"You WILL Get Caught!" - Act Now & Fix Your Crypto Taxes!
Summary
TLDRThe video script discusses the importance of understanding and managing crypto taxes due to increasing IRS scrutiny. It reveals that over 70% of viewers haven't paid crypto taxes, highlighting the need for proactive tax strategies. The speaker shares insights from a cryptex adviser on optimizing taxes, avoiding scams, and handling various crypto transactions. The video emphasizes the necessity of consulting local tax experts, using the right tools for tax calculations, and staying compliant to avoid penalties. It also touches on the potential of new technologies like Trestle Finance in the modular blockchain space.
Takeaways
- 📊 The IRS and other tax authorities are becoming increasingly aggressive in tracking down individuals who have not paid taxes on their cryptocurrency transactions.
- 🔄 It's crucial to understand that tax evasion is not a matter of if, but when you will be caught. Proactively managing your taxes in a bull market can help cover past tax obligations.
- 🚫 Over 70% of respondents on the speaker's profile have not paid taxes on crypto, indicating a widespread issue that needs addressing.
- 🌐 The speaker emphasizes that the advice given is not financial or tax advice and recommends consulting with local tax experts.
- 🔑 The blockchain's transparency and immutability make crypto transactions traceable, even if done through non-KYC exchanges.
- 💡 The video outlines actionable tips for optimizing crypto taxes, including dealing with scams, hacks, and various crypto-related activities.
- 💼 The importance of understanding the difference between capital gain tax and income tax is highlighted, especially when receiving tokens as payment or rewards.
- 📈 The video discusses tax implications for different types of crypto activities, such as investing, trading, NFTs, staking, and mining.
- 🛑 There are non-taxable events in crypto, such as long-term holdings exceeding 12 months, wallet transfers, and receiving crypto as a gift.
- 📚 The necessity of keeping comprehensive records of all crypto transactions and understanding the cost basis for tax calculations is stressed.
- 🔄 Tax loss harvesting is presented as a strategy to offset gains with losses, which can significantly reduce tax liabilities.
Q & A
What is the main focus of the discussion with the cryptex adviser?
-The main focus of the discussion is the complexity of crypto taxes, the aggressive stance of the IRS, and the importance of being proactive in managing crypto taxes, especially during a bull market.
Why is it a problem that over 70% of respondents on the speaker's profile have not paid taxes on crypto?
-It's a problem because not paying taxes on crypto can lead to legal consequences. The IRS and other tax authorities are becoming more aggressive in tracking and enforcing tax compliance in the crypto space.
What is the speaker's mission in relation to crypto?
-The speaker's mission is to find a billion ways to make money in crypto and to share everything with the audience so they can make money too.
Why is the speaker not considered a financial or tax adviser?
-The speaker is not a financial or tax adviser because they are providing general information and not personalized financial or tax advice. It is recommended that viewers consult with their local tax advisers or authorities for personalized advice.
How is the IRS becoming aggressive in tracking crypto transactions?
-The IRS is becoming aggressive by appointing additional staff, focusing on crypto taxation, hiring experts from the crypto industry, and requesting data from centralized exchanges, which can lead to tracing transactions back to individuals.
What are some taxable events in crypto?
-Taxable events in crypto include selling crypto for fiat, trading one crypto for another, and spending crypto. In some jurisdictions, adding crypto to a liquidity pool can also be a taxable event.
What is the difference between capital gain tax and income tax in the context of crypto?
-Capital gain tax applies when you sell or trade crypto and make a profit, while income tax applies when you receive crypto as payment for work, airdrops, staking rewards, or mining. The tax rates and brackets for these types of taxes can differ.
What are some non-taxable events in crypto?
-Non-taxable events include holding crypto for long-term (over 12 months in most jurisdictions), transferring between wallets, and receiving crypto as a gift.
What is the importance of understanding inventory methods when dealing with crypto taxes?
