Land Grab in the Metaverse

Tomorrow. Hey, welcome, everybody. My name is Mark Kohler. We're going to be talking taxes, business, legal, planning. All of you entrepreneurs out there, this is your time Open forum. I've got a special guest here with me. I'll introduce in a moment. But we're just about building wealth, living the American dream, and the topic to kind of kick us off today is the land grab in the metaverse. Yes, we are in reality. And this is not a futuristic film of any sort. This is for real. So we're going to see where we go with this today. But all of you folks that are buying cryptocurrency, statistics now show over 68% of Americans own or have owned some form of cryptocurrency. Wow. So how's it taxed? How do we protect it, save it, build it? I'm going to focus on the tax and legal aspects of this. I've got, again, some experts here. We'll do the best we can. But I also want to field your regular run of the mill in the universe of a reality tax and legal questions today with your S Corp, llc, building, rental, property, payroll, whatever you got. So thanks for being here. I've got my whiteboard. We're going to see how it goes. Corey, can I introduce my guest here? Just, you know, is that all right? Oh, there. Wow, that was quick. This is legit? Yeah. Darren Charrington, this guy's an engineer by trade gone rogue. He is now a tax lawyer. So he is super duper smart. And you play in the Metaverse?

I play in the metaverse, yeah.

He's legit. So I've been buying property in the multiverse, which is Facebook's version. Yeah, I own 16 properties.

Max is telling me that.

Yeah. So do you want to come over tonight? We'll be eating pizza, eating popcorn, watching a movie in one of my pads. In the multiverse. Yeah, my avatar will hang out with your avatar. All right, we'll see how it goes. Okay, well, we're going to field questions here. We're going to have a good time, see where this goes, but this is your chance again to have straight answers from two tax lawyers about your small business. See what we can do. So, thanks for being here today. All right, I'm gonna put on my glasses so we can start reading. Look at this. Can't wait. Love it. Hello from Wyoming. Sound is a little low. Okay, let's see if we can get this a little closer. Feel like Ricky Bobby. What do I do with my hands? I don't know what to do with My hands. Okay. All right. Okay, Chad is back. Chad is on it. Chad was at my earlier live today and I told him we talk about this today. Later. He said are strong book, sorry, strong block nodes, ordinary income or passive income. So why don't you explain to everybody what a node is, if you don't mind. I will diagram if possible. But let's see what you got.

Sure. So when people use the term node in a traditional sense, that really just means it's a computer that's on the network. Now when it comes to strongblock and SRX and some of these other nodes that you can purchase, these ones essentially you don't own the equipment. It's more, from what I understand, it's more essentially the rights to that computing power. So there's a computer out there somewhere that's processing these transactions, but you have the rights to kind of those rewards that are coming from.

So it's kind of like I'm leasing a rental car. I don't own the car, but I'm just. I bought the rights to use that rental car next weekend in Hawaii. Okay? So I have a node. This is a computer owned by someone

else and it's mining cryptocurrency and it's mining for me. Right.

So I could use this computer. I'm using it like a house. But I've got this computer and I have a mind myself. I've got, I think, five video cards in it now. Yeah, yeah. So in fact, I don't even want to use that example. So we'll go like this. So I've got this box here and I've got my own little mine. Now my mine is owned by an LLC and my Roth ira. Okay. And in fact, I need to actually be more clear about this, everybody. Okay, we're gonna bring this around to nodes. Chad. Oh, I can unplug it. Bring it over. Okay, cool. Alrighty, everybody. So I actually have an LLC taxed as a C Corp. And we're going to explain why. I'm going to let Darren explain this because this is probably going to come down to the nodes as well. And I have an LLC owned by my Roth IRA. And then this LLC owns 100% of that LLC. And this C Corp bought a CPU, a computer, and I've got five video cards. All right, now you just heard the extent of my tech knowledge here. And I am. I am mining in. What do I use? I use nice hash. Yeah, I use nice hash. Okay. So now some of you hardcore miners are like, that's ghetto mark. There's better ways but I'm ON Nice hash. 70 to 80% return. So I'm pretty excited with this. Now you're telling me a node is someone else out here or a company owns this computer and I've just got the rights to use it to run mining operations. Okay. So Chad asks how is this taxed?

Right. And then Chad was really kind of talking about how to write it off if he can write it off. Now with strongblock it's kind of interesting right now it's non transferable is the thing. So you buy those nodes, you get 10 strong tokens, you could switch it over and be able to purchase that. And so maybe you could look at writing it off as a rent type of expense. But with Strong they're also considering switching these over to an nft. And so now we have an asset that you could sell or transfer later on. So that's a hard question.

Okay, yeah, I would say this if I may. Yeah if you're. There's two different ways to do mining. Now I'm going to give a disclaimer right now and I'm gonna do it cause it just makes me upset. If there's anybody in my chat today that is saying get Bitcoin here, buy Bitcoin, I'm giving away Bitcoin or any offers at all that show my face or sound really cool, it's bull crap. So everybody be careful, do not try to click on anything that's an offer in the chat. And Corey you're gonna be blocking as we go if it looks suspicious, correct? Maybe. Alright we're gonna do the best we can. So everybody be careful. I am not selling any bitcoin or giving any bitcoin away or any crap like this so. But I'm grateful some of you here that are crypto miners but again this, our time here today is all about small business as well. So don't feel like you have to be a crypto expert to talk today. You might have a landscaping business. I want to hear from you. Okay so if you're doing mining I think there's two ways you can be doing it. You can be doing it as an individual or you can be doing it with an IRA or some sort of retirement account. And in either situation if you're mining that's operational income so it's going to be subject to self employment tax if I'm an individual and it's going to be subject to UBIT. For folks out there I've talked a lot about this so we've got two different structures for you. Essentially, you're going to use an S corporation if you're a person, and you're going to use a blocker corporation if you're an ira. I've got other videos on this. Today's not the time, but you're still going to be able to operate. And if I'm leasing someone's car, I don't get to write off the car. I don't own the car. So if I'm leasing a node, are using a node, whatever I pay them is a write off if I pay them at all. Or maybe I just get discounted revenue because there's a cost to using their node. But the bottom line is people. This is operational income. Fair?

