thing that had just come out recently and My thing is this like I stake a lot of my crypto A lot And a lot of those things are coming back and now it seems like well All the gains that I got from the staking cardano specifically Now I could potentially get tax, but there was this great lawsuit going on right now Uh with the this is a Nashville couple. I forgot their name. I think you what was their name the Yeah, josh and jessica jarrett And they went all the way and they are suing the irs And I thought to myself first of all, I was like, well, how can they sue the irs? Because it's just they're just a a family from Tennessee, right? How are they going against that and of course in this article let me blow this up so I can see it Uh, they are being bankrolled by the proof the proof of stake alliance And you know who's in that people like coinbase and people like gemini and people like facebook and meta They're the partial funder of the lawsuit And what this comes down to is they're like, hey, what how can you tax me? On the rewards that I got from staking when I haven't even sold it So she and how do we play this? Because there's it looks like the law is in place where they're gonna tax you but there's like a gray area So how does this work this year? Yeah, so I want to clarify that this is an ongoing court case And it's not finalized yet or anything like that. So don't uh, you know, blindly believe the the headings that you see on Some of these articles. It's just an ongoing court case, which is actually very favorable for tax pay So I'm I'm generally excited about this So here what they're arguing is that, you know, when you receive these, you know Cardano, whatever the new staking rewards, these are considered newly created property And they're giving some analogies from other court section of the the IRS like for example If you're creating a book You don't get taxed at the time you're done authoring the book, you know, you get taxed at the time you Sell that to an actual person uh Other example, if you're mining, uh, like let's say minerals out of the ground You don't get taxed at the time you take those minerals out of the ground You get taxed at the time you're selling it same thing with the farmers, you know, you don't get taxed at the time you see The harvest on the ground you you you get taxed at the time you sell that harvest in a market so They're applying that, you know, newly created property tax rules just taking And and what happened was that iris actually accepted their argument and iris refunded Whatever the extra taxes that they paid for that staking income Bro, are you there? Yeah, I just I just put you on on big screen because people want to hear you. I don't want to look at me. All right. Keep going. Sorry Makes sense. Uh, so iris did accept their argument and they refunded whatever the extra taxes the jarrits paid to the iris So it's a it's a I mean, it's a good ending for the jarrits But jarrits declined to receive that refund because iris failed to clarify The reason behind issuing that refund and that reason is super important for jarrits So they can make sure that iris not going to come up to them for the same reason In the future, yes At the same time jarrits were going to set like a precedence So other stakers as you know, there are a lot of stakers in the us and all of the world So if if we can get a reasoning from the iris other stakers can rely on that reasoning And not report staking income at the time of the receipt So because iris didn't give that reasoning jarrits took it to the court Because when there's a court, you know proceeding iris has to give Some reasoning and that that court ruling can be used as a Proceed and do not pay taxes at the time you receive the statement. So that's what's happening It's it's it's a favorable movement towards a pro-tax fair Tap of result, but it's not finalized yet. So that's that's what I want you guys to know Yeah, and that makes sense. And then of course in this article It does say that a bench trial is set for march 2023. So for this year, we're kind of aced out So here's the question And I don't know if you can answer this but if you're You are my cpa and I'm asking you so she had how do I play this? Do I report to the iris? the 10 billion dollars of I'm just kidding the the thousands of dollars that I got in rewards from my firm cardano from solana From ginsokishi all these things that I have Or do I just say no, I'm not going to report that and good luck finding me Uh, it really it really depends on like your risk tolerance, right? I mean if you want to be a little bit aggressive, you can be like, okay, I have I'm fairly confident that the court ruling is going to be, you know, taxpayer taxpayer friendly Um, and you could also have the exact same situations like jarred, right? Maybe you did taso staking So that kind of gives you like a more stronger argument to kind of follow the the same type of ruling even though that it's not necessarily a ruling it just a news because it's not a court proceeding yet so So if you if you want to be a little bit aggressive, maybe talk to with your cpa and and you can decide not to report staking income at the time You receive it, uh, receive it, uh, thinking that this that's going to be a court ruling to support that in the future Yeah Yeah, so the and or the conservative ways, you know, just kind of keep doing what you are doing meaning you're You know, you're reporting staking income at the time you're receiving it Uh and starting next year and hopefully this ruling comes out and from that point onwards, you know, you kind of We start reporting you don't start reporting income at the time you receive those staking reports uh Well, let me ask you this so here because like what you said made a lot of sense an actual physical minor Doesn't have to pay any taxes for the precious metals that they dig out of