-Understanding inventory methods is crucial because it determines which crypto assets you are considered to be selling or trading, which affects your cost basis and potential tax liability.
What is the significance of the Trestle project mentioned in the script?
-Trestle is a project aimed at providing a seamless connection between the Ethereum chain and Celestia chain, allowing users to get exposure to Celestia without bridging over to the Celestia network. It is considered a significant development in the modular blockchain space.
What are some strategies to minimize or eliminate crypto taxes legally?
-Strategies include tax loss harvesting, understanding and utilizing non-taxable events, using appropriate inventory methods, and being proactive in managing crypto transactions and holdings.
What is the potential risk of using digital residency to avoid paying taxes?
-The potential risk is that tax authorities may not recognize the digital residency as a valid reason for tax avoidance. They may argue that 'substance over form' applies, meaning they will look at where you actually live and use resources to determine your tax obligations.
What is the current trend in tax authorities' approach to crypto taxation?
-The current trend is towards enforcement, with tax authorities partnering with private companies and hiring experts from the crypto industry to better understand and enforce tax compliance.
Outlines
📊 Importance of Crypto Tax Compliance
The speaker begins by discussing the complexity of crypto taxes and the aggressive stance of the IRS. They highlight the importance of being proactive with crypto tax management, especially during a bull market, to optimize tax strategies. The video aims to educate viewers on crypto tax essentials, including dealing with past tax non-compliance, optimizing taxes with simple techniques, and protecting against scams and hacks. The speaker emphasizes the global applicability of the tips and stresses consulting local tax advisors for personalized advice.
🕵️♂️ How Tax Authorities Trace Crypto Transactions
The speaker explains how tax authorities, particularly in the US, are becoming adept at tracing crypto transactions. They discuss the role of centralized exchanges, which have users' identity information and transaction histories, making it easier for the IRS to request and obtain data. The blockchain's transparency and immutability also contribute to traceability. The speaker warns that even non-KYC exchanges can provide enough information to identify users, and that tax evasion can lead to serious consequences.
💰 Understanding Taxable Events in Crypto
This paragraph delves into what constitutes a taxable event in the crypto space. The speaker clarifies that taxes are due when crypto is sold for fiat, traded for other crypto, or spent. They distinguish between capital gain tax, which applies to profits from the sale or trade of crypto assets, and income tax, which applies to earnings such as staking rewards, airdrops, and mining rewards. The speaker also mentions non-taxable events and the importance of long-term holdings for reduced tax rates.
📚 Organizing Crypto Tax Data and Using Software
The speaker advises viewers on how to organize their crypto tax data, emphasizing the importance of having complete data, including public wallet addresses and CSV files from exchanges. They discuss the challenges of using tax software like CoinLedger and recommend seeking professional help due to the complexities involved in data reconciliation. The paragraph also introduces Trestle, a project aimed at connecting Ethereum with the Celestia ecosystem, and discusses its features and potential.
🛠️ Dealing with Complex Crypto Tax Scenarios
The speaker addresses the complexities of calculating crypto taxes for those heavily involved in trading and using multiple wallets and exchanges. They discuss the limitations of tax software, the need for manual intervention, and the importance of understanding the tax implications of different actions. The speaker also provides practical steps for those with simpler crypto activities, such as holding or occasional trading.
🎨 NFTs and Advanced Crypto Tax Considerations
This paragraph focuses on the tax implications of non-fungible tokens (NFTs) and other advanced crypto tax considerations. The speaker discusses bundle purchases, mint and burn transactions, inventory methods, and liquidity pool regulations. They stress the importance of understanding country-specific rules on these topics and the need for meticulous record-keeping and planning when dealing with NFTs and complex transactions.
🔄 Tax Loss Harvesting and Future Tax Strategies
The speaker introduces the concept of tax loss harvesting, where realized losses are used to offset realized gains, thus reducing tax liabilities. They also discuss the importance of being aware of cost basis and holding periods when making trades. The paragraph touches on the potential risks associated with digital residency for tax purposes and emphasizes the importance of compliance and aggressive tax optimization within legal boundaries.
