Avoiding Capital Gains on Cryptocurrency

Two and one.

We are live. Mark Kohler here, your tax lawyer expert. Well, I'm trying to be the taxation expert on cryptocurrency. All the above. Save taxes when we trade, mine, stake, do it in an IRA, not whatever. I'm here with you live today. You YouTube, Facebook, multiple portals. I'm going to be taking your questions and I want to help you try to save some taxes this year if you have some cryptocurrency gains or you're looking down the barrel at some gains. Now, I'm a CPA attorney, author, radio show podcast host, and I'm a crypto trader myself. I'm a miner. I don't have my little mining hat on, but yes, I mine cryptocurrency and I'm even buying some real estate in game land in the metaverse, baby. How many tax lawyers do you know that are doing all those things? Well, I'm not saying I'm an expert at trading or making billions, but I'm trying and I hope to help you out today. I've got another attorney coming from my office, Darren Charrington. He's going to join me down here on the end and I'm going to do my best here with an hour or less trying to answer your questions and help you out for 2021 now disclaimer. Like I said, this is a huge topic. I'm doing my best. Be patient. I know some of you that spend all day long dealing with cryptocurrency and studying blog articles and other websites and software that tracks your gains. There's some great resources out there. So be patient. Don't beat me up. But we sign your tax return, we try to protect you from the irs, and I know enough to be dangerous about the metaverse and all the different things out there that are just cutting edge. And I'm doing my best. Number two, we can't do this justice in an hour. And I want to announce when to write it up here right now. And then we're going to dive into some topics that I think you're going to blow your mind. January 29th, coming up in just six weeks, January 29th, we are holding the first ever Cryptocurrency Taxation Summit. Cryptocurrency Taxation Summit. There'll be a link down below. There's an early bird special if you want to join us. A couple hundred bucks, few hundred bucks if you want to come in person. We're doing it in Phoenix, Arizona, for a whole day on a Saturday, the last Saturday of January in Phoenix, Arizona. It'll be live streamed. You can watch anywhere you want. We're going to be covering six topics. In the link below you can find out the different things that we're going to be covering. And at the end of the day, there's going to be an exam. And if you pass that exam 80% or better, you will be a crypto. You will be crypto Taxation certified. That's right. You're going to get a silver play button type plaque that you are taxation certified for 2022 in cryptocurrency. And we're going to do our best. I'm bringing in experts from all over the country as well as myself and we hope to wow you. So January 29, 2022, the crypto taxation Summit. And I am so excited about this. Please come, please register the links down below. Okay, now let's get to our topic today. I want to get right into it. Ooh, do we have Darren already here? This is going to be great. Okay, so this is me. This is a webinar I gave that was two hours long on cryptocurrency. I'm going to just dive into some topics that I want to highlight today. Now here's, here's tax brackets. Now, I know it may be hard to see. Cory, you might be able to zoom in a little bit, but, okay, before we go there, in fact, I'm going to take that off for a minute. Okay. Many of you may have some cryptocurrency gains this year. Now let me explain. You know what my partner said, Mark, you've got to tell everybody first and foremost what happens here. So I'm going to go. Here you are taxed on either short term capital gain or long term capital gain when you sell cryptocurrency for a gain. Okay? So you buy some currency for $5 and that's your buy. And we call that basis. And then you sell it for $10. So you bought for five, you sold for 10. Add zeros if you want, you have a gain of $5. Now here's the scary part. Some you go, well, I just went into a stablecoin. That's a sale. Well, I traded my bitcoin for litecoin. That's a sale. The IRS says you have a taxable event. Now I know some of you better be sitting down because it's going to scare the hell out of you. And I'm sorry, your taxable event is one, if you sell crypto and go back to US Dollars, right? It's pretty easy. I bought crypto I sold it. I'm back in US Dollars. Now all of you think, oh, that's the only time I'm taxed? Nope. Number two, you trade one currency. I will call it one token or coin. Please work with me. I know some of you experts out there. One coin for another. That creates a taxable gain. Trade one coin for another. So if I have, okay, let's say I have. I know not everybody's buying bitcoin, but it's easy. Example, let's say I bought Bitcoin for 20 grand. I have one coin for 20 grand, and now it's worth. Today it might be worth 40 grand. Let's do that. So it's worth 40k today. So that's fair market value. And so you trade it for litecoin. No. Okay, and again, work. I don't even know what litecoin is going for today. But let's just say you trade it for litecoin or ethereum and you get 20 coins at 2,000 each. Okay, so you're saying I just traded my Bitcoin one coin worth 40,000 for 20 coins worth 2,000 each. Just work with me. Well, you're like, that's not taxable. Yes, it is. You had Bitcoin for 20, it's now worth 40, and you traded it for other coins. IRS taxes that. So you are now taxed on $20,000. And if you did it in less than 12 months, that's a short term capital gain. So short term capital gain is anything less. And I'm going to put this in red. Oh. Oh, no. Did I lose that page? I think I did. Oh, damn it, Corey. I hate this. Short term capital gain versus long term capital gain. That's the button I wanted to push right there. If you do a trade in less than 12 months, and I know some of you have equations and programs and systems where you're trading daily. If you trade you held it for less than 12 months, that short term capital gain, if you held it for longer 12 months or longer, then that's long term capital gain. So if we go back to our example and I bought Bitcoin, one Bitcoin for 20k and it's now worth 40k. And I trade it for 20 coins at 2000 each. Let's say you have a sale, the IRS triggers a sale and you have $20,000 in gain. Then we have to go back and say, okay, did I do it in less than 12 months or did I hold it 12 months or longer? 