Cryptocurrency Tax Planning with Drew Kernosky
Watch the episode here:
Listen to the podcast here:
Cryptocurrency Tax Planning with Drew Kernosky
I’m so excited to bring you someone and I’m bringing him right after tax season. He is a tax expert and we have had some really fun conversations. I am bringing you Drew Kernosky. He is from Archer Tax Group in Longmont, Colorado. He’s got some interesting ideas about how to handle your cryptocurrency and how to deal with all of that as you head into maybe getting a better tax season next year because maybe you got hit this year. Drew, welcome to the show. I’m glad you’re on.
Thanks for having me on.
When we talked, it would have been in ChainXChange. I did a little interview with you. There’s a little bit of video of us talking there. You and I met and we were having a late night chat with drinks and everything. You had some cool ideas about offsetting your tax year and stuff like that. Let’s talk about what’s going on first and get a beat of what’s going on and how do people treat cryptocurrency in their tax years and what’s going on with that in tax wise? What’s it categorized like?
The general transaction is a capital gain. In every crypto transaction, you’re going to either have a capital gain or a capital loss. That’s inherent just in the marketplace. What changes it is how did you receive it? Did you purchase it? Did you get paid in crypto? There might be additional taxes on there as well.
Why is that a difference? If you got paid in it, you earned it. It’s like income.
I should probably backtrack a little bit. The way that we calculate the capital gain is you take whatever the sale price is minus your basis. If you buy it, you’re setting your base as buying and paying that USD equivalent for it. If you’re earning it, it’s you being given that money in lieu of cash and so that service has that value and that establishes the basis there. What most people don’t realize is when you receive that as a payment, we have to subtract out expenses and then treat that as if it were self- employment income or if you’re running it through a corporation or a partnership accounting for it effectively there as well. It’s actually a great way for people to accumulate crypto is to get paid in crypto because one, processing fees are way lower. It’s a lot easier to get paid from international clients. We’ve picked up quite a few of those. I’ve had a couple of clients that pay me with a bank wire and some had paid with crypto, and I always prefer the crypto. It’s a lot easier. There are a lot less moving pieces and it clears in minutes instead of days.
I hadn’t really thought about that, but you’re right. That is always a problem.
There’s no negotiating on currency rates. I want for Bitcoin for my services and maybe pay me by this date and we’re good to go. It’s a great way to accumulate it because it does set that the higher basis. Even if your business doesn’t make any money, let’s say get your cell phone bill flipped in there and you’re paying suppliers and things like that, you’re paying them in cash patrolling under your crypto. You can have higher basis crypto without having to pay anything essentially for it. You’re just paying a cash out of it. When you sell it, you’re either selling at a loss. If you are lucky enough to earn it in ‘18 and then sell it before the end of the year or ideally be able to sell it all on year-end. One thing that I want to talk about too is what do we do in the next bull run?
A lot of investors got caught in this trap of things were moving so quickly and it was like a month of absolute chaos in ICO insanity. Prices tripled and by the end of month two, everything had collapsed. A lot of people put themselves in tax situations that we’re unwanting the damage, especially in this tax year. Knowing how your choices impact you from a tax perspective can make all the difference on whether or not you’re going to have a good year or a bad year. As far as we know whether or not you owe the tax man money.
I want to backtrack a little. How did the tax guy get involved in cryptocurrency? That’s what I want to know.People miss the fact that crypto back loans are a great way to pull the value out without having to actually pay any tax on it. Click To Tweet
I used to work with truck drivers and there are a lot of specific nuance laws and taxes for truck drivers. I’ve also worked for one of those if you owe $10,000 or more of the IRS, give us a call, we’ll help you settle. I understand how the IRS goes after things at an administrative standpoint. Everyone thinks that we get a massive liability and they’re just going to come take your stuff. There’s a good two-year process before the IRS can seize anything. A lot of the dealing with the IRS and even audits is just paperwork, making sure that you understand what needs to be submitted, when, how to formulate an argument and knowing what the law actually states. We’ve got to have a natural pull to cryptocurrency.
