How to Mine Crypto in A Roth IRA and Reduce Taxes

Now whether you're geek like me or not, you may be wanting to mine for cryptocurrency bitcoin and wonder how you could do this and even do it tax free or close to it. Well, my name is Mark Kohler and I'm going to break it down with some video of my rig and all the steps to get started. You're going to love this. Now, before I take you through the PowerPoint and the actual steps and show you my rig, couple disclaimers. First, I'm a tax attorney. I'm trying to be the best in the country out there. You Google me, you're going to see a lot of books on Amazon, blogs, podcasts and videos. I'm trying to be the best in the country. I am not an IT geek, I'm an accounting tax law geek. So for any of you out there that know the difference between motherboards and graphic cards and CPUs and servers, be patient with me, alright? I'm not saying I know how to mine, I know the steps. But. But I hired an IT guy to help launch my rig, so don't beat me up in the comments down there. But what I do know is how to save you taxes. And a lot of the IT world, I shouldn't say a lot of the IT world thinks, oh, I can use a custodian or you know, go cold storage off site in Europe or I can bounce it off this and I don't need to pay us tax people. Let me say the IRS is now releasing notices all the time, Q and A's. They deployed a team and a whole division at the IRS to monitor cryptocurrency trades. All of the big custodians, the coinbases, the Geminis and all those types of companies are reporting their crypto transactions to the irs. You are not going to be able to hide from the irs. It's now on the grid, for lack of a better word. So don't think that you can do something sneaky and get around the taxes. If you're making money with crypto, that's where I come in. I want to save you. So be patient. Look at my explanation here of how to mine inside a Roth ira, because that's going to save you a lot of taxes. Now one other disclaimer. You want to go out and mine in your own name and make money so you can buy groceries? Cool. Go at it. You want to go trade crypto in your own name, make money, go at it. Great. Short term, long term, capital gain. I know all the Tips and strategies. I've got other videos on that. But I'm also urging you to do mining and crypto holds and crypto trades inside a retirement account and preferably a Roth IRA where I can sometimes make it completely tax free. And guys, gals, five, 10, 20, 30 years down the road, you're going to have millions tax free to live how you want to without looking over your back at the irs. So this video is dedicated to mining in your Roth ira. How to do it. And I've done it. I've gone through all the steps, used my IT geek, empowered them with me, the accounting geek, to try to wow you. So let's get started with the PowerPoint. Okay, step one. Step one is creating a self directed Roth account. Now I'm a CFO and a part owner, minority owner and what I think is the best trust company out there and that's directed ira.com you can go over there online anytime, day or night and set up a Roth ira. Do not set up the crypto ira. You can see that down here. I want you to send up a standard Roth account that's not a traditional ira. It's a Roth IRA that can hold an llc. I'll explain in a moment. Now if you set up a crypto Roth account, which are awesome and you can do that, there's, that's just for trading cryptocurrency, not mining. So you set up a standard Roth account. Number two, you want to set up a new LLC that's going to have its own ein. And this is for holding crypto. This is for after the mining. Where are you going to put your cryptocurrency? Because this is going to be the tax free bucket. Now at this point you have to have an llc, so there's going to be legal fees involved. Because if you want to just go set up a crypto Roth account, you don't need to talk to a lawyer, you can just get going. But you it guys, it's not going to work with a LegalZoom LLC because there's provisions in here to allow a Roth to own an llc. This is what my law firm has been doing for 20 years. So you get a consult with an attorney that understands mining and trading and all the tax ramifications. Don't beat them up if they don't know what a hash rate is. But their idea, their goal is to get you into a LLC so that you can make your ID idea a reality. So option step two is you're going to set up this llc. It's going to have its own ein. You're going to open a bank account. Step three, I want you immediately to apply for a wallet. Now, see that little wallet hanging down there on the bottom left of your screen? We're going to come to that later in the final step. But step three, immediately apply for a wallet under the LLC's name. Now, I've done this myself and this can take a couple weeks, it can take a week or so. Now that's not going to stop you from starting mining right away if you're anxious to get going, but you want to apply for this right away even before you buy your mining equipment. At Coinbase, they were saying it could take up to two to four weeks to get that wallet set up under an llc because they'll