the ground until they sell those precious metals That makes complete sense and it is the same thing now. We're just talking about digital precious Assets essentially so to me in my mind. I'm like this cannot be this this cannot be law I will probably go a certain way with this one. I probably won't and I think uh moving forward will be okay But here's another question What would be the penalty if I said, you know what? I don't want to and then next year These jerseys lose the case it sets precedent it is staked and you have to report it Would that be like a huge fine or would be like, okay? All right now, you know, we have some clarity. Here you go I mean at that point Again, it depends, you know, you had to see, you know, if you want to go back and amend the return, right? That's the kind of right way to rectify things Uh in some cases again talk to cpa like it might not even be amending the return because Because you probably had a little bit of staking income. Maybe the Because it wasn't a big deal, right? It wasn't a big deal exactly And the the other thing to remember is that either you report staking income today or staking income later Uh, you still had to pay the same amount of I guess same Same amount of capital gains like throughout like throughout the whole the the life, uh, span of that coin So let me give you for for example, because a lot of people think that okay like this is great And so I'm not going to pay any taxes. That's not the way it works So the conservative approach, you know, you receive let's say one cardano reward Let's say five dollars. Um, and then you decide to report that as income and later you sell that for 20 dollars And when you later sell that for 20 dollars, you report, uh income taxes on 15 dollars with a gain, right? $20 minus five That's the conservative thing. Now, let's say you want to follow Jared's And at the time you receive that cardano reward, you decide not to report any income So that cardano reward has zero basis and when you later sell that for 20 dollars, you report $20 worth of gains. So the total gain that you report is Is is identical. It's just a time. It's it's about when you pay taxes Right. So, you know what when I in my mind what I'm thinking myself is I'm not reporting it and then later on if they say you have to okay That is that is a decision now. I'll go forward and I'll pay my taxes. I mean shoot, but I'm not going to just be like Hey, here you go. I know it's a gray area. So that's just me again This is not what you should do watching but that's what I will do and she hand has probably always do it Okay, so that's that part. Let's move on to something that I had no idea. This is a question I was thinking about we did this video It was about When I bought land in The sandbox and I showed you I showed everybody how to The the way to look for parcels and had grouped the parcels and to get a better deal and things like that And I didn't spend that much. I think it was just like like one or two ethereum now It's worth way more, right? So on that on that one, uh, how does that work for? Uh, virtual land versus physical land can I because like am I On these uh on these physical plots right here like in this house I can claim depreciation over 30 years and that is a tax deduction and that's why like I I always think that people should own Uh some property whether that be real or investment or whatever you want to do But depreciation works out pretty good. Can I claim depreciation? I know it's a funny, but you never know On my virtual land and how does that work with because I bought that plot of land? And and it's and it has appreciated greatly. So how does that work? Yeah, so uh at a high level virtual land is any type of digital property Just think of it as a coin. So you have a cost basis any how much you paid for it And then you later sell it you'd pay a couple game taxes um So it's it's unfortunately virtual land, uh, you know, you cannot depreciate land to begin with for example Uh, even if it's non virtual land because in order for you to depreciate something It has to have a useful life and and land, you know, has an unlimited life So you can only even in the non virtual world. You can only depreciate Buildings and etc. That's like a business or investment type of property Uh, so the two things just know that even though it's virtual land Like you cannot cannot get any like additional benefits like depreciation The other question that I get is okay It's virtual land and in the non virtual land Or buildings like you can do this 1031 exchanges meaning Right, you can, you know roll over the profits from one identical property to another and differ taxes Can that can that be done in the virtual land? Not really because that section 1031 the like kind exchange treatment is only applicable to real property. So Unfortunately virtual land is is not real property. I got you. Hey, how about this one? Okay, this is this is a little bit out. I'll base let's say you're on the virtual land You buy virtual land you put some type of structure in that virtual land So in the sandbox, I'm going to have some place where I'm going to hang up my nfts Or something like that, right? And then I want to expand onto that and I want to build different things So let's just say for example that I want to make this really nice And uh, there's a new code that needs to be done So I need to hire a developer to do this to actually upgrade The different structure that I have in this virtual land Could I use the developer As a tax write-off For my and almost like depreciation. Would that be a possibility or no? It is a possibility if you're using the virtual virtual land As a as a trade-off basis meaning like you bought the virtual land and you're you're literally trying to make like, you know Profits out of Building an exhibition center for nfts in the virtual land So still you cannot