Fair, Absolutely.

All right, we're going to move on. So ordinary income. I'm going to say this, Chad. If you spend any money lining up the node, if you pay someone to help set up the node, that's a write off. It's an expense. So I'm good. Good with that.

Maintenance fees. Absolutely. Write that off.

Okay. All right, question. How do we get in contact with your office? Left a message. Please advise. I think this was a comment from earlier today. I'm so sorry about that. If you're contacting the law firm, let me give you guys the number. Please be patient. There's a loop that will get you in to a person as soon as possible, I would hope. And we're trying to stay up with things. We're a little busy, but the accounting firm has a waiting list. So stick with the law firm, get a plan. And if you're trying to set up a Roth IRA or any such type of retirement account, go to directed ira.com. all right, let's set the stage while we wait for questions, folks. There's this thing called the Metaverse. It's a virtual reality where you can play games. Facebook has created a virtual reality. Upland has created a virtual reality. Star Atlas has created a virtual reality. There's hundreds of these per se. Theoretically, a video game is a virtual reality. I can go in there, play a game.

Yeah. And it doesn't necessarily have to be virtual reality where you have the goggles and everything. There are a lot of other video games that people would consider a metaverse. And, and so even Axie Infinity, you know, some of these other games out there that are based on the blockchain.

Okay.

Yeah.

So if we. And again, I'm a whiteboard guy, so forgive me, everybody. Here's reality. Let's try to have some fun. With this, you know, I'm a little older, so maybe this is good for some of you out there. But here's reality. I can have a rental property, I could have a restaurant. I could be a consultant. I mean, we could be a landscaper. I just said a moment ago, these are small businesses that if I make money, I claim it. I take write offs for my expenses and at the end of the day I have what we call net income and I pay state and federal tax based on my net. Okay, that's where, that's reality. Now some of you may think, well, if I go into Star Atlas or I go into Facebook or I go into Upland and I make money, that's just for fun. That's it. That's just for fun. No, the IRS is not going to go along with that. So if you're in virtual reality. Virtual reality and see what you think of this, Darren, here's how I'm going to try to present it.

Sure.

Virtual reality could have different metaverses, you know, so let's say these are all different metaverse. One metaverse, two Metaverse. You know, there's all these different metaverses and Facebook might be over here or Upland might be over here. So I can go play in one of those or run a business in one of these metaverses. And if I make money and I have expenses, I have net income. And you're like, oh, but it's in an altcoin or it's in a cryptocurrency specific to that game. If I can exchange it at any point in time, even through multiple wallets and get it to USD, you just made money and the IRS is going to tax it. And what do you think of that little diagram here? Does that mean.

Absolutely, that's perfect. And so, interesting thing. So with virtual currency on the IRS page for a little bit, they actually listed a few different video game currencies on there.

Wow.

And so just for a little while until there's a, there's a Bloomberg reporter that kind of changed that and they switched it around, but they had Robux and, and vbucks that were on there, which is Fortnite and Roblox.

Wow.

And so those aren't even cryptocurrencies, Chance. Turns out those ones can't really be converted to US dollar. But yeah, any game, any kind of situation, especially if it's a cryptocurrency on the blockchain.

Okay, cool. Now we're trying to get a metaverse expert today that just talked about how Upland Today released. What did they call it? Some. Some way to play games. I'm sorry? Play in the game of upland. You can open stores and sell things, right? What they call it the. Oh, we just had it here. We'll see. Have we heard from our contact? Okay, we'll see if we can pull that off.

Metaventures.

Metaventures. So you can open a venture in the upland game to make money. So that just. They just released that today, so. Okay, we're gonna go through some questions here. I might. We're going to see how this goes. First. Monty says, I have a self directed IRA with an LLC checkbook. I use it to trade crypto. Can I use this LLC and self directed I for affiliate marketing? What do I need to do now? I get to give the good answers. Do you want to give the bad answers?

Yeah, I can give the bad answers.

Okay. Do you want to just say no? You want to just go ahead if you're involved?

No.

Sorry, Moni. Okay. All right.

Someone else to do the affiliate stuff for you then maybe. As long as they're not prohibited.

Yeah.

But not you.

Yeah. So everybody, let's start with our trifecta here and put this in perspective. This is Monty down here, and if he's got an ira, and his IRA has an llc, and inside of it he's doing cryptocurrency, all different types of investments. That's great. Now over here, Monty is going to go do affiliate marketing where he refers different products, services, or websites to other people, kind of business to business, and they pay him and he goes, no, no, no, don't pay me. Pay my llc. So all that money goes in my ira. It sounds really sexy, Monty, but I'm sorry, no. Go. Your services and your work cannot generate money for the llc. That is prohibited. So you would want to run any affiliate income through an llc, probably taxed as an S corp. So all of your affiliate income would come down here. And that's a wonderful thing. I run my affiliate marketing through an S corp. So we want to run your income through here. It cannot go through your llc. Okay, I'm going to ask Darren this one. Starting my side hustle and Roth this year. So in this example, this is Kevin. Let's take money out of the picture. Here's Kevin, and he's going to start a little side hustle and he's going to start a Roth. His question is, should I set up my trust first? What would you say,

you know, if you're going to be setting them up at all anyway? Setting up the trust first can be easier. You're not going to have to then do that side hustle and move ownership of that side hustle into the trust later on. And so if you're doing it all at once, the trust can make it easier. But you don't necessarily have to do it in that order.