12 months or longer is taxed better 12 months or less is taxed worse. Okay, now again, there's three ways, three triggers. How the IRS is going to tax you. Now, I'm going to give you some solutions here, the best I can here in a moment, but you got to understand first, short term or long term capital gain. Number two, I want you to understand triggers. You sell back to US Dollars, or two, you trade for another coin. And at the day, you trade the fair market value of your coin that you sold or parts thereof or whatever it was, you have to go back and look at your basis. I'm going to explain that number three. And then number three, trigger is if you buy something with a coin, maybe even in the metaverse. Did I just blow your brain? That's right. If I take a coin and go buy some land in game land, I mean, some property in game land, I just exercised a sale of my cryptocurrency and bought something. Now, some of you are like, there's no way you can track that. The IRS can't track that. Okay, let's go to point number you're gonna. I'm not. I am. Don't hate the player. I'm just playing the game. Have you ever heard that? Don't hate me. I'm just trying to tell you the rules. Number one, I want you to understand short term and long term. Number two, I want you to understand triggers. And number three, I want you to understand basis. Now, what basis means is if you, whatever you bought it for, okay? That's your basis. So if I bought it for $10, and then when I sell it, that's fair market value when I sell, and I've got to take the difference. So if it's worth $35 the day I sold it, I have a $15 gain. The IRS taxes that. Now, here's your last point, and then I'll get into some strategies here. Number four, I'm going to call it the first question. The first question. The first question on a 1040 tax return. Now, everybody listen. The first question on your 1040 tax return, and if you lie, you go to jail. Did you. This is the first question on your tax return. Did you. Did you buy, sell, or exchange? Any crypto. Any crypto in 2021. And you go, well, Kraken doesn't give me a 1099. Or, I did it in the metaverse, and I sold this and I did that. Oh, I played a video game and got some coin, and then I traded it over to my phantom trade, and then I went it over and I converted it over into my Bitcoin and then I rolled it up into Coinbase or whatever. Whatever. You may think, the IRS isn't going to find it. Maybe they will, maybe they won't. But if you lie on your tax return and tell someone, I didn't do any cryptocurrency, if they find out that's tax fraud, you go to jail. And, you know, the IRS is going to make an example of somebody. They are. They're going to try to send a message to the entire country. If you're doing crypto and trying to hide it in some sort of wallet that no one tracks and they can't catch you, you're going to jail. That's how. I mean, that's how serious it is. Now, some of you I know, finally, are going to go, how in the hell do you track all that, Mark? Because I'm doing 10 trades a day, five trades an hour. That's where software comes into play to track your trades. And if you go, well, the exchange I work with, they don't even track it. Well, it's in the blockchain. I can figure it out in the blockchain. So you're going to play around on Excel for three days, for 48 hours or whatever, and try to put this all in an Excel spreadsheet at the end of the year. Guys, we are five weeks away from your tax return prep time. I mean, 2022 is around the corner. And then you'll have till April 15th to figure it out. Or you can extend. Now, if I haven't freaked out some of you, so be it. Now, Philip says, who went to jail. Philip, people go to jail all the time for cheating on their taxes. What I'm saying is someone's going to try to hide their cryptocurrency trades in some cold storage or some wallet that doesn't exist in the US doesn't even know about it. And if you get caught, then you go to jail. That's all I'm saying. I'm not trying. I'm not from the irs. I don't care. I don't want you to go to jail. I'm trying to figure this out. All right? Okay, so now let's do some strategies here. I don't mean to be so dramatic. Maybe it's because I'm drinking my Red Bull Diet Coke mix right here. All right, should I take a few questions or should we get into a strategy? All right, I'm going to give you a strategy. All right? Here's how. Here's how capital gain works. Now remember, you might have short term capital gain or long term capital gain. So if you buy cryptocurrency on Friday and you sell it on Monday, you pay tax on the difference. If I hold it at least 12 months, I pay long term capital gain. So you may say, well, Mark, what are the rates? Well, guess what, Corey, be ready to zoom in. We're going to do our best here. So right there and then hit play. Okay, a little bigger. Okay, Single, married. Let's just start at the top. Individual, married, filing joint. Okay, if I. Here's your ordinary income rates, here's your capital gain rates. So I'm going to go with a single individual. All right? Someone says, how much of a