depreciate the building because depreciation is applicable like these You know like hard structures being real property But anything that you spend on to get it ready to Press into nfts meaning get get it ready to have the building and or the graphics and etc In other words, whatever the good compensation that you pay for the uh the developers that could be a business deduction Because that's all true and necessary for you to get your bare land To to the point that it's it's ready to exhibit like your nfts Gotcha, you know what? I'm thinking about it and we're going to move on I don't want to dwell on this but like if I owned some type of virtual land and like web 2 Uh, it has depreciated because everything's moving to web 3 and I'm like, you know, there is depreciation here I will never win that argument, but I'm just saying that's what it is So that's leads me to my next point You wrote an article about web 1 actually on web 3 And how things are moving into a wallet based economy. I'm going to pull this up real quick So you can talk to us about it's going to get a little tricky so Let me go up here And just to bring people back So web 1 just so you know web 1 was like the very early days of the internet You had stuff like I mean you still had I mean Netscape Internet Explorer and msn You're still a google, but it was read only or decentralized and I was like really it was decentralized There was a great article all link of the end In the 90s web 1.0 was running on a fully decentralized infrastructure And it says one web 1.0 was running on a fully decentralized infrastructure Anyone could host a server and every computer on the internet would act as a relay between browsers and servers That's exactly what we're doing right now And then of course web 2 became stuff like this where everything is just a is hosting massive computer data centers and servers and things like that and everything goes through a centralized Locale and now we're looking to go back to decentralized Where everything is based on just the decentralization process different nodes and and it is it is hosted on people's computers Just like all the blockchain and bitcoin things like that. So what you wrote here Was you said the current financial system blow this up The current financial system built on web 2 is centered around accounts You saw everything by signing up for an account just like in google just like on amazon just like any every place This account base system makes you tax compliant compliant By employing what's called the irs document matching system third parties report your activity So everybody out there if you think that coinbase isn't reporting your activity to the irs trust me They are and every different exchange. They're pointing reporting it to those tax agencies unless you live in a different place that don't like Puerto Rico Anyhow this system third party information actually works really well in account based economy, which of course however Web 3 is creating a wallet based economy and web 3 start everything by creating a wallet as opposed to an account Your identity is tied to your wallet metamask fans. I'm not to a third party Accounts care who you are like in kyc know your customers wallets don't care because my metamask doesn't care who I am Accounts are owned by a third party wallets are owned by you and me Accounts make you tax compliant wallets don't care about taxes and a pure wallet based economy tax informants enforcement will not work Because your activity is not reported to the irs by third parties Founded in an account based economy pseudo anonymous wallet holders have no incentive report either Simply taxes are incompatible With web 3 and you said I don't think that tax regulators have thought about the possibility Of a wallet based economy so leading up to that How is that going to work moving forward because it's an interesting concept that everything that we have in our metamask wallets Uh, how they gonna know? Yeah, so, uh, I think this is a major problem and um Again the regulators are super behind on this thing. Uh, I don't even see that regular to see these as like I've been a potential challenge Uh, because you could come up with all the tax rules, but then the question is how enforceable Are they in a 50 tapper system? So my proposal, I just kind of it was on the trade as well the only way to kind of You know, if it's like a pure wallet based system and by the way, I don't believe the world's ever going to be kind of binary You know, we are moving completely towards like a wallet based economy. You know, there will always be like an essentialize Um exchanges and etc and people will still be using that because other people are they don't want to interact with simple platforms and You know, all people are not super technical So I think the the way that the tax compliance is going to going to work again I don't know the time period maybe next five or 10 years or maybe next 10 to 20 years uh, the regulators can directly, um You know police the you know the cash, you know on and off ramps. Uh, that's pretty easy, right? Because yeah, you know, you know uploading, uh, you know giving cash to coinbase then there could be some taxes that could be implemented at that that Similarly at the time you exit from from that web 3 world to the uh to the real world to like a coinbase or whatever the off ramp Yes So those are like two practicals way ways that you know regulators can work on. Uh, the the other way is kind of, you know, uh Embedding some type of, you know, small Tax percentage to the transaction itself. So think about, you know, similar to paying gas fee. There's like a I don't know like a maybe like a global uh, tax fee that goes to like a global tax Dow or something like that that gets distributed to the countries all over the world um Yeah, so those are like I guess the ways that we can kind of You know make