Yeah, I agree. I think you're at our firm, Kevin. You're going to save money. Because if we can do your trust at the same time, a lot of times we'll give a little kind of a discount or a package discount because we're doing an LLC and a trust and this and that. But do you have to do your trust first? No, you don't. So a lot of people, we say, hey, if you already have an LLC or you already have an S corp and, oh, you've got a rental over here in an LLC and you already own your own home, you can always add the trust later. And we have a department that transfers the home, transfers the llc, transfers the S corp, so you can always add the trust later. Some people go, oh, I'll set up my trust first. Then as I start my businesses, I'll add it and I'll have the S Corp on it right from the beginning. Pretty efficient. You will save a little money on transfer costs later, but you can always do the LLC first or later. Now we've got another accountant in the house here. I'm going to run this by Steph real quick. A pal. We're talking passive activity losses. That's what they're bringing up, right? Okay. So thank you. I want to just make sure I'm not crazy. So Mario G says, how can I use pals or a passive activity loss to reduce my tax liability? Mario, that's kind of like, how can I start a business to make money? It's a big damn question. Let me just give a couple general examples. So we go back to our trust. Let's just use this one. And let's say you have an LLC with a rental property. That's probably the most common pal. You have rentals, you have rent, you have expenses and the big D, and I don't mean Dallas depreciation. And you're going to have a loss with all those rentals. That would be called a pal or a passive loss. CarryForward. That pal stays in a bucket. You're able to use a part of it over here based on your income and what your occupation is. And I've got a whole chapter in my book tax and legal playbook. Sorry, Little selfless plug on rental property. Passive losses. How do we take advantage of them? This is what Donald Trump did. Love him or hate him, he's got rental property all over the world with hotels. His hotels produce paper losses and he paid very little tax the year before he became president. Everybody was pissed off about that. That didn't like Donald Trump. Well, guess what? Joe Biden had an S Corp. Joe Biden had a rental property too.

I.

That's okay. I don't care if it's Biden or Trump or I love small business. I love the American dream. Donald Trump used the losses from his rental property to offset his income from the Apprentice. No big deal. So that's probably the most common passive activity loss. I'll leave it at that. I don't know. Any comments?

And it depends on what kind of income you're trying to offset. And so if you have some passive activity loss that's going against other passive income, there's some more flexibility that way than if you're trying to do it from your W2 or your other business.

Joe Schmo. Ooh, this is a good one. He asks, do capital gains increase your tax bracket? Let me say kinda. All right, so when you have tax brackets, you've got these different income levels, everybody, and so these different little categories of income. And as you make more money and you go through the bracket, your tax rate goes up. So it might be 15% here and then 20, then 23, then 27. And I'm just giving rough examples now, that's your income tax bracket. Your capital gain tax bracket actually starts at zero, then goes 15, then 20, and then there's Obamacare on top of that, yada yada. But anyway, what happens is you may say, oh, I had a day job, it's taxed at this rate, and I sold some cryptocurrency or I sold a rental property, it's taxed at this rate, depending on what bracket I'm in. The problem is the IRS stacks it. They take your W2 and let's say it's here and you had 80 grand of W2, then your capital gain comes in here and let's say you had 30 grand of capital gain. Well, for determining what bracket you're in for capital gain, they stack them. So you would have here 110,000 of income and it would put you in this bracket. Even though you may think my 30 grand puts me in this bracket because of $30,000, you probably wouldn't pay hardly any capital gains tax at all. But because you stack it. Your capital gains are taxed as if you were in the 110 bracket. But this 80 grand stays in this bracket. It's not stacked here. Would you agree? Okay, so I'm looking at all my accountants in the room. We're good.

Tax bracket. It's your tax bracket increases your capital gains.

Damn it, you said it so. Well,

just gotta flip it. You gotta.

I'm outta here. That's it. I like that. We're going to repeat that. Capital gains don't increase your income tax bracket, but your income in taxable income will increase your capital gains bracket, even though you want to isolate them. Okay. You want to take one?

Yeah. You feel like Johnny Taylor has a good one. Okay, so Johnny has a. Has an LLC partnership. He's also a W2 High Earner employee and he's asking if he needs a separate S corporation from his partner.

Okay, so here's his partner. We're going to do Johnny's little bracket. So here's his trust. And he's also. Johnny over here has a big fat W2. That's what he said. I didn't say it. High earner, W2 making big bucks. All right, now what everybody? So you know what Johnny's getting at? If he's got a high W2 FICA this year, it phases out the bulk of it at about 140 grand. Let's say after that it's just Medicare. So what. What Johnny's getting at is should I really put an S corp right here and by doing so, would it save me? What do you. What's your take?

How would you. I think part of it too is how he words it is. He's asked if he needs a separate S corp from his partner. And so a couple different ways with that S corp, does he need one because you're a high W2 earner. Possibly not. Right. You're gonna have to have a lot of net income before that S corporation is really gonna pay itself off.

Yeah. And I would say, see the Medicare rate with is gonna be about 2.2.9.

Right.

So if you had a hundred thousand dollars of income flowing down to you at 2.9, that's $2,900. So.

Well, that's, that's if we're doing all of it on there. We have a split still.

Oh, I think his half was up.

Oh yeah, yeah, yeah. Well, he's got a W2K one split off the S corp. If we're going to do a typical split, it would be maybe 100 to 150,000 in net income before it's really going to make sense. Maybe it'd be a little bit less.

Yeah. So one thought you need to know. What I do is in the Kohler matrix.

Yeah.

If they've got a big fat W2, then we. I'll bring this down a little bit because I think we're okay.

There's a lot going on with it.

Okay.

All right, So I agree 100%. You'd have to earn quite a bit before that S Corporation. It'll make sense for you in the partnership. You may still want to keep that in llc.

Oh, of course.

Don't do a partnership S corporation because you want to be able to take those tax deductions and everything separately. So if you're doing healthcare through the business, then you'd have to match up with your partner and other things like that. So, yeah, don't do a partnership escort.