loss can I claim on cryptocurrency? I'm going to answer those questions and if people are out there trying to answer each other questions, that's fine. I'm going to try to go through this and say, no, you're wrong. I don't know. If you're going to go answer someone's question, you better be ready to sign their tax return. And I'm just going to throw that out out here in the chat. I love that there's conversation going on. This is a huge chat. But if someone gives you advice on how to handle your cryptocurrency and they're not signing your tax return, what good is it? Oh, well, you're not going to get taxed on that because you can put it in a wallet and the IRS doesn't know about it. That's tax fraud. I'm just telling you what it is. Now maybe you'll never get caught. I don't know. Be careful. Alright, closer please. We're here in Cory, so zoom in on this bad boy. Okay, Ordinary income rates, capital gain rates. This is short term gains. Short term capital gain is taxed at ordinary rates. Long term capital gain is taxed at a capital gain rate. So you held up more than 12 months. All right, so let's say I'm single and I have a $40,000 W2. Some of you might like work at Starbucks or you got a great day job or whatever and you're making 40 grand a year. You're going to be taxed at 12%. This is your taxable income. So let's say you have your standard deduction of $12,000. So you. I'm just simple oversimplifying this, but let's say you bring in 50 grand, you have your standard deduction of 12. 5. 5. You know, and you net 40ish somewhere in here. If you net between 10,000 and 40,000, your tax rate on those dollars is 12%. That's for the Fed, it's not counting state. So if you have a day job and net 30, $40,000, then you go out and make 50 grand in your cryptocurrency day trading, you're now up to 110. 110,000 is going to be taxed between 22 is going to be at 22% up to 84,000 and then 24% up to 160. So if you, so you may say, well my day job is taxed worse. Nope. Short term trades in crypto is added to your W2 and then that's your individual rate. Where it gets ugly is if you make more than 160 grand on your short term capital gain plus so your day job and your crypto short term gains, you're now at 32%. You add 10% state to that, you're paying 40% in taxes and you're like well I don't have any cash in my bank, it's all in my crypto wallet. Well you're better converted to US dollars to pay the damn tax. That's how ugly it is. All right. Now if you're married, it's kind of double everything. So it's 12% up to 80 grand. Then up to 322,000 is 22%. And it starts to get ugly at about 400 grand. Now some of you may go, well I want capital gain, I want capital gain. I held up more than 12 months. All right, so I don't pay tax, it's zero percent on the first 40,000. And if I'm married, it's zero percent on the 1st 80,000. Woohoo. So I can pay zero tax on the first 40 grand if I'm single, 80 grand of short term capital gain if I'm married. All right, let's see how that looks. Okay Corey, I want that out of presentation mode. Okay, so here we go. All right, you may think, sorry everybody, I'm trying to get this damn thing to work properly here. I do not want presentation mode. And I'm trying to get my screens back. Sorry, you may think I'm really techy, but there we go. Thanks Corey. I hit the X. Okay, now you may think, here's my regular W2 job, I'm going to get taxed here and then I have long term capital gain. Well it's zero up to the first $20,000. Right. That's what we just said. It's zero up to 40 grand if I'm single, up to 80 grand if I'm married. So you say, okay, well, I can carve out. So in this example, I have 1004002 W2s married filing joint, and I have a zero bracket over here on my capital gain. Wrong. It's called stacking. Buckle up. Stacking says, no, no, no. The long term capital gain rate is 0 on the first 40 grand of. If that's all your income, we have to stack it. So you take your ordinary income plus your capital gain, then you drop it into this bracket. So we have people that are like, well, I don't want to. Capital gain rates are different. They're different on the portion. Once it's stacked, you have to stack it together. Now I've got Darren Charrington, our resident tax attorney, expert on crypto taxation. He's going to join us here. I'm going to field some questions. Corey, can we get some questions going? Because I really want to. I know people are upset. They have some in there. Some of you are saying, mark, you got it wrong. I want to answer it all. I want to do the best I can. And I'm going to repeat. Everybody, January 29th, an entire day dedicated with a workbook, a certification quiz. At the end of the day, we're going to be doing networking. I'm going to have multiple experts all day talking about crypto taxation. All right, Michael D. Okay, Michael D. Says, what software tracks your trades? What do you recommend? Okay, I'm going to give you just a few here. One, the Cointracker IO. Let me just get. And I'm. We're going to be having some sponsors on our January 29th workshop and we're going to be vetting some of these in the meantime. But some of the software you want to look at is CointrackerIO can you get Darren in here too? Corey, Sourceforge has a page where they tell you Sourceforge.net lists a bunch of options, but CointrackerIO, there's crypto trader tax dot tax, crypto trader tax. And then the last one is tax bit.com tax bit. Whatever, just Google it. Tax bit. Okay, so these are three Cointracker IO, crypto trader tax, and Tax Bitcoin. Now, how you integrate those with your exchange and download all your transaction on your blockchain and inputting them into these, you'll go figure that out. That's not today's podcast, but those are some software Programs. Anything you want to add to that?