do it for an individual right away. But you want to step three, get that going immediately. Now step four, you're going to fund the llc so you'd go back to direct it IRA and do what's called a directional funding letter. In all the website, you can call them anytime. You can talk to a real person at Directed ira. It's not like some of these where it's just send an email and hopefully get someone or a live chat call and say, hey, what do I need to do? I want to get my 10 or my 20 grand in my Roth IRA into this LLC and what form do I fill out and they'll help you. Now, the fees are very reasonable to open up a Roth IRA. Directed IRA, around 300 bucks. There's no stock brokerage fees or things like that. So you're going to really find this self directing concept really refreshing. Now, some of you don't even know what self directing is. I got videos and my partner, Matt Sorenson, his book the Self Directed IRA Handbook. Go to sdirahandbook.com to learn more about self directing. Also, if none of you have a Roth IRA and you're like, I need more money to get this off the ground, I'll talk more about that in a moment. We also do a summit twice a year for two days on how to self direct and build Roth IRAs. Peter Thiel, who started PayPal, built now over a hundred million dollar Roth IRA. We can teach you how to do that. Okay, So I know there's some loose ends here where you're like, this is all new to me. Be patient. Okay? Now step five, after you fund the company, you're going to open up a second entity. This is going to be the entity that's actually doing the Mining this is, see how it put right there. Set up crypto Mining llc. Because when you mine, the IRS is going to tax that even if you do it in a Roth. Now we don't want to pay what's called UBIT tax. So we all make in C election. So it's going to actually be a C corp, but we file it as an LLC and make a C corp election. This is what us tax lawyers are really good at. You know how to optimize a hash rate to not burn out a graphics card. I don't know how to do that. Let's both do what we're good at. So we set up this llc, that's going to actually be your mining entity and it's going to be a C corp. Step six, you're going to fund this llc. So you're going to move. Now, let's say you take 15 grand, you're going to do this whole thing for 15 grand. Maybe do a four graphics card, motherboard, CPU, that's I set up and I'm going to show you a video of my setup. Some of you are way smarter than me and you're saying, Mark, you need to be doing cold storage or do this or do that. So be patient. This is what I learned how to do. And I've got three graphics cards with a 12 slot motherboard and it's working for me. Now, I did it for around 10 to 12 grand and I'll show you what I did. Okay, so you're going to fund the blue entity here, which is going to be your C corp, that's going to buy the equipment. So the money goes from the Roth to the Orange holding parent company and then the subsidiary is going to actually do the mining. Now when I did this at the bank, I did this all in one day. And when I called directed Ira, they moved money around in two days at most. So this isn't a long process. And the lawyer when you set up the LLC is with my law firm. We guide you through this. You actually work with a real lawyer. You're going to be at about a couple grand in legal fees to set up both entities. At least two grand depending on where you would go set this up. But we're going to walk you through it. You're going to have a good hour or two of legal time with a real tax lawyer to help you do it. If you need as much time as need. Now step seven, you're actually going to go buy the equipment. Now, if you notice the timing here, I want to Be applying for the wallet for your parent company while we're doing all these other things because that wallet for the parent company might take some time. So we're going to move the money up to the subsidiary C Corp, then go buy the equipment. Now this is just an example, like I told you, I bought a motherboard and three graphics cards for about two grand each. It holds up to 12. My total investment was around 10 to 12 grand. And my IT guy, Peter Gunter, which I can give out as contact info. So any of you that are going to sub this out, you're like, Mark, I don't know this IT crap. I got a guy, my guy's awesome. And so his contact information I'll have down below. And you can get a quote from him on a server package that you want and he can put it in a box, send it to you remote in, set it up, you're mining. So don't stress about that. If you need to sub that out. Now step eight. This is an important one. This is what caused me a little bit consternation or problem is I was thinking I had to set up a wallet for my C Corp, but you don't. You can go to Nicehash and set up your account because Nicehash is actually going to give you a mining wallet and they'll do that within minutes. So that's really cool. So I was able to get my Nicehash account set up, but it's a two step process. Notice right there what I put in detail. Set up an account personally then for the company. Now when you go into Nicehash, which