And I want to say this for everybody. I love that so many of you are here on YouTube and Facebook learning some cool strategies. Some of you may be like, this is way over my head. Just take a breath, don't flip by this video yet. Let me use another example of where Johnny's coming from because Johnny's asking a fairly advanced question and I want to back it up for a minute. Let's say I'm going to talk about my daughter Sydney for a moment. My daughter Sydney is a realtor and as a realtor, an S corporation is a great fit for her. So we started her out as an LLC and when her income reaches a certain level, we're going to turn it into an S corp. Now that's just a simple election. We charge 200 bucks easy schmeezy. So Sydney's down here and she's got her S corp and she's cranking. Any of you out there driving Uber? A landscaper, a consultant, a realtor, an electrician, a plumber, a contractor, a hairstylist, whatever. Once you start netting around 50 grand. So let's say you're bringing in 70 and you've got 20 grand in write offs. Once you are Starting to net 50 grand or more, the S Corporation is going to save you money. Go to YouTube and just type S Corp Kohler. And I've got so many videos there that'll explain this. Now if Sydney was to go out and get a big high paying job and make 100 grand over here, then her savings can be affected because now she's paying fica. The F word. What? The fica. She's paying it in two spots. And the government allows you to only. Only requires you to pay FICA in totality around 140,000. And so. And so Johnny says, well, I have a big W2. Does the S Corp really help me? And that's what we were trying to get at. On top of that, he had a partnership. So we need to remember, partnerships should always be an LLC. I think 99.9% of the time and his partner might be an S Corp. But for Johnny and my daughter Sydney, we would really look at how much money is coming out of this bad boy before we worry about doing the S Corp. So everybody, I hope that helps. I want to kind of put that in perspective.

The reason being is just that S Corp has a few extra returns. It's a little more complicated on the tax side. And so, you know, if you don't have to do it, you don't have to get go there then, you know, hold off for a little bit. That's okay.

I'm going to give some bad news here to Lino. Lino asks, do we have time to be an s Corporation for 2020? The answer is maybe. Okay, everybody, let's take Lino, and I'll take my daughter Sydney as an example. So here's Sydney, and last year I set her up as an llc. I didn't know how much money she was going to make as a realtor. So all year in 2020, Sydney was an LLC. Now, Lino, we're going to take worst case scenario here. Lino was not an llc. He was just a sole proprietor. And so for the year of 2020, Lino just went out there and made money doing whatever the freak he does to make money. And now we're over here in 2020. Oh, my gosh. You're asking about 2020, Lino? Holy hell, probably not. You guys are like. Did Mark say maybe? Really, Lino? Let me tell you about 2020. Hell no. Now, let's say you're talking 2021 is where I thought you were going with this. Oh, my gosh. Lino. Bless your heart. Okay, in 20. Okay, we're here. We are in 2021. Oh, my gosh. I was off a year and now we're sitting in 2022. Okay. Boy, my whole team. You should have cut me off, Mark. Okay, he said 2020.

Okay, strategy, I'd never heard.

Yeah, yeah. You're like, mark, come on, throw down on us. Give us, give us something to work with. All right, okay, so in 2021, if any of you out there were an LLC like Sidney right now is you got about two weeks to pull this off because what happens? Oh, he did mean 2021. Okay, thanks, Lino. Okay. Bless your heart. Okay, so Lino, Sidney, because she was an LLC all year, we can go back and backdate it into an S corp. But that means she has to take payroll and designate her payroll for the S corp in the next two weeks. I mean, it's got to be done by 131, 22. So she can still do it. But we want to nail payroll right away. She's calling adp. We're going anywhere we can to get that payroll finished now. Poor Lino. If he was just a sole proprietor, there's nothing I can do. We're going to have to set you up as a new s corp or LLC, taxed as an S corp or whatever for 1122 moving forward. So your year's kind of shot. You're going to be a schedule C. So let's do. Colin, this is a good blocker crypto question. We got Darren here. What do you think Colin says Mark. Okay. Yes. Crypto bookkeeping. Why don't you tell them tax bit.

Yeah, yeah. So best way to do crypto bookkeeping is just get some kind of software

to do it for you.

So tax bit is fantastic. Cointracker is fairly common. Cryptotrader tax. There's quite a few of them. And so, yeah, what they do is they're actually going to go on the blockchain. They'll pull all of your transactions. All you do is, you know, you put in your wallet address. It's fairly. They make it pretty, pretty simple for you. It's fantastic.

But Colin, everybody Collins asking a good question. Because if we go back to our trifecta, everything just is a trifecta in my head. I'm sorry, I'm just. See, Colin could be doing two different things. 3. Colin as an individual could have a Coinbase account, let's call that cb and he's just buying and selling, trading crypto. Okay. He also could go out there and put together a mine and maybe he's mining in his own name. Okay, cool. Maybe. And he says, I've got an IRA and my Roth IRA is going to open a couple LLCs and my blocker and I'm going to go out and do some crypto mining in my ira. See, he's got three things going on. Now. I'm going to put this in red. Where do you think he should be using tax bit Here? This is where you need software because what you need is the software to track the blockchain of all your buys and sells. Trading of crypto is taxable. So if you trade Bitcoin for Ethereum you got to pay tax on the, in the gain in comparison of what you bought the bitcoin for. And now what is it worth before you trade it for Ethereum? So that's where the software comes in over here for your mining. I'm using QuickBooks. I mean there's no need to use software for that because we got income, we got expenses and so Nicehash is going to kick out the income for me and I pop it right into my wallet and I'm off to the races. So up here you're going to use in your blocker QuickBooks, Colin. And yes, we're going to be talking all about this at the summit. Get down to Phoenix, We've got about 50 seats left live and then you can get on virtually if you'd like.

And if you're, there are some things, you know, with a holding company, for example on that llc, if he's trading at all, you might want to use it there essentially just anywhere you need to track transactions. Now one thing I will mention is if you're on an ico, brand new crypto, sometimes it won't be uploaded in the software so you may have to hop on a block explorer and pull some of those transactions yourself.