Well, I think ones is that if you're going to be doing this, it's really good to look at each of the different software to see if it has QuickBooks ability to export QuickBooks, because that's going to make it a lot easier on your accountant.

Well, and also if it coordinates with the exchange you're using or the wallet.

Yeah, there. So a lot of the newer stuff, if you're involved in like a new chain that's kind of just on as an initial coin offering or even on a, you know, test net, then that might not actually be linked to some of these programs. And so you're just gonna have to find a block explorer and pull it off of there.

Okay, now Eric, I want to go to Eric's comment up here. This is a good one, Eric. He says, what about wash sales? Okay, now everybody take a breath. This is deep. If you're going to be doing crypto trading, you got to know this. So, okay, so let's look at stock and we could just say GM stock versus Bitcoin. You know, boy, probably two behemoths in the history of whatever, right? So we have stock and we have Bitcoin. Now listen everybody, this is going to save you some taxes freaking today, I hope. With GM stock. Let's say I bought it three years ago for $100 and I bought it one share of stock. I don't know what it's trading for, but let's say. And now today it is gone down. It's gone down in value. Oh, no, no. I'm going to do a better example. This is going to be good. You have some GM stock that you bought for 100 and it's worth 250. Okay, so you have $150 gain. All right? Now you also have over in your portfolio in the stock market. I'm going to relate this to crypto. So you've got, let's say earlier this year you purchased some Tesla stock. I don't know what it's trading for, but it's probably off the chart. Right? But let's say you bought it for $300 and today Tesla is trading for $200. Okay, so the fair market value is 200, but your basis is 300. If you sold it today, you'd have a loss of $100. Now what People in the stock market have tried to do for years is they'll say, oh, I'll sell the Tesla stock, get the loss and I'll just repurchase my Tesla stock the same day. So I'm going to harvest a loss, then I'm going to use this loss against my gain on my GM stock. So I've got this sale that I made. I've got a gain of 150, and I'll just sell the Tesla stock and repurchase it the same day. Can't do it. It's called a wash sale. Because if you turn around and rebuy what you just sold, it's called wash sale. Not allowed. Can't do it. Not allowed. Okay, now with cryptocurrency, wash sales are. Okay, so let's say earlier this year, you sold some bitcoin and you had a gain of $50,000. You have a $50,000 gain on Bitcoin, or you traded Bitcoin for Ethereum, which is taxable, or you use Bitcoin to buy a new car. Taxable. So you sold bitcoin, traded bitcoin, moved it to a different exchange with a different currency. You're going to get taxed on that. Okay, so you have a $50,000 gain. Oh, but right now the market's down this week and you've got a loss sitting there. You bought, let's say, litecoin earlier this year, and you bought $20,000 worth of litecoin, and now it's worth $10,000. Okay, so let's go fair market value. So if you just sold all your litecoin and just rebought it, you want to keep that litecoin because you know it's going to go back up. So you sell it and rebuy it in the same day. You just harvested a $10,000 loss. You can use that loss against your gain from the bitcoin earlier in the year. Wash sales are currently allowed under cryptocurrency, but guess what? Under the new legislation that the Biden administration is kicking out starting 2022, in the new legislation, no longer allowed. So this could be the last time you're able to do a wash sale. So, Eric. Oh, Build back Better Deal is looking to seal the wash sale loophole for. For crypto. So don't get used to doing this. Thank you, Blake. That's exactly right. Do you want to add anything to this?

No, I think it's perfect. You mentioned the build back later act. Everything may be changing here. Now, it hasn't officially gone through, and so, you know, we'll see where it ends up.

Okay. Carlos says it only allowed to deduct 3,000 a year. Not aware of that, is he? I mean the capital loss.

He's trying to use losses against ordinary.

Oh, well, okay, Carlos. All right, all right, everybody, we got to bring in the Kohler trifecta and I'm hopefully you're watching my other YouTube videos. I've got millions of views on other YouTube videos that have nothing to do with crypto but building your wealth. Real estate, saving, taxes, small business, because a lot of you have a side gig. All right, so here everybody, this is an important point of Carlos. Let's, let's say you have a W2 day job. Let's also say you're driving for Uber. Okay? An uber is a 1099. That's a small business. You take all your write offs and you have net income. So you've got net income from Uber and then you say you have some W2. This is ordinary income. Now over here on this side of the equation, you have your coins and you have capital gain and you're going to do some losses with the wash sale strategy. Okay? So you sell some crypto and rebuy it. You can only use these losses against capital gain on this side of the wall if you have more losses than gains. So you've got a loss overall. It's called a net capital gain loss net. I'll just call the net loss. You can only use 3,000 on this side, Carlos. And then you have to carry the rest forward so it goes into a bucket and you carry it forward and you can only harvest 3,000 every year over here. So what I'm talking about is many of you that have some serious capital gains that you're sitting on from crypto trading earlier in the year, turn around and sell some of your crypto at a loss and rebuy it right now. Generate a loss to try to bring this capital gain down a little bit. But these losses, you can't just bring them over against your W2 or Uber. That's where there's a limit. So hopefully that helps. Carlos, the guest mic is a little low or you need to talk louder. Okay, cool. Thanks, guys. Thanks, Celeste. Chuckboy. Okay, let's do another question. Oh my gosh. Nodes. We're seriously going to go there. All right, Alexander says if you own your own nodes and are generating passive income from them, some of it reinvested. Is it better to start a business for tax purposes? Pluses and minuses. Now can I just put it in the trifecta?

Absolutely.

Nodes and staking.

Yep.

Now everybody, this is. What's his name? Alexander, everybody, you're thinking, oh, nodes is Passive income? Hell no. It is a business, like staking, like mining nodes. You say, well, it's passive, I'm not doing anything. No, it is ordinary. So everybody out there in your trifecta and I'm going to let Darren tell you what to do to save taxes here. But here's your Trust, here's your 1040. And some of you are like, I don't need a trust, I'm not wealthy. All of you need a frickin trust. I don't care if you're 21 years old or 91 years old, I've been teaching this for 20 years. You need to up your game on business, education and asset protection, privacy. So a lot of you in the crypto world have been sucked into now the business world. And I gotcha, Darren, and I got you. I do podcasts every week, I do YouTube videos every week. Okay? Now if you're going to get a W2 at work, that's a day job that comes down into your 1040. But if you're going to have a side hustle, let me tell you an example of a side hustle. Driving for Uber, being a consultant, mining crypto staking nodes, those are businesses. You're going to have expenses, you're going to have income and you're going to have net income, which you're going to be taxed on. This side has nothing to do with buying and selling cryptocurrency. Short term capital gains, long term capital gains. Your trading is over here, your nodes are over here. So Alexander Ass. And I'm going to put Darren on the spot. He's my crypto taxation. He's a real lawyer, Michigan state. I mean this guy is legit. What do I do with node income?