these wallet holders tax compliant while preserving their privacy I gotta tell you when I read that A light bulb went off and I was like, yeah, how are they gonna how they don't know that like let's just say like And I'm not saying this has ever happened But let's just say that I have a metamask wallet and someone wants to pay me for a service They live in oh, I don't know Let's just say Spain and they're like, hey, Rob. I want this service. Great. We'll send me over some Whatever usdc. Sure. Here's your usdc. All right. Well, I don't have to report any of that stuff And I'm not saying that I won't but I'm not saying that I will But I'm just saying that uh, those wallets it's very very difficult and now I understand why By the administration everything else how they talk about crypto and digital assets are actually a national security issue Especially what's going on russia and china and the digital rubble and the digital you want So it makes sense again. I don't know how they're gonna do it But I can tell you what right now what I see and I think you feel the same way she in America is Vastly behind the ball on crypto and digital assets. Just my opinion Yeah, I I agree. It's it's literally like, you know, me coming to your house and just handing handing you all like a $100,000, you know, but you know briefcase. I like that what's inside um You know, it's really hard for anybody to track unless you go to Central, you know third party like a bank or deficit then then it's gonna, you know, trigger some some some reporting but In a wallet based system, you know, that's why in my example if you're you're working for a dowel You're getting paid through a cryptocurrency directly to a madame asca con and you never have to cash it out because you can buy your grocery You can pay your rent and everything. Yes in the in the metaverse so then Then how is everybody anybody's gonna know right? So Yeah, exactly. That's awesome. Okay. So then lastly, we'll finish up and we'll get to everybody's questions This one is about there's a couple of things. First of all tax form tax tax or excuse me exchanges in the tax forms and then we're going to talk about uh the programs That you can use and tax minimization. Actually, let me let me get that out of the way first That's probably the most important. So everybody out there who's a little bit Uh A little bit Uneasy about taxes you got two options. First of all crypto trader dot tax. That's one that I use there's a link in the description It looks just like this I even did a uh explainer video on how to use it from the time I open it up time I get all my My integrations my api integrations take me 30 minutes. There's a direct integration to voyager now That's good for some of you who like voyager Also, it integrates with the dexes and nfts and things that you bought an open sea and stuff like that So that's mine Also shihan Has works for a unicorn status company called coin tracker and they do same types of services a little bit different In way that they approach things, but there's options for everybody And coin tracker is of course another option for you and you can check that out coin tracker.io. So shihan Talk to us about two things. First of all Tax forms from exchanges. What are we getting ready to do? And then how can we minimize these taxes legally you could but after this you can tell me illegal stuff that you want to On this on this one Yeah, so let me kind of go through what kind of tax forms you can expect to receive from from these exchanges Important topic because we are in the tax fighting season um, so number one uh 10 9 and miscellaneous, um, if you Earn any staking rewards in excess of six hundred dollars or any type of Other type of rewards for completing certain activities and etc. You You you can go to the tax center of the exchange and you should be able to download this form And that that's obviously taxable income. You should receive that on that form and that's that goes on your tax return Uh, the other form you might see, uh, Rob. Do you have any questions or? No, go ahead. Okay. So the second type of form you you might see is the form 10 9 9 k That form uh summarizes your monthly activity It's it's not a Tax payer friendly form. It's it's the the numbers over there is is useless because it does not Actually, yeah, that would be great if you can put the uh form 10 that's by the form 10 9 and miscellaneous Uh form 10 9 k so it's kind of as soon as you receive it, you're going to be like, oh my god These numbers are completely wrong. These numbers are super inflated uh The the reason is that the this form does not report your cost phases In other words, how much you paid for the coin? So if you ever receive this form, just make sure you connect your wallets and exchanges to a crypto kinds of tax software tool to kind of get the right numbers out of this form Do not just put this form or what are the numbers on this form with the tax return If you do that you're going to be over paying your taxes big time uh The the other the third type of tax form you're going to see from some exchanges is a form 10 9 i b Uh, this is the form that you're going to get from like stock brokerages Like you know if you try to stop in, you know robin hood or td. I'm gonna try you guys see this form Uh, this form is actually actually useful in in most cases. It shows your, you know, cost basis It shows your, you know sales price But when it comes to crypto and especially if you have multiple wallets and exchanges The the cost basis box going to be zero. It's going to say missing cost basis And in that case you're going to have to figure out the cost basis By using a crypto tax software tool because if you do not report the cost basis, you're going to be all paying taxes again No, um Yeah, so so those are the three three tax forms and And I would say the number four is, you know, there