I had a trucker who was a trucker by day and silver trader by night. As all good career story start, he said, “There’s this post on Reddit. You think you can answer it?” It was all about the 2014 IRS notice that establishes what crypto is, how’s it taxed, what do we do with it. In that situation, everyone was of the mind because it was early 2017 of like-kind exchange applies to crypto. Finally gathered enough value that people have to start seriously thinking about how it impacted their taxes. We came in, we broke a lot of hearts with our stance of like-kind exchange doesn’t apply to crypto. That was part of the reason why we were at the ChainXChange was we were talking about the specifics of the law and why it’s not a good idea to claim it as like-kind and how people are claiming you’re wrong. Once again, it all boils down to paperwork. Most of the people aren’t doing the paperwork required to even clean like-kind exchange.
Explain to our audience who may not even know what that means. What’s a like-kind exchange?
It used to be any kind of asset that was like-kind and the actual section of the Revenue Code is 1031. You’ll hear like-kind 1031 exchange used pretty interchangeably. The idea is when you sell a property and you have some capital gain in it, as long as you pull it into 45 days or at least identify another property by 45 days, you can roll that capital gain into the new property and reduce the basis for depreciation against the gain instead of having to recognize the gain. It’s used a lot in real estate. As of 2018, it can only be used for real estate. It used to be vehicles. It used to be machinery. As of the Tax Cuts and JOBS Act updates at the end of 2017, they say that as of 2018 it’s only for real estate transactions.
Do you think that’s a part of why a lot of people are getting into unusual hot water with their taxes?
At least the biggest case that comes to mind for me is the John McAfee. That has less to do with the like-kind rules and more with him trying to evade taxes and being a conscientious objector very publicly.
Tell people the story because not everybody has heard of him.
I’ve actually filed a Freedom of Information request act to try and get more information on it. Unfortunately, they won’t give me any more information unless John McAfee signs off on it. If he’s reading, I hope he is. We would love to tell your story and show to the world with what’s going on and why this is such a big deal. What they’re alleging is he has all these unpaid taxes and he went on Twitter and said, “I haven’t filed tax returns.” I think it was seven years or something crazy like that. “I’m not going to file returns, come and get me,” and then jumped on a boat and is somewhere in the Caribbean where they don’t extradite. Keep in mind, take it with a grain of salt but it’s a good case on if you’re going to do something, the less public you are about it if you’re in the wrong, the better off you’re going to be because the IRS doesn’t take kindly to tax evaders.
The joke that have been going on the same for a few years now is you get all these guys on these YouTube channels to sit there like, “Crypto is free of tax. I’m not going to pay my taxes. You shouldn’t either. If you like our show, donate below.” Now you’ve got a tape of the video confession. A link to a Bitcoin wallet that you can trace the chain and see where it’s gone and they have you admitting on camera that you have no intention of paying taxes. Your argument of culpability, “I didn’t know that I was doing something wrong. It wasn’t malicious. I wasn’t being intentional about it.”
I did an interview with my good friend, Aaron Young, on Product Launch Hazzards, one of my sister podcasts. There are rules in the Federal government and they can come after you for things you should have known. That would probably fall into “Should have known this,” and you’re still in trouble even if it wasn’t as blatant.
Being such a student of tax law, I always take for granted how much I actually know in that space and how much is it coming out. They don’t teach it in schools, which is unfortunate, but it’s all publicly available and there hasn’t been a ton of information that’s been put out on it. They do have one notice and it’s been a hot topic. If you just search cryptocurrency taxation IRS, I’m sure it’s probably the second or third down there. There’s a real argument that you should have known that you were trading something of value and operates a stock. Whether or not the Wash rules apply or what accounting methods can we use. That’s probably up for a little bit of debate. However, you’re still going to have a gain somewhere. You have less, now you have more. You’ve got more of these tokens that boils down to a simple calculation for the IRS.
Just holding them doesn’t mean anything. It’s when you go to sell them. That’s what I want everyone to realize here. It’s just because you happen to have that in your asset base, it doesn’t mean anything. If you go to sell it, if you go to transfer it and if you go to do any of those things, now you have to consider what you’re doing there. Drew, I’m a little bit of a tax geek. I’m going to admit that, which is so funny because people would not realize that about me. The thing that so interests me about it is that there’s a strategy behind how you might run your business, how you might operate. That’s why you and I hit it off so well as we were talking that night at our friend, Adryenn Ashley. I should give a shout out to Adrian. She’s got a great app that she’s working on called Loly. She was starting this party and we were starting to geek out on some tax ideas. We were talking about a lot of Amazon sellers, which is what we deal with in our podcast. They’ve been kit with this crazy misunderstanding of what inventory is.