There was a question there by a woman on her S corp. Go down a little further. Okay. Oh my gosh. Find, find my. Call me. There we go. I wanted to answer Gladys's question. Okay, Gladys, Gladys says I was a brand new S Corp. So let's see, here we go. Here's a little trifecta that makes sense. So Gladys is over here, she says I have a brand new S corp and I need to kick out payroll for the first time for 2021. She has to get her payroll report done by 131 22. Right everybody? So she's asking here, she says I net 80 grand. Okay, so let's say she brought in 100 grand, she spent 20 grand on home, office, auto, computers, blah blah, blah and she net 80 grand. Well how much payroll should she take? Now that's issue number one. Now for some of you out there, you've maybe watched some of my videos. We're going to go and look at the matrix. As your income goes up, your payroll percentage goes down. Now right here in the middle is kind of our sweet spot at about 100 grand. Of net. We're going to do a payroll allocation of around 40%. Now if she's going to net 80, which is around in here, we might do a payroll allocation of about 45%. I don't know. Everybody's a little different. I've got to be really careful on a live broadcast to say, Gladys, take this X amount of payroll. Don't know if she's married or single. Other income. How many expenses have we written off home office yet? I mean, there's so much to talk about Gladys. But everybody, we need to figure out what her payroll is going to be. And then right here she has to issue that payroll. Let's say we do 40 grand. If she does 40,000 in payroll, she's got to send in the 941 and all the taxes, the FICA on the 40,000 by January 31st. So Gladys, get with your. Figure out your payroll allocation, then get to a payroll company and say, hook me up. You're going to have a deposit of around six grand and you'll send that 6,000 in. Now, if Gladys didn't do this, she's going to owe taxes of 12 grand come April. See, that's why the S Corp makes sense. That's why every dentist, doctor, landscaper, plumber, electrician, accountant, lawyer, we're all freaking S Corps all day long. Because I'd rather pay six grand then twelve grand. That's how the S Corp works. But if Gladys misses the deadline on 1-3-122 in the next two and a half weeks, she's SOL and I ain't talking statute of limitations. All right, your next question. All you, baby.

Okay, I've got one that I like. So angel, scroll down the court, give me something good. All right, so angel has started mining helium on the helium Network.

You know, an ira Personally.

Personally.

Okay, so let's get this on the board. We're gonna play Pictionary here, bud. I'm gonna keep. I'll diagram what you say.

Yeah. So basically he's asking, do I need to set up a business entity for mining helium? Now, for those who don't know, I'm gonna. This is an oversimplification, but helium is basically an Internet router, long distance Internet router that you can put on your house. Super oversimplified.

You pissed off some helium miner.

But it guy out there is like, it's not a router.

He's just trying to explain. All right, so we have helium and he's mining for helium.

Right?

Which is what type of income?

Which is Ordinary income.

Okay. Ordinary employment tax, subject to self employment tax. The way people, some of you got to think about this and maybe we ought to do a list right now. What type of crypto activities are subject to self employment tax? Now, we're going to be covering this at the Summit on the 29th, but let's just give them a precursor. Obviously. Mining.

Mining. Absolutely.

Staking.

Staking.

Node mining.

Yeah. Having a node the rewards on that

would be subject to se mining helium.

Yep.

I would say any metaverse business. So you're selling a product or rebuying.

Selling product and selling NFTs.

What about collectibles? See, collectibles. If it's an NFT that's designed, if it's not a utility nft.

Right. So if you're the one that's creating it to be sold. So I've had digital artists and photographers and people who are selling things as NFTs.

Okay, so creating collectible NFTs. We're going to define NFTs. There's a lot of different types of NFTs. Real estate NFTs, collectible NFTs, utility NFTs, or we're going to say collectible or utility NFTs if you're creating them. Okay, everybody. All of this type of activity in the crypto and metaverse, subject to self employment tax. This is equivalent to having a lemonade stand. It's equivalent to making lemonade and selling it out on the street. And you may say, well, it's in the metaverse and no one can track it. No, there is a blockchain somewhere telling us how much you made. And the IRS is going to get their shiz together at some point, start auditing people. And they already are. This is why it's the first question on the 1040. Did you do anything in crypto? If you did and you don't check the box, that's perjury. Not good. Okay, so if you're over here doing helium, what type of structure should you do?

So potentially you do an S corporation for that.

Now, we might want to. The question is going to be what you're going to ask.

Yeah. Now it depends on how much you're making. Right. So if you're starting out and your net income in from that business is under 40, 50 grand, you stick with an LLC, right. Or even maybe as a sole prop for a little bit. But once we get that LLC in place, what that's going to do is just like we were talking about earlier, it'll act as a placeholder. So then when you do hit the right number, you can be able to back date and use this S Corporation strategy to start saving some taxes.

Yeah, it's just like my daughter Sydney being a realtor. I want her to be an llc so when she makes big money, she can go back and be an S corp. If you start mining helium, you go, well, I'm not going to make that much. What happens if you do? If you don't have an llc, you're up here like Lino butts to the wind. So we don't want that. So I think coming down here and starting out as an LLC would make a lot of sense. And by the way, you cannot set up this LLC in freaking Nevada, Delaware, Florida, or Texas. If you live in freaking California, it's going to be a California llc. Sorry, it's the way it is. Don't hate the player, just hate the game. All right, all right.

Set it up where you're making money.

That's right. So if you're making more than 40 grand net, you got to be going the S Corp immediately. So that's how you do it. Okay, let's see. Let's do angel just for one. Well, should we look hard?

That was the one we just did.

Oh, is that the one we just hit?

He's doing the helium mining.

Okay, Duck. Okay. Is it possible to wreck? No, let's not go there. Man, this is hard. Okay, Corey, let's bring her down. Bring her down. There's a lot of questions after that. Can you. Sorry, everybody. I got it.

Okay, here's a quick one.

You got one? Yeah.

So Logan K. He says, paying kids from S Corporation. Do I need a family management company as an LLC or as a sole prop?

Okay, you're answering. You brought it up.

Okay. Okay.

So let's keep the same diagram up here.

Right? So out of this S Corporation, paying your kids is a great tax strategy because you're able to shift your income down onto their lower tax bracket. So they do have to be working in the business. Right. We're not just. Not just throwing money at them. Right. But it's very simple. You set it up as a sole proprietor bank account. Then you're going to go ahead and move the money from the S Corporation to the sole prop and from the sole prop over to your kids.