is free software, just download it. You're going to set up an account for you personally. They're going to want to verify who you are with a passport or driver's license. Then you're going to go down to the account setup and do a new organization. And that's when you set up the LLC with its tax ID number. So when you go into the organizations in the toggle of Nicehash, you're going to see you personally and then a second organization, which is your entity. That's where you're going to set up your rig. You're not going to do any mining in your personal account, you've got to do it in the C Corp. That's how we're going to save taxes here. Now your IT person should know all this if you're using Peter Gunter. He's been all through this with me and he freaking gets it. So he understands the tax side as well as the it side. Now, step nine, it's time to start mining. Now, what I did, I didn't want to wait for my parent company to get its wallet. I wanted to start mining right away. Now, efficiency wise, it's going to cost me a little of tax. I'll tell you why later. But I wanted to get mining right away because money. Time is money. So once you get your rig set up inside your Nicehash account under the company organization, your mining and the numbers that we have seen already, I'm experienced. This is right now. I could go into my account and show you, but want to be a little private. But I'm generating about average $0.40 an hour per graphics card. My utility cost is about 2 cents an hour. Now, you're going to see out on the web and in YouTube, everybody's like, oh, the utility cost and electricity is. It's way too expensive for the average person. Well, these are people that have these huge mining farms where they're paying out thousands of dollars in electricity costs because they've got thousands of graphic cards going. I don't know. But for me, it wasn't that bad. 2 cents per hour per graphics card. I'm bringing in 40 cents gross. NiceHash charges 2% of the rev, not per hour or anything. It's just my revenue. So if I make $100, they're only charging $2. So it's. It's not that bad. So you're. I'm actually netting around 36 to 38 cents per hour per graphics card at 720 hours a month times my three graphics cards. I'm averaging about a thousand a month. Now, some of you say, well, does your IT guy know to get the hash rates right? So you're not burning out your card in one year? Yes, yes. Peter's got that dialed in. You know, he's not running these at full capacity. You shredding them, he's like, I want to get four to five years out of each one of these graphics cards. Now, some of you may go, you can't do that. Hey, if you're an IT nut and, you know, sorry, I'm an accounting nut. So I didn't mean that offensively, but if you know how to do it yourself better, fine. I'm just telling you I am aware of those issues. And we want to get the optimum use of our graphics cards. So that's what my revenue appears to be now. Boom. Step 10. You just can't turn this thing on and forget about it and wake up 40 years from now you've got to do some bookkeeping and there are going to be some taxes because when you're mining, you're in business. And there's a concept called UBIT tax unrelated business income tax. So you're not getting appreciation, that's passive. You're not paying short term gain, you're not paying capital gain. You're paying ordinary income tax on mining. Now in the accounting world, when you do that inside a roth or a 401k or an IRA or an HSA. That's right. You could do this in a health savings account. You've got to pay UBIT. Well, UBIT is 37% federal alone, not even counting state. It sucks. We don't want to pay that. So that's why we have a blocker Corp. So step 11 is you're going to report the income on a C corporation corporate revenue of your Bitcoin earnings. We're going to depreciate your equipment right off the utilities, any IT support services, your net corporate income will be taxed at 21%. Now if we can do this and it set this up in a tax free state. So I'm not paying state income tax where you live now you're going to. We've got to look at corporate and state income tax strategies. But this corporate tax is only 21%. So we cut UBIT in essentially half, which is really good. So you pay your corporate tax and then here's the real trick. Daily, this is the only maintenance I have to do. I'm trying to figure out how to automate this part. I haven't yet. Daily I've got to move a wallet to wallet transfer. I'm going to move the money from my mining wallet up above in step eight down to that little wallet hanging out in the bottom. Right. So I'm going to do a daily transfer of my revenue because I don't want any appreciation in the C Corp. The appreciation is tax free if I move it to the other wallet. So see, in step 12 I move the revenue down to the parent, the orange bubble. And then I move the money in that process to the wallet that my parent company has. And in step 13 I can now build the value completely tax free. I can buy real estate, I can buy gold, I can buy other crypto, I can leave it as bitcoin, I can buy ETFs. You decide. That's the beauty