Yeah, if you're operating a node or you're participating in a node or sticking to a node, Right. It's the same thing as mining. Essentially you're providing computing services to help to maintain the ledger and to create new blocks on the chain. And so since you're providing a service and getting paid for that service, it's subject to ordinary income. They treat it like business income. You have to pay self employment tax on it. Now with self employment tax, what we do is we're going to run it in through an S corporation. And the way that the S corporation works, if we're going to do this as an LLC or just a sole prop, you know, just doing it yourself, you're going to have all of your, all of your gross income come in. So all of your rewards, you'll take out expenses, any kind of write offs for electricity or maintenance or anything like that, and you're going to get it down to your net income. And so in an LLC or by yourself, you have to pay self employment tax, which is that 15.3% for Medicare and Social Security on 100% of that net income. So what we do now, don't make

it sound scary enough. Can you make it sound okay? Do llc. Okay, Darren, do llc, save taxes.

No.

Hell no. If I set up a sole proprietorship and do nodes or staking or mining, do I save on self employment tax? Hell no, people. If you're out there doing staking or mining or nodes, you get to write off your electricity and some of the crap you bought along the way. And then you're taxed at 15.3%, then federal, then state, say bye bye to about 50% of your income. Okay, was that dramatic enough?

That was very dramatic.

Trying to make sure people get this. Now if you run it through an S corporation, which is an LLC taxed as an S corp, tell them how it works. Get more dramatic. Okay. Damn it.

Okay, so now you're going to take that net income, you're splitting it into two different. Two different draws, essentially. Two different types of income people.

Okay, all right, so you got your S corp or LLC taxes and S corp and I have note income. Okay, so walk us through it.

Right. Get that note income in, take out your expenses and deductions, and then you're going to take a W2 that you're going to have to pay that self employment tax on. And then you're going to take a K1, and with the K1, no self

employment tax, no self employment tax, no Obamacare, and you still pay your federal and state, but we just save 15% on the bulk of your income. So over here we channeled somewhere between 20 to 40% of your income in a W2 or lower. And then we drop the rest through a draw. Every dentist, doctor, realtor, engineer, plumber, electrician, lawyer, accountant, even Joe Biden had an S corp for his book deal before he became president. This is what everybody does. And you may say, well, I'm in cryptocurrency, I don't have to do this bs. If you're mining, staking, or doing nodes, or on the Metaverse making income in a game that is taxable. That's right, the income you make in the Metaverse is taxable. You think the IRS is going to be cool with that? You don't like it, move to Another country, Renounce your citizenship. That's what the IRS is saying. Because the Metaverse is taxed. That freak out enough people? Maybe. Okay, now, someone said, I live in Texas and sell crypto. Do I need to collect and remit sales tax? No, sales tax does not apply to selling crypto. You're okay. All right, so, people, if you're in this situation, you've got to either for 2021, if you're like, well, I didn't even have an LLC. I didn't even have an S corp. I just made a bunch of income. You're going to take it in the rear for 2021. For 2022, make an appointment with one of our tax lawyers or go talk to your accountant. Or go figure this out. Come to our January 29th taxation crypto, taxation summit. Get certified, know what the hell you're doing. And in 2021. I mean, in 2022, do it right. I want you to make money in crypto. I want you to make money in the Metaverse. But you got to play the game because you're a US Citizen. Anything you want to add?

Absolutely. Well, I saw a lot of comments on here about, oh, that's double taxation, and they're hitting us twice, and, you know, things like that. So I think it's good to clarify that.

You're right. Some of you are pissed about this. That's double tax. You want to get it worse? Go put this in a C corp. If you go put it in a C corp in Nevada or Delaware, it's even worse. I've written books on this, people, guys, I'm legit with this. I am not screwing around. I'm a real CPA with a real attorney signing tax returns. And I know I'm totally dramatic today, but it's like people think, well, it's in a wallet somewhere that no one sees wrong on. The first question on your 10:40 is, did I buy, sell or trade crypto? Go ahead and put no. See, in jail, you know, don't bend over for the soap. Now, here's the thing. There's some strategies out there. You got to start to learn this. Now, if you don't like self employment tax, welcome to the restaurant around the corner that's paying self employment tax because their dad told them to be a sole proprietor. Get it? No, that's where the S Corp comes in. We have strategies for you. If it's double tax, it sucks. Do you have a tax service in New York State? People? We do taxes all over the country. The problem is right now. I'm recruiting because we have a wait list now, it doesn't mean you can't learn from us and bring your accountant up to speed and find the right accountant. There's a lot of great accountants out there. They're just crappy at marketing and teaching. We want to teach you. We want you to help find you the right accountant. So at our tax summit in January, I hope to have another 20 accountants working for me. And we help people all over the country with their taxes.

We.