This is a chapter in my book, Paying family Members. By the way, before the end of the show, we'll give away three or four books here. Corey, I want a couple male names, a couple female names. Can you do that? And everybody do not type. Give me a book. That's not going to get you a book. Cory's going to randomly choose some winners today, so we'll get that going here in a moment. Valerie, so kind says payroll matrix is on page 41 of Mark's Tax and legal playbook. The Bible. You rock, Valerie. Okay. All right. Translis says I currently own manage zero legal entities. What should I read or do to become more comfortable with and learn what it takes to own and manage things like an llc, a trust, or et cetera? Well, first, Terenslas and everybody out here, this is a perfect place to be to continue to learn how to run and operate a small business and what these entities are all about. I've got to tell you, certainly my book, tax and legal playbooks is going to be a great start. But I'd say this, too. I've got this eight steps to start grow a business. And I do eight different kind of town hall meetings that are an hour and a half to two hours long. Answering questions just like that. There's a whole section just on legal entities. Now, I would say this as well, everybody. This is so important. Ainslist. Having an entity is different than having a business. And the big thing that I want people to focus on is making sure that your business is making you money. It's functional. It's your understanding how to operate it. The business is the heart. That's the heartbeat of an entity. See, the entity is just a shell around a business. We are not going to set up an LLC for the hell of it. We're going to. I'm going to ask you, what's your business? I want to start and grow your business. Then we may put an entity around it. Maintaining the entity is the easy part, really. Making money in your business. That's our part. So yada yada. All righty. I had. I'm going to go to Michael. You want to take that one? We're going to save Michael some money. I mean, this is a freaking slam dunk. Do you want me to run with it? You feeling it? Okay, Michael. Michael, do not go anywhere. We're going to make you some money today. This is. I thought you said he had an llc. Uh, oh, now I got to give him bad news. Gosh, I thought you said you had an llc. Okay, so Michael. Oh, Michael, I'm sorry. So Michael's down here and he got paid over 200 grand in the 1099 type of situation, I'm sure. Gross income in 2021, but not paid to me. Personally, not in an LLC. I don't understand that. I'm going to assume if he got. We're going to answer it both ways. If you got paid personally, Michael, if any of you made money for 2021, much like our prior example, you're going to report that on a schedule C, as in Charlie, and you're going to pay self employment tax on all that net and it's going to be ugly. So, Michael, you want to get a new entity asap, Brick and asap. Now, his question could be also interpreted the other way. I was not paid personally, but to an llc. So the beauty is, and this is what I was hoping is if he was an LLC for 20, 21 and he had 200 grand of gross income, we're going to want to write off all those expenses and whatever Right now you got two weeks, bud. You want to do an S election and backdate it to 11121 and kick out payroll based on the matrix in the next two weeks. This will save you $10,000 or more. Easily, easily. You've got to do this immediately. Some of you accountants out there will go, you can't backdate an S election. You got 75 days. And it's way past that. We have a special rev rule that we attach to the 2553. We've had 100% success in making sure our clients can backdate their S election to the beginning of any year. The payroll is the key, making sure that that gets done in time. If any of you would like to make an S election back to 1121, talk to Susan Compey in my office. We're going to charge $200 and I'm going to tell you right now, set up a freaking consultation for a tax strategy session. Get your matrix build. I'm not. Get your trifecta built, Understand the matrix, answer your questions, get your company cleaned up. You could do a tax. We charge 1200 bucks to meet with a tax lawyer and build a plan for this year for you. If we don't save you 5x that we screwed up, that's going to be freaking easy. So get that scheduled. I'm going to throw you under bus here. You got one?

Yeah, Karen, that's a good question.

Oh, you got Karen. Okay. I was going to give you Patrick here. Okay, go ahead.

Okay. You can throw me on the bus next time. So Karen, don't go.

Cory, leave it there too. Corey, leave it there. Okay, go ahead.

Karen asks, okay, moving crypto from one wallet to another wallet. Do both wallets get taxed. And so this is pretty simple. We just have to understand when a taxable event is for cryptocurrency. Now, if you're moving it from one wallet to another wallet and you own both of those wallets, a transfer is not going to be taxable.

If you keep it in the same coin.

Yeah, if you keep it in the same coin.

So if I go bitcoin to Bitcoin, wallet one to wallet two, you're fined.

Right. Okay, now make sure when you're doing your taxes that you treat that as a transfer, not as a purchase. Yeah, but yeah.

Now let's say I have wallet one, wallet two, and I have Bitcoin here, and I'm going to Ethereum.

Right?

What about that?

At this point, we're now selling the bitcoin cross, creating a taxable event and purchasing the Ethereum. And so you're going to pay the gains on whatever appreciation you had on that bitcoin.

I'm sorry. And people, you may think, well, my wallet doesn't report to the irs. It does not matter. Do you want to go to jail? That's what I'm trying to point out. Everything I can hide from the irs. Good luck. All right, so let me say these are the three events that create a taxable event. You just sell your coin to USD. We all know that's taxable. You trade one coin for another. We just. Darren just gave that example number three. You use coin to buy something. I buy a Tesla car. That's like selling it. Even though I traded coin for the car in that infinitesimal of a microsecond before the coin went into their hands, it was sold for the US dollar equivalent of what the hell the Tesla cost. That's a taxable event. These three things are taxed by the irs. Boom to bang.

There you go.

Okay, now, nitty crypto, nitty gritty. Oh, my gosh. This is so, so important. Everybody, you've got to hear this one. And crypto nitty Gritty, you are not going to be happy. And I'm so sorry, but I lived in California and I got the hell out for this very reason. I live in Cali, but set up my S Corp for my crypto business in Florida. So here's Nitty Gritty, the last part of it, too.

He says he plans to move.

He has his S Corp and he lives down in California, and he owns it directly or through his trust. And he's like my crypto business. Now, again, crypto nitty gritty. I'd like to know what your crypto business is that you're needing or feel you need an S corp. I presume you're doing one of these things. If you're just trading crypto, you don't need an S corp. An S corp is not going to help you if you're trading. But if you're mining, staking node, helium, metaverse, creating collectible utilities, NFTs, blah, blah, blah, nitty gritty. You needed an S corp. So. So he says, well, I created this S corp in Florida even though he lives in California, because, let me get this crypto. Nitty gritty. Yep, I get it. Hey, I live in California. I go to In N Out Burger. I enjoy the sea breeze. I live in. I go to the airports in California, I use the roads in California. But. But if I set up a Florida entity, California is not going to tax me, right? They're good with that. Really? You think that's going to work? Oh, no. I do it in Nevada. They won't catch me. Do you know how many people they have assigned to catching people like that? So I hate to tell you, having an entity in Florida, even though you live in California is not going to save you state tax. I hate to tell you. I'm so sorry. I hate this. And he says, I want to leave California in the next two years. Great. Until you do, you're paying California tax. Boy, I'm kind of nasty today, huh? I feel bad.