It’s a huge problem for them that they don’t understand that just because it’s not sitting in their house or in their garage or in their warehouse, it’s sitting out on Amazon stock, doesn’t mean it’s not your inventory. They messed up on that. You had an interesting idea, and you said to do that the same thing works for Bitcoin and cryptocurrency as well, and that is to offset your tax year so that you can fall into different brackets. You don’t get hit having to pay everything April 15th. They might come in a different time of year when you have more money, when you have more revenue, which for Amazon sellers, it’s usually the fourth quarter of the year. I remembered that and thought that’s so smart because so many of the companies and brands that I used to work for used to close their tax year in June, which would mean that they would be paying right at the height of when they have the most income.
Fiscal tax years are pretty common. In some cases, you have seen CPA firms that deliberately set their company fiscal year to be after tax season because you’re not going to focus on your own return. I filed an extension. I’ll be probably doing that mid-June. Looking at the way to structure, you have to do it through an entity. If you’re going to be trading in that regards, you have to understand that you do have capital gains flow through, depending on what kind of entity that you set up. We could probably talk for two hours on specifics of that and that’s what we did to consider how do we actually leverage crypto. The other thing that I think a lot of people have missed too is crypto back loans are a great way to pull the value out without having to actually pay any tax on it. When you borrow and he gets it, it doesn’t constitute sale.
What are these crypto back loans? I haven’t heard about them.
We’ve got SALT here in Denver that does them. MakerDao, CP is a crypto-backed loan for Dao. You’ve got, Unchained Capital, BlockFi. There are a couple of companies that have sprung up. I’ve talked to a handful of CEOs and just said, “From a tax perspective, if I’m going to encourage my clients to do this, how are you storing the tokens because that does matter?” There have been a couple of court cases for stock back loans where they traded their stocks that are options to this company and they set it up like a loan. That company that went and sold the stock underneath that is Devirian Capital. Devirian Capital versus the commissioner.
They weren’t holding it in a capacity like a loan, because you think about like a home sale or a mortgage, when you get a mortgage against your home, it’s not the sale of your home. It’s borrowing against the value of that asset. The bank were to sell it out from underneath you and sell your home, then that constitutes a sale and you have no void. There are a lot more contract issues than that, for simplicity’s sake. The idea being that if you want to unlock the value, you must stay long in the position. Putting it into a loom like that will at least pull some of the value up. Usually, it’s about 35% loan-to-value is where I’ve seen on average for these loans. You can invest that loan into a business and get that started.
You can actually write off that interest if you’re using it for business purposes, as a bona fide business expense. We’ve got some miners too that they’re mining all this Bitcoin and they’ve got all those expenses that they have to pay, but they didn’t want stay long with Bitcoin. They pull this Bitcoin together and they borrow against that Bitcoin and then they use that loan to fund operations and then they’re just paying off the loan and the interest as they go along and maintaining position. There are all sorts of ways that you can structure it. Honestly, all taxes boil down to, “Can we think far enough ahead? What do we need? Will I need dollars in my hands for my living expenses? What living expenses are actually business expenses? What’s my timing?” If I can wait and stretch things out, it’s sometimes better to sell in the next tax year than it is the sell right away. We’ve had some clients that balance, they sell only a little bit in December 31st and sell even more on January 1st. It makes a huge difference for the time value of money for them.
It was getting me thinking also that many people are working on their business plans. I know I’m working on one with putting part of my entity in blockchain and looking at what that is going to be. Starting to think about the implications of that and how I might fund that and what am I going to do. The tax implications are high. You do need to think about that and plan that ahead and plan that as a part of, “How might I fund this and then how might I be able to continue to find that?” Are you going to be continuing costs that go on that? “How can I make sure that there’s value there that’s adding back to me.” I love the idea of the loans and all of that. It would be interesting to look at from a business planning standpoint. Now you’ve got my brain whirring.