We can set up LLCs or S Corps all over the country. If you want to try to get on an appointment, it may be in January. If you want to try to get on our wait list, just call our main number, 888-801-0010. You can go to the law firm@kkoslawyers.com Now, I know some of you are like, I need an appointment next week. If your lawyer is available tomorrow or next week, you may have the wrong lawyer. We're out three to four weeks at least on some of our appointments. But it's okay. Keep learning. Chill out.

All right?

Do you choose a question? I have a sorry. Oh, sorry. I don't like that. Who said they had a sorry ass llc? I want to go to that. Jose Pena says I have a sorry ass llc. Jose, that's okay. That could work for you. Tell us why.

Yeah. So as long as you have that LLC set up.

Okay, this is Jose, right?

As long as you have the LLC already set up, we can backdate an S election on that llc.

Okay, so let's say Jose had an ooh. Let's make this. Erase this. Everybody, this is good. If you had an LLC on as of January 1, 2021, you can be an escort for the whole year. We have a procedure. Oh, my gosh. We charge 200 bucks. It's that easy. 200 bucks. We turn it into an S corp, issue your payroll, and, Jose, you're saving money. But if you call us up in December and go, I don't have an LLC, then we're going to set up your LLC for 2022 and make it clean. Now, my daughter's a realtor. She was like, dad, do I need an S corp? I said, no, you're not making enough money. But let's set you up an LLC so that if you do make money, I can backdate it. That's the trick. Jose, you're doing great. No employees. I know. Jose, you're going to be the only freaking employee. Everybody. If this Is interesting to you. Go to YouTube. I'm going to write it right here. Go to YouTube. Type Mark Kohler or just type Kohler S Corp. I've got video after video to help you get this down. Cryptocurrency can be trading or business. You've got to learn the business part. How many years can you back, Teller?

Yeah, you can go back to the start of the llc, but for one year. Well, you don't want to. A lot of times you don't want to go past January 1st, because then you're going to have penalties and things like that for misfiling. Yeah,

thanks for bringing that up, Darren. Damn you. Okay, you could go back further than a year, but the penalties and interest for you not having your crap together further than a year, not good. So we're only going to backdate you to 1,121. So we can save this year, but I can't save last year. Oh, Corey, slow down. Which question are we taking? I love you guys. Thanks for asking questions.

Yeah, go up a bit, Corey.

There's one about reporting, mining, trading in the metaverse. I got new respect for you, bro. Thanks, dude. Sunday night, I was in the metaverse, like on game land, like, trying to buy property in the Bronx. It was freaking awesome. I got to give a shout out, Remy Campbell is my teacher. He's freaking awesome. I've got to get him. He's out. I got to get more information. I got to have Remy here on the show. Okay, go ahead.

Yeah, so there was a question up here just asking about reporting. Right.

Okay.

Okay. We're. We are self reporting. We're on a self reporting system, Right? So, sure, it might be out there in a wallet or cold storage, where you don't think that people are going to be able to track this down and find you. But if you don't report it on your taxes, you're committing tax fraud. Don't do it. It's not worth it. Right. And the thing is, with a lot of crypto, it's not as private as you'd like to think.

Stay there, Corey.

Most of this is on a public ledger, and you can track it from wallet to wallet to wallet. And so, yeah, be careful with that.

Back in the 80s, back in the 70s, even the 90s, a lot of wealthy people would say, I'm going to go put my stock transactions in Switzerland or the Cayman Islands. Go watch the movie. The Firm with Tom Cruise, they were doing deals in the Cayman Islands. They were trying to hide income offshore. And for years, you could generally get away with it. But the IRS has now in the last 10 years, struck treaties with all these countries, said, no more. You cannot hide income offshore anymore. With all these different countries. The same thing is going to be coming down the pipe with crypto and the Metaverse. They are going hard at Coinbase, Voyager, Gemini, Kraken. Kraken's in trouble right now. Everybody's. The IRS is like all those transactions, just like Merrill lynch and Scottrade and Ameritrade. Public record for tax purposes. You may say, well, that's not. That's my privacy. Too bad move to another country. This is how the IRS works. Now. Matthew Moon says, why can't you claim staking as a hobby? Because you're making money. I mean, why would I. I'd love to claim my horse racing business as a hobby, but if I sell a horse and make more money than expenses, I pay taxes. So how it works, you go out and open a lemonade stand, you make money, you pay tax on the lemonade. Well, the IRS can't track it. Well, lie on your 1040, good luck, and maybe they won't catch you. All right, other questions. You like? Okay, Clinton says, if I lost 100 grand trading crypto, should I claim that on my taxes? Hell, yeah, people. If you lost money in crypto, claim it. Just like you have to claim your gains. Now, someone asked, Randy says, can I switch my LLC to an S Corp anytime? Hell, yeah. Randy and I probably want to backdate it for the whole year. Get a consult with an accountant, make sure you're on top of this in the next six weeks. Okay, now, everybody, let's. Let's reset. Relax here for a minute. I get so excited. Let's make it easy here. Let's say some of you did some crypto trading. The one thing you want to do is try to figure out all the transactions you did during the year. You're going to look at how much you bought them for, which is your basis, and how much I sold them for. And you're going to go line by line and find out, did I have a gain or did I have a loss. Now, a lot of the software out there is going to help you now in all of these gains and losses. At the end of the day, it's going to say how much of those gains and losses were short term, meaning they were transactions you did in less than 12 months and how many were long term. You held those stocks more than 12 months. Okay, all right, everybody. So what you do is software will help you is you're going to look at all of your crypto trades throughout the year. What did I buy them for? What did I sell them for? Was there a gain or loss? And then your software or you on freaking Excel? You're going to have to figure out how many of these deals and you'll go, oh, that was short term. Oh, that was short term. Oh, that was long term. That was long term. And at the end of the day, I need to know how much of your money was short term and how much of it was long term. Right? Okay, everybody, you're getting that, right? Watch that over again if you need to. Now, once we know how much is short term, you're going to add that to your regular income, whatever your bracket is, and you're going to pay ordinary tax on that. But not self employment tax, because self employment tax does not apply to trading. See, the self employment tax is over on the other side with mining nodes and staking and selling product on the metaverse. Okay, now if it's long term, you get capital gain. Long term capital gain. See, some of you are like, well, I get short term capital gain on ordinary. Short term capital gain is the same as ordinary. Sorry, spoiler alert. Buzz kill. Okay? But long term capital gain is where you get better rates. So that's where we go. And we go over to our table. Oh, my gosh, I'm dying here. Is it three fingers up? Okay. Oh, I go. And hold it. There we go. Okay, so look at our table. Short term is ordinary rates. Long term capital gains are long rates. Okay, so Corey's going to zoom in again. Everybody, we just looked at this a little earlier, but once, you know, do I have short term capital gain? It's in the blue column. If I have long term capital gain, it's in this column. And you're going to say, oh, I take my one income and put it here. My other income and put it here. No, for these rates, you have to stack it first. And that's where I put this in here, where your long term capital gain is not off to the side, it's on top. And then we find out what your rates are. Okay, I wanted to just bring it down to ground zero again. Okay, you get to choose questions. Oh, Corey's got a question here for us. Yes, you could go. You want to explain or you want