Oh, pay your California tax. And when you leave, pay your Florida tax.

Yeah, Then you can go to Florida. Bugs, humidity.

Alligators.

Great. Alligators, sharks. Great. Cuban sandwiches. I mean, that's good. That's a good point. Okay, now next, Patrick says I max out my Roth 401k and my Roth IRA strategy working as an employee in two different places. I'm good with that. Patrick, everybody, we call this the backdoor mega Roth IRA strategy. There's a lot. There's different ways to tackle it. It depends on if Patrick is married or single, how much money he makes. But the point is he can have two different jobs and he can play in two different 401ks. And he can also, in his personal life, have a Roth IRA. Now, you could have two Roth IRAs, but let me tell you the rule. I'm going to assume he looks pretty young in his picture, so he's under age 50. You can only do six grand in total amongst your Roth IRAs. So that's three grand here, three grand here. And with a 401K in 2021, you could do $19,500 total in two 401s. Now the trick here is you want to get, I call it matching out. Put in what you need here, get the company match and then get the hell out. If you. And then over here you do this and get out. So once you get the match, you can decide if you really want to put more money in there. If they don't have a great investment option portfolio, you may say, I'm going to come over here and set up my own S corp and set up a solo 401k and then do the rest of my 401k here. So you could do three. Let's do it in red. Isn't this fun, Darren? Yeah, I could do, I could do three grand here plus a three grand match, I could do five grand here, plus a five grand match and then get out. You just doubled your money. Three, three, five, five. That's a total of eight. So what do you got left? I could do $11,500 over here and do my own match for my own business. So you can run three 401ks to get the maximum rate of return and you can self direct the Solo 401 and go buy real estate or set up your crypto. Mine. Okay, your question, you choose.

Okay, so Jay asks, he says, I have a self directed Roth IRA. Can I buy NFTs within it? Specifically Digital Land NFTs.

Oh, I like his last little piece there. Tell us what you wanted to say before he said that last sentence.

So it depends on the NFT mark. You already went through that. There's, I mean, so NFT really is more of a technology, it's not a specific asset class.

How do you. Non fungible.

Non fungible token.

Non fungible token. NFT. So what kind of NFTs can you have?

Okay, anything that's not a collectible essentially. Oh, you mean in general?

Yeah, in general. Yeah, yeah.

Okay. So we've got, I mean, so he's actually got a profile picture on there, looks like it may be an nft. That's kind of the standard NFT type of profile picture. So there are those, you know, just art, digital art. There are auction houses that use NFTs for tracking ownership.

Avatar is an NFT. But if you use that avatar in Star Atlas to make money, that's a utility nft. And that's okay?

Yeah, yeah, that can be okay. So the main thing, and with, with other NFTs too, some people will use them for tickets, some people will use them for all sorts of stuff. Right. So the main, main thing here though is within your retirement account you cannot own or invest in collectibles.

Okay.

So that's the thing to look out for.

So I'm going to put a big line through collectible but utility and land. Now here's the tricky part with the utility. Yeah. Is if you're the one improving that avatar and you're playing with the avatar that your Roth owns, that's like the first question of the day, you know, and I, you can't do that.

This literally came up this morning. I was talking to my assistant and she said, you know, I want to play Axie Infinity, but I don't want to like throw in a thousand bucks to do it. And they are talking about doing starter packs, but I was like, okay, cool, yeah, maybe I'll go buy a couple characters with my retirement account and you can play it because I can't.

Now here's my concern too. Let's say I'm playing with an avatar and I generate income. Yeah. Ubit, but what happens if my avatar gets really good and my avatar itself goes up in value? Capital gained. Right.

So we could have you, we could have capital gains. There's a lot of uncertainty with it. And if your avatar. The other question too is if your avatar is rare enough, could it become a collectible? So there's a lot of uncertainty around NFTs and doing it inside of your self directed account. I think that it's enough of a gray area that I wouldn't do it unless it's a very specific situation.

It's okay. I love the land.

I think the land.

Yeah, yeah. I mean Digital land is Digital land. Yeah, that's.

But be careful with it.

Yeah, I guess you're right. You could buy now Rushmore.

Yeah. So I don't know, for example, the Axie Infinity game, you can, you can use your characters to breed and create a new character or new nft. And if you breed and suddenly you come up with a new rare one that's super valuable, well, is that a collectible?

Now I have a hard enough time breeding in real life, let alone breeding in my avatar, so geez. Yeah, so it's getting a little risque. We're talking about breeding avatars.

Well, maybe this NFT will really up your game, make it easier for you.

Mark Hovspan. Mark Hovspian. Thanks, Mark. I apologize for that. Says, can someone 65 or older set up a crypto IRA? You're darn right you can set up a Roth IRA. If you're 102 years old. You're never too old to set up an ira. So I would go with a Roth crypto IRA and go to directed ira. Now you may say, well, I don't want to go through Gemini, but you're up and trading in three days. Boom. If not, you got to create an llc, an institutional account and go to the exchange you want to go to. But wow. I was going to ask hit a question in there, but Sebastian says, is it easy to change from an LLC to an S Corp? Yes, it is $200. And I said earlier, call Susan and you're good to go. Cory is making me sick right at this moment. So go ahead and take a question.

I was just reading it. We'll see if it's a good one or not.