The only thing I think a lot of entrepreneurs miss out on is they always jump into business and they have a sole member LLC. They don’t realize that just goes on your Schedule C on your tax return. I keep a range because I want to make sure that anytime that we do anything from a tax perspective or tax mitigation that the dollars spent to do this are going to be offset by significantly more tax. We always try to balance. I don’t want just spending $500 to save $0.25. I’d rather you just pay the tax and the $0.25. A lot of people are afraid of setting up an LLC and then electing S corp status. If you’re a small business and you’re making over $70,000 of profit, just making that election to an S corp and then paying yourself a salary and say you do $30,000 or $40,000 salary, the remaining $30,000, $40,000 salary comes back to you at income tax only. Most entrepreneurs don’t know that every dollar they’re making that Schedule-C profit gets hit with income tax and then self-employment tax as well. There have been a couple of clients that we’ve worked with that we were actually able to cut their tax bill in half just by flipping a switch on the tax forms. Same dollars, same income but it makes all the difference in the world.Some credits will come and fall away. Some will stick around. Click To Tweet
I get in this little battle with my family over tax time every year because my parents got hit with the no longer able to deduct your property taxes, which was a big deal. They’re expensive here in California. That was a big hit for a couple of retirees. My dad didn’t end up having to pay in, but he was really close. I was like, “We just got a refund and it was quite sizeable.” He was like, “What did you do?” I go, “You know I have a business, dad.” I was like, “We’re an S corp.” We did it from the very beginning because my husband is my partner, so that makes you a single member LLC if you’re married. That doesn’t help either. You don’t end up with that member-based LLC. You just end up like you’re a sole entity.
We did it from the very beginning. We’d make more than $70,000 in our business, so now it’s beneficial. Even when we started, we did it that way as well because we knew there was so many tax benefits and it has always benefited us. I had to go and help my daughter and her husband do their first joint tax return together. They don’t have a ton of income, but he’s a videographer and he operated like a sole proprietor. I was like, “I can’t do anything about. You didn’t make enough money. You didn’t do any of this but I can’t do anything. You still have to pay your self-employment tax because you didn’t elect, but good news. It’s $100 cheaper than the corporation fee. Be happy about that.”
In Colorado, it’s $50 a year and a half.
It’s $800 here.
There are a lot of things. Honestly, the biggest change that we’ve seen with the tax law updates is those that were wholly W-2 got pushed the limit and either I had to pay a little bit in or we’re barely on the cusp of getting a refund because they didn’t change their withholdings. That’s what happens every time that they make an update.
They weren’t aware of that. As an employer, I wasn’t even aware that I should advise them to do that, which I should have. I thought it was going to net out close enough for them, but for the ones who have homes, that’s where the difference happened because of their tax space has shifted so much that they should have withheld more.
It’s so difficult and the dependence dropped off as well. You’ve got your standard deduction doubled, but if you’ve got five kids, you used to get $4,000 a kid off your income and then the standard deduction of twelve were more if you’re in a high state income tax or high property value areas. There’s been an interesting mix of some people who benefited from it. Some have gotten kicked in the teeth by it. One thing to remember too is everyone always dogs on corporate tax rates. When the corporate tax rate drops from 35% to 21%, sometimes the best thing to do is to create a C corp that manages your S corp. You become truly passive in your S corp and you lock in at 21% tax rate. Once again, if you don’t need that money, you could use that to fund management fees and then run your payroll through the C corp where you actually can get more payroll benefits that came through your S corp. We’re just going down the rabbit hole here with all these different things.
I’m going to be talking to you in 2020 because I have 50 employees worldwide, but they are worldwide, and so I don’t have a lot of US employees in my business. As I look at that, that’s going to be changing this year. It’s a question for me, “Should I elect C corp?” I think that this is really important for people to start thinking and planning about. It’s so good you bring that up because this is stuff that I do think about, but most business owners don’t. All of a sudden, they hit and they go, “I wish I did that last year.” You should consult a professional. That’s why I brought you on here.