me to go for it?

Okay, so let's say you own a restaurant, and on the weekend someone breaks in and steals all the food you bought for the upcoming week, you get a write off. For the expenses that you paid for that you don't get to use. Someone hurt you, someone ripped you off. Now, if some of you put money into a deal and you get scammed, you get to write that off against the other income doing the same thing. So if you're investing and you get ripped off or you have a loss, you get to take that. So in this equation, if you had short term capital gains and long term capital gains, if you had losses, whether they were short term or long term, we would take those losses here and then we net it out and go find out what bracket you're in.

Okay, I've got a question. Don Wells.

Corey, keep it on that page, too.

He says, I'm 71 years old. I do have a substantial amount of top tier crypto that I have never touched, only held. Is there anything that can be done because of my age to be protected when I do touch it?

I love it. Okay, everybody, this is where you want to go to YouTube and type Kohler Charitable Trust. Because if some of you have some huge value crypto that you're just sitting on, and I know many of you are like, I bought this crypto three years ago, five years ago, and I'm just sitting on it, and it's worth 1 to 2 to 3 million, and you're just sitting on it and the tax is going to kill you. That's why I've been working on charitable remainder trusts. I am so busy. I'm literally. That's what I'm working on tonight. And we've got a wait list. I'm trying to get people in, but with crypto down right now. That's okay. Let's get your charitable trust in place. We donate all your crypto to a trust, you get income the rest of your life. There's a charitable deduction and the rest goes to charity when you die. And there's just so many things. I got a video on it. Go watch it. So what was his name?

Don.

Don, go watch the video. Kohler Charitable Trust. I've got two videos out there. I'm not a big fan of the Krat. I want you to use the crut. Someone a little earlier said, mark, I just sent in all my info for the crut. I've got a waiting list. You work with me personally on a charitable trust. Eight grand in 20, 22. Eight grand to do a trust, pay zero tax when you sell. Freaking awesome. Okay, I like Hoppy's question again. Oh, no, no, no. Where was that? Okay, Clark, Clark Gustafson. Says hosting a minor with someone else. Who pays the taxes, the owner of the host or both. Well Clark, first of all, only one person pays tax. So now if some of you are like Mark, you don't know what you're talking about. Let me throw this out. I just want to wow you Here. This is my crypto mine. This is mine. Now this is with three cards. I now have four more cards on here. This is a 12 card motherboard. Here's my CPU and I'm just working through Nicehash. I know some of you are better at it and than me. Nicehash works great for me. But this is my mind. Now everybody pay attention. Here's with my mind. If I set up the Nicehash account, all the income is going to come to me. I write off my cost of the equipment and write off my electricity. I pay tax on the net gain that's mining. Now if someone's hosting it for me, you have to ask yourself, are they just hosting the mine and running it through your Nicehash account for you and then charging you? So if you're claiming the income, you're going to write off the expenses paying them. Now I guess some hosts might claim the income for you, pay the expenses and give you a 1099 for the net. I don't like that.

Yeah, I don't know about that. But I mean if there are hosting fees or expenses or anything like that. Yeah, if you're getting paid to host it, you're going to have to pay taxes on what you're getting paid. But that's separate income from the mining, right? You're offering it services at that point. It's not. Yeah, it's not the mining reward.