⚖️ The Future of Crypto Tax Regulations and Enforcement
In the final paragraph, the speaker predicts an increased focus on enforcement by tax authorities in the coming years, as they partner with private companies and upskill their staff to better understand crypto. They anticipate official regulations and amendments to tax acts to address crypto taxation. The speaker concludes by reiterating the importance of paying taxes and staying informed about regulatory changes.
Mindmap
Keywords
💡Crypto Taxes
💡IRS (Internal Revenue Service)
💡Taxable Event
💡Capital Gains Tax
💡Income Tax
💡Tax Optimization
💡Cost Basis
💡DeFi (Decentralized Finance)
💡Tax Loss Harvesting
💡NFTs (Non-Fungible Tokens)
💡Compliance
Highlights
The IRS is becoming increasingly aggressive in tracking down individuals who have not paid taxes on their cryptocurrency transactions.
Over 70% of respondents on the speaker's profile have not paid taxes on crypto, indicating a widespread issue.
Crypto taxes can be optimized with simple techniques regardless of location.
There are various ways to make money in crypto, including minimizing tax liabilities.
The speaker emphasizes consulting local tax advisers for personalized advice due to the sensitive nature of tax topics.
The IRS has hired additional staff to focus on crypto taxation, indicating increased scrutiny in this area.
Most centralized exchanges have user identity and transaction history, making it easier for authorities to trace activities.
Even non-KYC exchanges may have enough information to trace users, such as email addresses and IP locations.
Taxable events in crypto include selling to fiat, trading for other crypto, and spending through a crypto card.
Long-term holdings over 12 months are taxed at a different rate, potentially lower.
Income tax applies to rewards from staking, mining, and airdrops, regardless of token price fluctuations.
Capital gain tax is different from income tax and applies when assets appreciate in value.
There are non-taxable events in crypto, such as holding long-term, transferring between wallets, and receiving gifts.
Individuals can volunteer to report unreported taxes without penalties in some jurisdictions.
The importance of complete data and accurate cost basis calculation for tax optimization cannot be overstated.
Using specialized software or professional services can help manage the complexity of crypto tax calculations.
Trestle is highlighted as a project aiming to bridge Ethereum with the Celestia ecosystem, offering staking and a unique approach to modular blockchains.
The video discusses the importance of understanding and utilizing tax loss harvesting to offset gains and reduce tax liabilities.
Digital residency and tax avoidance strategies are mentioned, but the speaker advises caution due to potential legal risks.
The future of crypto taxation is expected to involve increased enforcement and potential changes in tax acts.
Transcripts
I just had a long discussion with a
cryptex adviser and we got to talk they
they look paced and they tell me Chris
we've been trying to do this our sales
for 3 4 months hard sometimes and they
it's just so complex the IRS is becoming
very aggressive because it's not a
question of if you will be caught you
will be caught it's a question of when
and what better time to become proactive
in in the bull market because at least
you have some funds a lot you can do to
optimize your crypto taxes by staying
where you are so want to get very real
here I asked you on myx profile whether
you have ever paid tax on crypto and
over 70% of you said no and that is a
problem so in this video I'm going to
give you everything you need to know
about crypto taxes we'll talk about what
to do if you have not pay taxes ever how
you can optimize your taxes with some
simple techniques how you can ride off
rugs scams hacks and coins and nfts
that's just simplement zero how to
handle taxes when it comes to investing
trading on centralized exchanges
decentralized exchanges nfts liquidity
pools staking Mining and every tip I'm
going to give you will be applicable
regardless of your location there are a
billion ways to make money in crypto and
I am on a mission to find them all my
name is f i share everything with you so
if I make money you can make money too
if you're new to the channel subscribe
we bring you the best offer in the
crypto industry if you're returning
smash the like button and let me know in
the comment section if you like this
content and what you want me to review
or test next so one ways to make money
in crypto is to not pay that much taxes
and preserve all your Capital all your
gains and very important before we get
going with this video I have to tell you
I am not a financial or tax adviser
anything in this video is not Financial