Call me now because I’ve got nothing. Call me now. This is the best time to talk to me because we can take a look at the return that you just filed and we can go over and say, “If we make these adjustments now, this is what’s going to mean for you by the end of the year.” A lot of what we’ve been doing is we’ve been shifting away from individual returns and doing more tax and business planning. We’ve even done some international consulting where we’ve got multiple companies that have licensing agreements and we could structure the income in a very effective way and it’s all legal. You have to make sure that passes the duck test, “Is this an actual transaction? Are we moving money around?” We’re not just saying that we’re paying a fee and then bearing the money on the bank. We’re doing things the right way. Just an ounce of prevention is worth a pound of cure. When you’re talking about cutting your tax rate in half, what business owner wouldn’t want to take off their biggest expense at the end of the day, especially service professionals and cut that right out? If you go from $30,000 to $15,000, that’s a lot of money back in your pocket.
I thought I was going to get hit this 2019 because of my oldest daughter aged out. They changed that. I have two younger ones but they got more, so it actually balanced out and I netted the same. It actually worked out even from me where most people got a different hit. It didn’t have to be that way.
With the structuring with Archer Tax Group’s taxes, our income pretty much doubled between ‘17 and ‘18. Because of the way that we structured the business and took on specific deductions and focus on key things, even though our AGI was almost double, our effective tax rate, not the marginal tax rate because that’s what you pay on every dollar at a certain point. The average of the effective tax rate between the two years, we actually dropped 2% of our taxes. We had way more income, we had significantly less taxes. For small business owners, there are a lot of gifts in the Tax Cuts and JOBS Act that if you’re a professional who doesn’t know about them, there probably have been quite a bit of money on the table. My business income alone, you know to structure your income around that and say, “I don’t want to make more than $317,000,” I think is the married filing joint limit. That’s a 20% deduction off of your business income coming from any S corp partnership or sole member LLC. That’s a big chunk of change. Once again $100,000, that’s a $20,000 deduction that you get, no questions asked, sign me all day every day. I’ll take 20% return on investment.
I just did some research and to the people, whether they elect business or not, but the small to medium-sized business enterprises that identify with zero employees. There’s 5.5 million of them with zero employees here in the US. When you look at that size of that number, they’re doing everything themselves, they’re doing all these things. The shocking number to me was 68% of them make $200,000 or less in revenue. They’re not even making a ton of revenue to begin with. Yet thinking about it, if you could save 2% to 3%, that’s amazing. Why not? You could do more business with that.
That would pay for it. We normally charge somewhere between $2,000 and $10,000, depending on the complexity for a tax plan, with the aim that we’re wanting to save you at least three times our fee for the next three years. Having a good professional and you’ve been just sitting down with them on a quarterly basis and just saying, “What can we be doing to optimize?” and having some of that who actually studies the law and keeps up on the trends. I was appalled at the number of tax professionals that have no idea about the Tax Cuts and JOBS Act. I’ll be the first one that call it our industry. We get so complacent of, “This is the way that it’s always been done. They’ve been changing since the ‘80s.” Some credits will come and fall away. Some will stick around.
If you’re wanting to be working with small businesses and being invited into this person’s financial life, which is a huge step I think for a lot of people to just open up about, “This is what I do with my business.” You need to be an actual professional. You need to keep up with trends. You need to have to take continuing education that matters because how many businesses out there do you think these small businesses that are just starting out can benefit from a research and development tax credit? There are so many different people in the crypto space that are just starting out. If they knew that they could structure themselves in a qualified opportunity zone, they can actually get investors easier because they’re a tax advantage investment vehicle. There are so many things that just knowing these little tips and tricks makes all the difference in the world. Even if it’s not me, please reach out to good professionals and do your research and don’t be afraid to dig into it and ask questions.
Thank you for sharing that because I agree. That is a big difference. I’ve been doing business for over 25 years, and I always saw myself as a business owner and not an entrepreneur because it just wasn’t the term when I first started. Because of that, there were professionals at your access and you were always urged to do that. That made sense back then. Now, we get in this entrepreneurial mindset and we think, “We could do all this ourselves and we have TurboTax. It will be fine.” That’s not advice. It answers your question but it’s not advising you.