are some exchanges They don't issue any type of, you know, formal tax forms and they just give you the transaction history report It's it's complicated. Like you're going to see there are thousands of lines. Um, yeah, I never liked that one Yeah, yeah, it's really hard to figure out your taxes by looking at that So again, you're probably going to have to use a crypto tax software tool to kind of convert that reporting to a taxable gain Our last report Uh, and then the last one finally if you're using like, uh, like these web three type of protocols Like could be Unisvab, OpenSea or MetaMask, you're not going to get any type of reports whatsoever So in that case, you will definitely need a crypto tax software tool And and you can connect to a MetaMask or OpenSea directly there and and the software can kind of figure out What your Ethereum address has been doing and and kind of convert that into Uh, capital gains and capital losses. So those are the the five types of things you can expect this tax season Perfect. Okay. So that takes care of that part. So we're all in compliance. No one was like great. That's awful Let's talk about how to minimize taxes and this is important and uh, there's I know there's there's different things. There's uh, Tax loss harvesting one of my favorites And you can kind of do those things and then what else can can help us actually minimize these taxes Yeah, so I'll start with taxes harvesting. So as you guys know the market goes through ups and downs all the time So if you got into let's say, for example, I'll take bitcoin If you have bitcoin and and you pay six nine thousand dollars in several months ago You can sell that coin harvest the loss and and get back in the same coin if you really believe in bitcoin um, so that harvesting that loss helps you You know minimize your taxes meaning right that that loss can offset your crypto capital gains and even stock and even in some case W2 and other types of income as well So it's worthwhile for you to kind of sell these and harvest losses versus kind of continuing to hold hold them and if you I mean, it's good to be a hoardler, but Creating that loss kind of helps you offset your taxes. Yeah, so shanis. Here's a question real quick. So just so you know What he's talking about is wash trading essentially and that is illegal to do in equities, correct? You can't sell your stocks and then buy them right back in like a minute later. It doesn't It's just to be clear. It's not illegal. I mean you can still do it But iris going to disallow that loss because you did it within without waiting 30 days In the crypto space, uh, you can do it like real quick like, you know in the next second But at the same time I would be really cautioned about doing stuff like that I would at least fade, you know, maybe a couple of days or three days Because this is whole argument called, you know substance versus form In simple terms, you know, if you're selling something to create a loss and on the next second You if you're buying back the same thing iris could say that hey, you're actually trying to create artificial losses Uh, so therefore even though, you know, you can do that in your specific case You literally did that to create an artificial loss because you didn't even wait like a second To buy back. Exactly. Yeah Yeah, so make sure you you give like a reasonable time period before you buy back. Yeah, I got you and then so here's another question So like right now because we're in 2022 I mean anything we do right now for that specific Type of action we can't use that as a loss in 2021 right that would only apply to this year 2022 So if you were going to do that for last year's taxes, that's when you would do it now Right now when everything was going down and things like that that would have been a good time to actually sell and With day or sell like she has someone and then buy it right back Take those losses on paper And of course there's transaction fees depending where you go to but then you have those losses locked in so that's like That's a good strategy. What else also she in can we do for tax minimization? Yeah, the the other easy ones are like if you really need to cash out Make sure you sell the long-term coins first meaning the coins you have helpful more than 12 months because Those coins are subject to a more favorable tax rates than the coins that you purchased within the last two months There there are some software tools that's going to kind of help you identify You know, what are your long-term coins? So you can sell them if you really need to cash out Um The the other stuff that you can do like this is like kind of a big move But it's going to save you a bunch of taxes, especially if you have a lot of gains If you're if you live in a you know high Taxed state like, you know, california new york canary in new jersey You can go to a state like texas of florida with no state income tax and and obviously you have to establish your residency there And you can cash out your crypto positions and and those gains Uh Would not be subject to any state level income tax because those states don't have any taxes uh So for example, just to give you some numbers like if you're a high net worth individual uh in in california You got to pay federal taxes up to 37 percent and then the highest california tax rate is like 13. Something percent So if you if you go to texas you can easily save that, you know 13 uh person state level taxes that you would have otherwise paid Yeah, makes sense. Yeah, so that's a good one for the us and then is there any other thing that we can do to kind of so Of course, just to recap make sure that you Sell the ones that you've held the longest because you don't want to pay short term capital gains less than a year Everything over a year is good to go Is there anything else we can do to kind of minimize these types of things besides moving