Okay, I'll do Paul. Paul says in 2021 I earned some staking income. I already sold these coins under my own account. I do have an LLC already. Is there anything I can do now to reduce taxes? All right, Paul, everybody, this is deep. Now this is the kind of stuff we're going to be covering in the conference. So Paul's over here. Okay, so here's Paul. Now this is tricky, everybody. I'm going to try to use, maybe I can use an example here. But Paul's going to go out and do staking. Now what did we say staking does? It creates ordinary income. And that ordinary income is subject to self employment tax. So he's staking and he's got a small business staking. How much did he make? We don't know. And then what were his expenses? How much did he net? He says, I earned some staking income and already sold these coins. Now see, he jumped, jumped to the second part of the story. When he was staking, he was paid in coins. What was the value of the coins on June 1st when he earned them? That helps us decide what is his tax here. And then let's say he went out there and those coins he put into the wallet and let's say these coins netted when he was all done, netted him $10,000. Well then he put those coins in the wallet and the wallet went up to 20 grand. See here you have a capital gain because he was paid in coin and then the coin went up in value. That's important because, Paul, I only want you to pay capital gain tax rates and no self employment tax. This part over here, we've got to do an S corporation where you're going to, it's going to go on a schedule C and you're going to pay the highest possible tax. You're going to get toasted over here. So what I want to know is when you made the money in staking, what was the value of the coins at that moment? You move the money over to the wallet and then it becomes capital gain from that point forward. That's what I do in my mind. And this is why I said I have a Roth that has an LLC that owns another LLC that mines. And so when I make money up here, I pay tax, but the minute I move money down here, I paid no tax because I have a different wallet. So you've got, you've got to remember you've got two things going on. This is holding, this is earning. Paul, I hope that helped. Come to the conference on January 29th. I know the car horn was crazy. Okay, you have another question. You ready?

Yeah. So Clark had asked. He says he's hosting miners and off of those minors, he's getting 40 to 50% of the mining rewards, ordinary income. Now he's asking would it save him money or save him taxes if he did it in a Roth llc?

I think if he's hosting, he's probably providing personal services.

And that's what I was going to say.

Yeah.

In that case, you're providing personal services so you can't do it in your retirement account. Matt and Mark have a great podcast, the Directed Ira podcast. If you're interested in self directing, doing anything with self directing, Start with episode one, go through at least episode five or so and then you can jump around. But that'll definitely walk through it.

See, and what was his name?

Clark.

Clark, everybody. Listen, what Clark's doing is I'm hosting. All these people want a crypto mine. And so I'm going to help set up all these little mines and we're, you know, and I'm going to, I'm going to help them buy their video cards and da, da, da. And I'm going to provide the electricity. So he's got this mining farm, sometimes they're called too. So he's over here providing hosting services. The only way this could work is if the ROTH hired someone, not Clark. And so this is a third party that you would pay to do all the work on someone else on another farm. I don't think it's realistic.

Yeah, no, you probably wouldn't be able to get in.

So you're going to want to run an S corp here, Clark, because you're providing a service. Okay, where are we at on time, Cory. Ooh, one more question and then I'm going to give away four books. No eight steps. I'm just going to go with these four other books, Cory. You got names for me? Two males, two females. Don't go anywhere, everybody. Can I move my S corp from Nevada to the state I live in? I own property and live and work in Colorado. Kenco. Thank you. Freaking a way to own up to the fact you got sucked into a Nevada corporation and now you need to move it. It's called Articles of Domestication. Call my paralegal, Susan Compy. Susan Compey could do an articles of domestication move and move your, your Nevada S corp over to Colorado. Now at the same time, you might want to consult over here with one. I've got pointing to two other attorneys off camera here, Steph or Katie. And you have a meeting with them and say, make a plan for me. Let's clean up my entity. Let me see why, what my payroll should be. So Kenco, step one is get the domestication done. Step two, get a consult. Make a plan. Last question. You get to choose.

I thought that was the last question.

What? Okay, Big Mike says could you set up an S corp in a state where you don't live in?

You can, you can, but no, don't do it.

No. Not gonna help you, Big Mike. See, here's the purpose of an S corp. I'm gonna just throw it out there. Corey, you ready? If I want to say, I'm gonna ask my producer. I'm putting him on the spot here, Corey. If I have an S corporation, what tax am I Saving Self employment tax. And I have to do the Kohler payroll matrix and take A what, a K1 and a. A reasonable salary. Good to answer, Corey. So salary in an S corp. If I'm going to take a salary, I have to issue myself a W2. The state where I live is going to require an employment ID number because I'm an employee in the state where I live. See? How can you set up an S corp in another state where you don't live and get a W2 in a state where you don't live? It's impossible. That's the problem. You could do it. You can set up the S corp in Nevada, but if you freaking don't live in Nevada, you can't take a payroll in Nevada. It's all jacked up. There you go. Okay, I'm giving away two books. Two plus two. I'm giving away four books, Corey. First, the self directed IRA handbook. Written by my partner, Matt Sorenson. Who's the winner? Dennis Sinenka. Dennis Sinenka. Dennis Sinenka. Now, any of you that are winners, all of you are winners because you're here today. But Dennis, if you're a winner of a book, you have to email CoreyArkJKohler.com so email CoreyArkJKohler dot com giving your information. Dennis. Okay, the second book, Business Owner's Guide to Financial Freedom. Love this book. Joe Venito. Joe V, as in Victor. Joe Veneto. Winner of the Business Owner's Guide to Financial Freedom. Then my tax and legal playbook. Always a favorite. Second edition,

Christina Osmer.

Christina Osmer. Christina Osmer. You have the winner of a book. Make sure you email Corey. He'll get it out to you. And what your CPA isn't telling you, the story that'll get you addicted to taxes. You're going to love it. Janina, Lucien, Gina or Janina? Janina. Lucien. Okay, I butchered that. I'm so sorry. Okay, there's our four winners for today, everybody. Don't give up. Keep learning. If you're not. If some of this was over your head, that's okay. You're at the right spot. I'm here every week. Thursday at four. Next week I might be. Wednesday at four. We'll see. But anyway, get the newsletter. Get over to markjkohler.com, sign up for the newsletter. You can also sign up for the Crypto tax summit there. MarkJ. Kohler.com and I've got a free ebook on tax strategies for small business owners. I've got a tax library with access to almost 60 videos that you can start watching immediately to save money and make money. Darren, thanks for being here. Always a pleasure. Appreciate you. Darren will be at the summit too. The man. Yes. There we go. See you next week.