Now I have a 13 step process of how to mine with two entities in your Roth IRA. Now guys, I'm going to blow your brain here. And I know many of you like Don, you've got cryptocurrency in your own name. There's nothing you can do about it now to get it into your Roth IRA or 401k. But what we're trying to do is get our clients to open their Roth IRAs or solo 401ks from the income they're mining. So you can set up a mine, make money, fund a 401k and go buy crypto in your Roth 401k tax free. Bing. Oh, should I drop my pen? Okay, so my mind that you just saw here, this is owned by my Roth ira. So all the crypto that I earn, I pay tax on the earning and then everything else that grows tax free. XRP says immediate with no gain. That's right. If I'm. If I buy cryptocurrency in my Roth ira, I can buy and sell all day long and I don't pay any tax. I've got it right here on my Gemini app. I'm doing in my crypto, so, I mean in my Roth ira. So now that's okay. So on our big event we're doing on January 29th, we're going to talk about buying, selling, crypto. Just trading, mining, staking and nodes, liquidity

providing liquidity, providing yield, farming on top of that, lending. Just your typical trading.

Then we got. That's topic one. I got six topics. Then we're going to do mining, we're going to do charitable remainder trusts, we're going to do trading in your Roth IRAs. Gosh, there was something else. It's on the link down below. Go look at it. Okay. Please tell us how to buy real estate in the metaverse. Oh, by the way, it's with a T, not a D.Bwix 6. It's metaverse met, as in Tom Aver. Anyway, go look it up. Okay, sure. Okay. I gotta have my trainer, Remy Campbell. This guy's freaking awesome. I'm gonna have him come on the show, but I'll just give you a little teaser. You ready? Okay. You got to correct me if I'm wrong. Okay, so you're going to start out with some sort of coin. Some sort of coin. So you're going to go to, let's say, coinbase. You're going to buy the coin that works best for. So you have to think, okay, I'm going to go out here into the metaverse. And there's different metaverses, right? Everybody's trying to find, you know, everybody's trying to figure out who's going to be the Oasis. That's what we're trying to figure out, who's going to really be the metaverse that everybody's going to go to. Facebook's trying to play in the game. Hey, I got my player, you know. Ready player, Game ready player one. Is that ready? Player one. Okay, so the big question is who's going to be the metaverse that everybody's going to play in? So you kind of have to realize there's a lot of risk out there. This is a. The wild, wild west. All right? So you got to figure out, where am I going to play in which metaverse? Now, I was playing with Game Land all Right. Okay. Game land. Right. That's what. No. Is that what it's called?

Or possibly sandbox or.

No, Okay, I got it. Okay. Upland. Okay. So I was in upland, which was a type of metaverse. All right? So if you're going to. You got to figure out where am I going to figure out which coin to go play. So I was going to play in upland, and I need a specific coin for that, which I think is Atlas. Is it Atlas?

I don't know on that one.

I think it's Atlas, but I got to get to Atlas. So I go with the coinbase. Then I'm going to go to a wallet. I think we went through Phantom. And then you do a conversion over to Atlas. Then once I have Atlas coin, then I can go buy real estate in upland, which is a metaverse. Now, I probably butchered that. Everybody be patient. I'm just a dumb tax lawyer that's 50 years or older. I know I look younger anyway, but I will have an expert out soon, and we will talk about how to buy real estate. So this is virtual real estate. In upland, you're going to use the coin that you have to. In upland, you got to get coin from US Dollars into coinbase into a coin that you convert, then you get over to uplink. Now, it's tricky. Is that all right? Did you like my explanation?

Yeah. So whenever you're trying to buy any cryptocurrency, what I recommend is going to be CoinGecko.com and CoinMarketCap.com. so if you go in there, you search the coin, you find it on there, there's going to be a tab that says exchanges, and that's going to list all the places that you can go and buy it.

Okay, cool.

What can I finance? Land and upland.

Yeah. What? Yeah, an upland. You could buy an airline. You could buy a bus station. You can buy real estate and develop it in upland.

Oh, some of the. Some of the most valuable NFTs right now are actually jetpacks.

Oh, really?

Yeah, jetpacks came out a little while ago. There's a blimp that you can go and, like, fly inside of the blimp, and it's like, kind of a. Yeah, big deal. Right? Right.

Yeah. All right. Okay, we're. Oh, my gosh. I've got to go get on a plane. I got to go get on a plane. Okay, everybody. Hey, January 29th. Let me repeat, down below is our crypto taxation summit. It'll be virtually broadcast if you want to come live. It's in Phoenix. It will sell out. We're only having 70. We only have seats for 75 people live. We'll be networking. There'll be a certification program at the end of the day for an extra 100 bucks. Take a test. We'll see if you really know your stuff. Six different topics. Darren will be there, I'll be there. Some other experts. We're going to lay out as much strategy as we can with NFT. Oh, that was the other topic. NFTs is one hour, so we're going to do NFTs and metaverse for an hour as well. We're going to have an awesome day. Get registered. There's an early bird special. We are going to hopefully have you the ability for you to pay for your registration with cryptocurrency here in the next few days. Isn't that sweet? You can pay for the crypto taxation summit with crypto. I mean, seriously, we got to throw down. We're going to do it. We should. Everybody, thanks for being here. I'll be here next week. Is Christmas Eve on Thursday, right? Is Thursday Christmas Eve? It could be close. Anyway, I'm going to do a live next week, everybody. Appreciate you. Keep living the dream. Maybe next week we'll do a live just on the Metaverse. That could be fun. All right, thanks, everybody. Have a great day. We'll see you next week. Darren, thanks for coming.

Yeah, thank you.