to portugal or portorico or apodavi or something like that Yeah, so the the other Ones are like i mean i don't rub like you're always talking about self-directed iras You can you know create crypto currency in a self-directed rock ira So you can compile your capital gains and everything inside that account and you don't have to pay taxes today Uh, and if it's a rock ira you pay taxes You don't even you don't pay taxes at the time you get that money out either as long as you qualify the the correct age requirement You know what perfect and before we get to the q&a. So thanks for all those those questions I had a question yesterday from somebody who said hey, what a Roth IRA makes sense for me because i'm 61 years old And i was like and i was thinking about i was like well I mean because you're over 59 and a half years old. So i mean you put in the Roth IRA Wouldn't that be tax-free if it appreciates like so let's say he puts bitcoin at 44 000 he's 61 years old He waits four years at 65 years old bitcoin is a million dollars. Well, just say i'm not giving a prediction Would he have to pay taxes on that if he takes that he puts it in his Roth IRA? Um, I don't know if there's an age requirement to set up a Roth IRA. I had to get back to you on that Yeah, that was I didn't know But wouldn't that be great? Like you're like things you're like i want to go tax-free and just open Roth IRA just and never and you can What's great about these Roth IRAs and of course there's a link in this rips and itrest capital It's an upright above Shean there is that you can do all the trades you want within that Roth IRA If you think bitcoin's in a crash you could sell your bitcoin for cash in that Roth IRA You could sit on it as it went from 69 to 33 buy bitcoin back and you would pay again zero Capital gains tax. That's I think the coolest thing. I don't do that because I don't trade and i'm not that smart So that's what we have for today Shean thanks for coming by we appreciate it. Let's get to some people's questions and hopefully I need to remind myself to Remind people to hold their questions till the end because I know everybody's got some pretty good questions So let me turn off this banner. This is this is the fun part. I like this part. This is fun Cal stinks. I'm ready to leave. Yeah, I don't blame you. I don't know what the what the tax rate is But I think it's I want to say it's above eight percent for capital gains tax and I think it might be going off Let's see Jay says you both are amazing. Thank you. We appreciate it That's nice you Uh, this one I can't pull up but it says, um, amazing content dan and she had I've been Doing the majority of my trading on an exchange that doesn't require k yc From us residents Can the irs see those trades wink wink? That's a good question If it's a good question, uh I mean, obviously iris has You know ways to figure out who owns, you know certain wallets and etc Even without the k yc information, uh, they have been a bunch of cases that that that iris has been successful Because they have access to tools like you know chain analysis and stuff like that So I wouldn't Encourage you like not to report anything because the exchange is not doing k yc Uh, if you're still moving around money, you know, there are certain type of reports that could get triggered at the bank level uh, and So I wouldn't I wouldn't be it would not be safe for you to not report anything So I'll leave that. Yeah, I would think like this and this is just me brainstorming not that I'm doing this But I'm just saying like let's say it's in let's say you've got an exchange over in Kazakhstan, I don't know and uh, you do all the things there's no k yc and then they're and all of a sudden you're like Hey, I think I want to take Uh 100 bucks out today and it goes into your bank account I don't know if they'd be able to try I mean We know that that the the irs is is pretty much triggered for bank accounts of over $10,000 But I'm not telling you what to do and I don't want to get my I don't The digitalized news uh channels just just uh taking away because I'm like, hey this guy's giving out a device But I'm just saying I don't know how they would do that, but maybe they have some superpowers. Who knows Mullets here Can't sell on a wallet and that's true. It's a good point Uh, let's see. Thank you rob and shean. Thank you And then this is uh take the risk it will cost you more than what I'm not sure about that one Oh Here's a good one. My brother just moved from new york to japan Same pay but takes home much more than before reason to I don't know what the taxes are in japan Maybe that'd be a good plan. I'm not going to move there. So who knows? Um, how about this one? How is it considered when you buy nfts with crypto assets? Like how would they distinguish that like buy nfts with a theory or any other coin? So would you well when you buy the nft Would that be Let's say you buy a 30 minute 100 bucks Now it's 3000 you buy an nft for one ethereum. That's $3,000. Is that a taxable event at that point? It is a taxable event. Uh, you gotta come the you had to pay taxes on the 29 hundred dollars for the profits Ah, let's see Here's another one. Here's another one jason says any thoughts on the charitable remainder trust As an exit strategy now I've heard this before Charitable remainders or charitable organizations that you can set up and you put it into a charity non-profit organization, but How does that work for charity? Like let's say I bought a 30 for 100 bucks And then I it goes to a $3,000 and then I contribute that $3,000 to the humane society. How does that work? Yeah, so in that case, uh, you get a tax deduction for $3,000 because that's the market value at the time you're donating your You know coin to the charity So you get the $3,000 tax deduction and you do not how to pay the capital gain tax On the appreciation. So that's