advice and you should always always
always consult with your local tax
advisers or authorities but this is a
very sensitive topic so I couldn't just
go on Google and share with you whatever
I found I had to take another approach
and this is exactly what I did so I
reached out to Chris herbs from C defi
who is specialized in crypto Taxation
and he told me that there are a lot of
things that you can do to optimize and
minimize or even completely eliminate
your taxes without having to move to
another country my idea to minimize my
crypto taxes was okay I'm going to move
to Dubai and that's it well it's not
that easy for example if you're in the
United States you can just simply
relocate and solve your taxation issues
also if you have not paid your taxes up
to today it doesn't matter what you do
in the future because the past years
that you have not paid your taxes for
will be taxed on the location where you
are right now I got good news because I
got the solution for you I'm going to
outline this in this video but you could
ask me why do you do this video right
now and the reason is simple because
this is the bull market one if you have
not paid your taxes yet now you will
have the funds to cover even going back
to the past four years because as Chris
said it's not a question of if you will
be caught you will be caught it's a
question of when and in a second I'll
show exactly how you'll be caught number
two by implementing the tips I'm giving
you in this show you will have a much
better start starting point and you will
be able to optimize your taxes going
forward if the tax year ends there is
nothing you can do so going forward the
only thing that you can do to optimize
your taxes is to be proactive and know
what you got to do so let's jump into
the show number one how will they catch
me yeah so this is a conversation we
very often have with clients I first
want to find out let before I proceed
with your services let me make sure that
I can be caught otherwise it's a
different discussion absolutely yeah if
if we look at what's happening in the US
the IRS is becoming very aggressive
they've appointed 87,000 additional
staff and they set a part of that focus
is crypto end of February this year they
appointed two big crypto space tax
advisors one that was which is
interesting the head of tax Global Tax
for consensus and of consensus is of
course the parent company of metamask
and then also uh another person that was
head of global tax for crypto tax
software so they are bringing in a lot
of experts so absolutely it is traceable
and here's why somewhere most people
have a Fiat on ramp so even if you only
use a hot wallet let's say metamask you
still have a coin base account or
binance account where you put in your
Fiat and you have kyc and you move that
to that hot wallet that centralized
exchange like coinbase have your
identity and they have of course the
transaction history of where you moved
that crypto the relevant institution you
use Robin Hood or whatever they send a
form to the IRS to report your gains
losses income Etc they aren't giving
that finer grain data straight up but if
the tax Authority asks for it which is
happening now most exchangers will not
fight that they will give it some
exchangers might fight it and lose in
the court and then they have your finer
grain data and they can see all the
possible wallet addresses you've moved
crypto to and they can put that wallet
address in ether scan and see wallets
that was transferred to Etc and there's
tracing software I mean the moment we
get our client data and we put it into
software like J analysis it becomes very
clear quickly the whole flow of that
data from the centralized to the hot
wallets and and let's remember the
blockchain is one immutable and two 100%
transparent so all that is protecting
you if that is your argument is that
your name is not next to certain
addresses and that can be traced from an
enti entry point from kyc exchanges and
then if the tax authori is unsure they
send you a letter and this we've seen
and they ask you is this your address or
not and of course if you're at that
point going to say no that's a different
kind of situation it's all good and fine
but what if I use a non kyc exchange you
might ask good question so the thing is
that exchanges even the non kyc ones
have a lot of information about you
we're talking about email address we're
talking about phone number IP addresses
through that your location if you're a
small Trader Maybe you have not much to
worry about but if you are becoming a
larger Trader or the platform that
you're trading on gets a major
investigation you can get in serious
trouble because they might be able to
backtrack you from the information they