of self directing. And it's all in your Roth ira. Now here in a moment I'm going to take you through the B roll of my rig. Just so it's a little helpful to see what these things actually look like. You IT guys know it, but many of you that are watching just want to make this an investment in your Roth. You're like, show me where you got there, Mark. But before I do that, let me say this. That little video is my current understanding of how to mine. Could you do it differently maybe? Sure. I'm not saying it's my way or the highway. This is the way we know how to do it. And we're trying to be industry leaders in doing anything in a Roth ira, literally, you start Googling Matt Sorenson and Mark Kohler, you're going to see we're in the top five humbly stated experts in the country on this. We've got the books, the blogs, the podcasts, and the video stand behind it. But I'm not seeing there couldn't be another way to do it. If you crack the code, that's cool. But when you dive into this, don't feel like you're going to watch this video over and over again. You're going to have to retain the law firm to set up those two entities. All my tax lawyers have been trained on this. They know this slideshow. So you're going to be able to ask questions of the tax lawyer when you're doing this. You're also going to be asked able to ask questions of directed IRA who's holding your Roth. And then you're going to be working with Nicehash to be doing the mining. And you may even have an IT person if you're going to sub this out, like my guy, Peter Gunter. So if you've got your IT person, you've got your tax lawyer. We can also be your accountant. We have an accounting firm where you get your accountant on board and they're going to have to do a C Corp tax return at the end of the year. But there's going to be support people here, so don't stress out that it has to be that complicated. And you have to know all this. Just be know enough to captain your ship. Okay, now let's go through a quick tour of my rig. All right, here's our little outtake. Going over to my IT specialist office now. We'll be moving this to a location that I have so I'll be paying for the power. My IT guy's like, hey, I wanted to work out a few kinks and he's letting me mine on his utility bill right now. Cool guy. For those of you that are just looking to do this inside of your retirement account and hire an IT specialist like Peter or whatever, this is what you're going to get. So this is what I understand to be the motherboard. And it's got 12 slots. And so I can have up to 12 of these graphics cards. Then over here, I think this is what he calls the cpu. Now, this is the system afterburner that helps monitor the hash rate and I guess some of the efficiency of servers we got. Our power unit looks pretty cool and it's up and running now, what's cool is with Nicehash, which is right here. And I can look at how much I'm making, my history and stats and my payment history of how much money I've been making. And there's a lot more details that you'll learn about this. And I can also do projections. So it does my projected income. Now, when you look at your projections at any given moment, the rig might be resetting, getting a new job. Anyway, kind of exciting. And hopefully this was helpful for you to get a feel for this, this little rig. Again, some of you, if you don't remember, I said in the video this was around 10 to 12 grand. And I can start adding more slots or more cards for approximately two grand a piece. And if you want to use my IT specialist, contact me and we'll get you his info. I don't make any money on it. And find someone that knows what they're doing and can set up your rig and then coordinate it with NiceHash and your wallet. So there you go. In summary, I hope this has been informational now. I've also shot other videos on how to just buy and trade crypto in your Roth ira. I how to save taxes when trading crypto even in your own name or doing mining your own name. So there's other videos out there. But if you find this helpful, please save the hate mail. Again, I know I don't know everything when it comes to the Iot world, so be a little patient, but I want to wow you with the tax world and that's where I can help you. So if you found this helpful, please subscribe. I go live every week on Thursdays. I've got little newsletters and videos on owning a business. When you're mining, you own a business, you want to know all the strategies that go with that. That's where I come in. So please share this, let other people know that, hey, here's a guy that's trying to explain it. That's not a, you know, cocky person that's trying to just be a jerk about it. I'm trying to really, really help. I think this is really exciting. And when you run the Numbers, I'm putting $1,000 a month into your Roth IRA for the next year. Five years, 10 years. Numbers are off the chart. In 30 to 40 years, you could have millions tax free. So give it a shot. Throw 10 or 15 grand at this. I'm not saying there isn't risk. There's risk. So be careful. Know enough to hire the right experts, go out there and kick some butt. Thanks.