TurboTax is great if you’ve got a simple W-2. You’ve got an app now where you can literally snap a picture of your W-2. If that’s all you’ve got going on, awesome. If you’ve got dependents that are in college or you’re divorced, you don’t know who actually gets to claim the dependent. There’s a bunch of penalties and issues that can crop up. The number of people that I see when they claim their self on an expense, I see the monthly cell phone payments. They bought a brand-new iPhone in that year and they don’t realize that they can expense it. It’s depreciating right away. Anything under $2,500 you can expense and not have to worry about depreciation and have that business expense right away. Our go-to every year is my wife and I are in alternating years. This is my year. I finally get a new phone. December 31st, we go get the new phone and because we’re paying an installment plan on the phone through Verizon, I can still take the full value of the phone December 31st in that tax year. I get this tax benefit without having to spend $1,000 upfront. It’s just things like that that make all the difference in the world. Just learn the structure and learn to ask yourself, “Can I make this a business expense? Is it reasonable and necessary? Is it a usual expense in my industry?”
Is there anything else that in the crypto space or in what you’ve been seeing going on in the blockchain research world that people may not be thinking about that they could really take advantage of?
I’ve shifted how I look at tokens on a macro level. I am not concerned with getting 1,000% super sexy returns once every three years in that crazy bull run. I’ve moved a lot more of my portfolio in things like KuCoin shares or other staple or notable tokens. A lot of people don’t realize that by running a master note, because you’re putting effort into setting that up, you could treat that as a business. All of the crypto that you’re buying for that, we can actually treat as a piece of business investment. Take up the expense there, now you have to remember if you do that, you’re going to have a zero basis when you turn around and sell it later. All the coins that you received are treated as income. You can use your cell phone bill, a home office deduction against that income and accumulate crypto without having to pay taxes on it. It’s something that is a huge benefit to people. A lot more projects are moving to proof of stake over proof of work. There have always been the other rumblings and the theory is going to be proof of stake at some point. We’ve been saying that for two years now and every project has got their hype for sure.
We’re talking about thinking and looking at stuff from a business perspective and not just a hobby perspective, which is a big difference here. Whether you realize it or not, you are an acting business. You’re making money on your money and you’re making money on your time. That’s business.
The other big shift that I’ve seen since we talked at ChainXChange is we’ve seen a lot more projects go away from the ICO model, as it was in just selling on the open market. The Securities Commission has cracked down on bad actors, I would say. There’s still a lot of confusion on, “Do we actually have utility tokens or is everything security?” We’ve seen a lot more projects shift to going for the security filing right away and they’re doing things like using CF, which now you can fundraise and crowdfund, the first thing with $1.02 million and then get a project started. Instead of raising the $35 million, if you think that you can fundraise and sell those tokens, $1 million will get you quite a bit of runway and get you a legitimate private start bringing on other investors on the backend to grow.Become an expert in something and you'll get invited into a lot more groups and industry. Click To Tweet
I don’t think we’re going to see the ICO mania that we saw in the past. I think it’s going to be mostly investment-driven and speculation more so than anything else, unless there’s an actual use for the token or provide some value outside of, “I hold this so it has value.” It’s not getting burned or destroyed or disappearing and/or can be used as the money equivalent, then the project’s worthless. We’ve seen a lot of all coins just drop like flies. You raise a ton of money and they haven’t produced anything in a year and a half and everyone’s walked away from the project as the market shook out. That’s a good thing overall.
I’ve also seen a lot of this problem with exchange issues. That’s the biggest problems that people buy into a fund. They think they’re doing it well and they think this is great and they see evaluation, but there’s no place to exchange them or the exchanges didn’t take them in like they expected them to. Or this is the one that really shocked a bunch of people. It ended up like reverse mortgaging, instead of a reverse split is what I mean. Instead of getting like a split stock and you get two. You’re going to get a half. People are like, “My value dropped.” It was like, “It didn’t actually but it feels like that to you.” Some big problems are going on here.
We’ve cut them with the happenings coming up here soon. To me, it’s a very interesting case study. I don’t know how quite to play that just yet from an investment standpoint. I try to stick to my taxes. I try not to get too creative. I’ll let my brainier friends that are market TA experts, I’ll let them tell me what I need to be doing in the weeks leading up to it, but we’ll see.
The last question I think I have for you is how do you stay up on what’s going on? It does seem like things are changing and precedents are being set. How do you do that?