the advantage there Gotcha, and then um, I was thinking about a question. Let's say that Gifts So how does that work? Let's say again the same example $100 for a theorem goes over $3,000. I give it to my wife Can I give an unlimited amount of gifts or is there a cutoff or there is no gifts? I can give away as far as tax reasons and how many times can I do that You can give away gifts like uh, so you can give uh Up to $15,000 every year as a gift for unlimited number of people As long as it's below $15,000, you don't have to even report anything if it's above $15,000 again There's no taxation for you. Uh, know the recipient But if it's more than $50,000, you got to have you had to file like a tax form called form 709 disclosing, uh You know the stuff about the gifts and when you give to the United States, etc But generally speaking receiving get a receiving a gift is not a taxable event Uh giving a gift to somebody else is not a taxable event either Interesting, but the the other thing is that you really have to know what a gift is for iris purposes Gift is something uh that you give it to somebody else without expecting anything back if you're expecting Something back then then it's not a gift then then it's a dispossession event That could trigger a taxable event. So I'm good. Well, I think my wife's gonna be pretty happy Someone's gonna gift this year. All right. So there's another question here What about a run pull? How do you report because there's been tons of those on on the d5 apps? How do you report that on the tax form? Can you report on tax form? Yeah, it's kind of like a gray area because uh There was this act called uh tax cuts and jobs act which passed in 2017 And that restricted people from claiming theft losses on on the taxes uh, so Again, first of all, we had to figure out again. What type of loss is that? I mean if it's a tax loss, uh, you know, if somebody hacks you or something. It's unlikely that you can claim that uh But at the same time I have seen you know, some people claiming Rock Bulls as like an investment loss meaning like if you reinvested three thousand dollars and Now the coin value is zero They will report, you know, three thousand as a capital loss But the problem is that in order for you to report a capital loss. There has to be an exchange of something Uh here you had a coin I went to zero. Yeah, there's no exchange. You didn't sell it to anybody So that's that's why I said it's kind of like a gray area. I've seen people doing it in both ways This is a this is a prime example. Here's my my example. Um So I had steve urlick He was the ceo of voyager on and everybody was was saying hey We want to open up the the token swap because we got screwed and we weren't around for it And it was open for nine months. So I don't know what to tell you But I made a mistake on my zero token zero token had the exact same thing It was a token swap for a token called relay I didn't I took my eye off it for months. I didn't really care about it So let it sit and then they had a token swap in 45 days I missed the window and I lost a good 10 thousand dollars And I was really ticked off, but it was my fault because I mean who it's me I mean, that's the one so now I'm thinking about this and right now it's worth 0.001 cents or something like that Are you saying if I sell this to somebody bite to an exchange or whatever else then I can claim those losses Yeah, then it would be considered a capital loss. Yep Oh, I will be doing that today. Well, I mean, I can do it to I can do it today, but it'll have to be for taxes this year, which kind of sucks Yeah, here's another good question. I can't bring it up. Uh, it's from uh, pompano pompano mic and he says does interest received from From voyager or Celsius and other exchanges fall under staking. So these are Interests that you get from the apy from the crypto that you have on those platforms Is that a staking rule because they're sending out 1099s? Is this interest and staking different? Interest is taking a different, uh, because staking is based on, you know, some type of proof of staking mechanism and it's actually According to you know, whatever the information that was in that, you know, code case Have you described you're creating actual like, you know, new property, but in the case of interest You're not actually creating new property. Like you're getting a pieces of property that already exists Um, that's that's that's a taxable event unless, uh, you know, somebody argues that point Again, these are all gray areas. So people, uh You know, if you have deep pockets, you know, you can argue with the iris and sometimes you know, you can end up like You know what I guess would be how they pay how they pay you an apy because I think on voyager Like I put dot in there dot is that 12 percent apy So that's the interest that I get and they do what they do with with dot, which would be they will lend it out They can rehypothecate whatever else they want to then they give me the yield on that which just adds to my dot position So it actually comes back. But the other places that they give it to you in like die I think in in celsus correct me wrong in the comments, but they give it to you back and die or in like kind Or I think other places. It's the us dollar I would understand that if it's the us dollar then definitely you're gonna pay But if it comes back to you in the same crypto How would that work? Sheen does that make sense? Yeah. Yeah. So I think There's some confusion with marketing terms, right? I mean sometimes, you know, some of these thought forms They're like, okay, I'm giving you interest, but it's actually like a staking reward So first of all find out exactly what they're doing after you give them money I mean, if it's a staking reward that you're receiving Again, you could make the argument like Jared's that I'm receiving newly created properties