I try to find a group of people that were all good in specific fields. There are a couple of different Discord groups I’m a part of. There are some groups I’ve been invited into and I’ve been into a lot of the meetups out here in Colorado. You have to invest the time. Signaling groups are good if they’re good. If it’s someone just pulling out the other butt and making it up as they go and they’re not really doing anything. It’s not worth it. This is not an endorsement of all paid groups or groups together. Reddit used to be a good resource. It’s fallen away with people throwing crap at each other over it.
“Who can you trust there?” is always my question. It’s like, “Is this trustworthy or not?”
It’s free. That’s the thing is if you’re not going to spend the money on it, then you have to spend the time on it. We try to keep up on the tax part because it lets me sit down with programmers and developers and say, “What are you doing in your project? What do you see going on here? Here’s what I think you guys can be doing based on that with the tax side,” and we have some mutual dive share in between. Become an expert in something and you’ll get invited into a lot more groups and industry, things like that. We actually have been working with the Governor’s Blockchain Council quite a bit on the taxation side out here. We’ve got some sharp attorneys and had met some good people on the security side, things that I would never have exposure to.
We’ve been hearing some interesting things about the stuff going on in Wyoming as well, and that’s just across the border. Not too far from you.
In Colorado, we’re a little bit anxious that they’re getting our lunch. The legislation out here is trending more favorable even though it’s in Wyoming to a certain degree. They can explain it through. I want to say it’s a smaller state but it’s a smaller state.
It is technically a smaller state by population.
I’ve got a lot of friends up in Wyoming and they come down into meetups and stuff like that. We give each other some razzing and some of that. The big thing honestly is Colorado’s got a great tech culture. Our governor, Jared Polis, actually ran on blockchain issues in his platform. We’ve got a pro-crypto governor. We’ve got a pretty good advocacy group in the Governor’s Blockchain Council and a lot of the state senators and legislators want to see this development. We’ve been passing things, better securities, laws and things like that. I’m a little bit out of the loop right now because I’ve been head down with tax season, but the legislature is in session. We’re probably going to start. It might have been eating Wyoming’s lunch very quickly.
I look forward to that because my family has a house in Colorado, so there’s nothing I would like more to move my C corp there.
We’re at one of those QOCs and those are ones that you can defer the capital gains. You just take some of that crypto that you’ve been holding for forever, sell that, buy a building innocuously. You renovate the building and turn it into an incubator and the headquarters for your C corp. Defer the taxes on it, get a price break on it and in ten years when you sell the building because you put this massive community around it, all the property values have gone up. You actually have no capital gains because the basis becomes the fair market value.
Drew, thank you so much for being on the show. I appreciate it. You have opened my eyes and I’m sure you’ve done the same thing for our audience. I will make sure that everyone knows how to reach you. Get some rest. Go on vacation. Get to the beach. Get out there.
I was just going to say I’ve got the gin and tonic in my hand, and then by the end of April, I’ll be back. I’m putting out a very nice, “We love our clients. You guys are great. We’ve really enjoyed this tax season. I’m on a beach. There should be nothing that’s on fire. Please leave us alone.” I’m also checking my email. Check out our website. We have a Contact page. We actually do free fifteen-minute consultation, so any questions that you have, we want to give you those tools as much as we can. We’ve kicked around the idea of doing a video series of, “As a small business owner, how do I get enough education to know what is payroll tax? What is an LLC actually? What is a partnership? What is an S corp?” That is so people can start arming themselves and start being more intentional about how to become and pay us to do it. Keep an eye out for that.
After the season, you’ll get on to those things. When you give an update like that, send us a message here and we’ll make sure to post it because you never know when someone might be reading it. Thanks again, Drew. I appreciate it.
New Trust Economy audience, thank you so much for being with me. I am glad that you all survived your tax season yourselves and are moving. Maybe some of you filed some extensions and you’re confused. Reach out to us anywhere on social, @NewTrustEconomy, and we’ll connect you right up with Drew. Thanks again.
- Archer Tax Group
- Previous interview with Drew Kernosky
- Aaron Young – previous episode of Product Launch Hazzards
- Unchained Capital
- Contact page of Archer Tax Group
- @NewTrustEconomy on Facebook
About Drew Kernosky
Love the show? Subscribe, rate, review, and share!