So I shouldn't be taxing on that again. It's not a finalized case, but that's an ongoing thing On the other hand if you're giving like for example, I do this like You can lend G usd to to Gemini and Gemini is, you know, lending it to to other people and in that case I'm actually getting interest because you at usd I'm not earning any staking reward. So in that case, it's it's interest. So that's that's clearly taxable at a time You're receiving it And then when they pay you back or they pay you in g usd Or they pay me in g usd. Yeah, which is the stablecoin Okay. Yeah, okay. I give what you mean. So there's just the way they're doing it Is it just interest or is it staking from the protocol itself? Okay. Here's another another good question and How about taxes with with a strong token nodes? And I think this would be the same thing as like a cardano node that you run or cardano staking I would I would think correct me and I know I know mullets got a couple Of strong nodes, but I think that's how it works Sheanna, are you familiar with strong nodes and setting up nodes to gain and do you get Do you get paid in in strong token? That's the question I'm not exactly familiar with the strong nodes. Uh, but again, I I want to reiterate this That Jared's case is not finalized But if you could make the argument that you're receiving some type of newly created token um You could rely on the Jared's argument, but it's it's risky because it's not a final court ruling yet. So Yeah, okay. So we'll see how it does. Let's see Uh IRS hates crypto I don't really hate it I think the government's really excited about it because that's a lot of opportunity to tax the live and tar to people And I mean just to get some get some more money into it. That's what it is Now let's see Oh, this is a good one Can you split your gains and your tax return into capital gains and business income? I don't think that's No, it's it's not possible. Unfortunately. Yeah Uh, okay, how about this one? Which entity is best for a trader? Not considered a trader per the IRS because I guess you to be considered a trader You have to do this for a full-time job and things like that. So would it be an LLC an s corp C corp So to be a trader Yeah First of all, it's it's really hard to meet that criteria. Uh, you know, you had a new trading, you know, set number of trades every year Uh, consistently throughout the year and it has to be kind of your main source of income So it's really hard to meet that bar under the IRS Um, if you if you think that you have a lady trading basis, you could set up an LLC LLC is a legal structure. So LLC could be taxed as S corporation or partnership or a bunch of other things. Uh, so I would stop at an LLC Yeah, S corporation could work If you if you have at least in 100,000 or more Income then then you could see some tax savings compared to like a regular LLC Gotcha. How about this one and then after this we'll go in there five minutes. So this has been a long one We're almost going for an hour. So what about losses from trading? Uh, I mean if you have losses from from trading as an investor, you can use that losses to offset your crypto capital gains and also stock capital gains Gotcha. And then here's the last two. So well, first of all, when mullets, hold on, let me go down here I think he answered this I haven't seen this guy forever. Oh my god. This guy's a classic XRP freak. He used to he he was always a troll Spam is what you get unpaid to pump channels like rob's. Hey man. I missed you. Thanks. Thanks for coming back Oh, let's see what else over here. Uh, this is uh Oh man, sometimes I get nostalgic Uh, I don't have the answer for the strong nodes yet. There's two questions that I wanted to bring forth But just one actually And it's just it's just a it's not a tax question But do you think the us is likely move the digital dollar to tax everyone accurately? I and to me, I don't Well, what do you think she I mean, can we really get The us a digital us dollar and they're going to tax everybody accurately and everybody will use it I think it's very tough to do I think it's pretty tough. Uh, it's it's going to really Raise like a privacy concerns and etc as well. Um, I think you're so far away from from that type of thing Yeah, I don't know. All right. So now we're coming up. It's the last one I think that is it Oh, this is just a comment. I guess I'm 60 years old I trust Roth. I already told me I have to wait something like three years to pull out Without paying. Yeah, and I someone else had five years So I guess if you're 60 and you create a Roth IRA, you still got to wait some time frame before you put out That makes sense actually. Okay. All right. She and that's it man It's been an hour and I know you got a lot of stuff because you're coming with tax times You can't hire she had anymore He is uh, he is moving into other realms unicorn status, but I'm saying thanks man for coming back on it's it really helps people because People get scared about taxes and I don't blame them. I mean they they they scare me sometimes But they also make me angry, but I think it's just through education. We can do a lot better So she had any last words of wisdom for everybody out there Uh, no, thanks for having me Rob and um, if anybody needed any introductions to a comments I'm happy to do so just reach out to me on twitter Great, and then let me pull up your information again so people can see it You can follow him over at at the crypto CPA or you can just look at my timeline I'm always talking to him on twitter. So just go to twitter. It's the easiest way to find. Uh, she hand. That's it So she and thanks for coming by hey stick around. We'll talk about the illegal stuff that we can't tell these guys I'm just kidding. All right, everybody. Thanks so much. Appreciate it Thumbs up and uh, subscribe. I'll see you guys in the next one. Adios See you