already have of course you can use a
burner email and you can use a VPN and
you can do all that but you really have
to evaluate whether it is worth doing
that now that we agree that they are
going to catch you we can talk about
what is a taxable event in crypto pause
there and say what is a realization a
realization in crypto is if you sell
your crypto to for Fiat if you trade
your crypto for other crypto if you
spend your crypto so this is one a lot
of people don't take into account if you
have a binance Cartage you buy a coffee
you are actually selling your crypto for
fear so those are all realizable events
in some cases in some countries it's
even a realizable event if you put it
into a liquidity pool so in general you
got to pay taxes when you sell to Fiat
when you swap from crypto to crypto and
when you spend your crypto through a
crypto card I'm actually planning a
special video on how you can save a
bunch of money using crypto cards if you
want that let me know in the comment
section so let's look at everything
separately number one investing if
you're investing meaning you don't swap
and buy and sell and transfer and
metamask and all that but you buy the
coin on an exchange you leave it there
and at one point you are selling it you
only pay tax when you sell your crypto
if you sell your crypto over 12 months
that will consider as long-term holding
and that have a different capital gain
bracket meaning you will most probably
pay less tax number two is trading
Trading trading is swapping or buying
selling different coins so whether
you're leverage trading whether you're
spot buying and selling whether you're
just swapping on unisoft whatever you do
that is taxable every single transaction
so for example if you buy ethereum for
$1,000 and you sell it for $2,000 you
have to pay capital gain tax on the
$1,000 profit if you buy ethereum for
$11,000 and you sell it for $500 you
will have a $500 loss that you will be
able to use to offset your gains in the
future same goes for swaping if you have
an ethereum that you bought for $11,000
and you swap it to Solana when your
ethereum is worth $22,000 you have to
pay tax on that $1,000 profit and now
the cost basis for the salana that you
have is $2,000 so just to make it
understandable if your salana back if
you buy ethereum for $1,000 you set you
swap it to salana when it's worth 2,000
you pay capital gain tax on the $1,000
and your Solana bag is worth $2,000 when
your salana bag goes to $3,000 and you
sell it to Fiat or swap you will need to
pay capital gain tax again on the $1,000
number three nfts So when you buy an nft
that has a price that you buy it for
that's basically the the cost basis that
you have that means if you buy an nft
for $11,000 if you sell it for more than
$1,000 you will need to pay capital gain
tax if you sell it for Less you can ride
off that amount now if you've noticed
I'm talking about capital gain tax
because you gain something from the
purchases or from the transaction action
that you're making that is a different
tax than an income tax so if you buy an
asset for example crypto and it
appreciates in value you have to pay
something called capital gain tax it's a
different bracket different percentage
but if you work or you get paid for your
work you have to pay something called an
income tax and that's also a different
percentage so why is this interesting
it's interesting because if you're
getting paid in tokens if you're getting
air drops if you're getting staking
rewards if you're mining you will also
have to pay in tax now if it doesn't
make sense now hold on here because this
is important this is the number one
thing that can really wreck people in
crypto so let's say that you get paid in
crypto when you get paid in crypto in
the native token of the project you have
a cost basis the value of those tokens
on the day you receive them let's say I
get 10 tokens for my work and one token
cost $10 so I got $100 worth of tokens
on that $100 worth of tokens I have to
pay income tax no matter what it doesn't
matter if the coin price goes up or down
I will have to pay my income tax if my
income tax is 20% I will have to pay
$200 from the day I receive those tokens
so the problem comes in when I don't
sell those tokens but the token value
fluctuates as the market goes let's
assume that the token goes to zero I
still have my income tax that I have to
pay but because the token went to zero I
have nothing to pay it with so even
though I made no capital gains I still
have to pay my income tax so always pay
pay attention when you stake and you get
rewards when you mine when you get adir
drops or when you get paid in crypto you
always have to understand your income
tax bracket understand what percent you
have to pay of that amount regardless of
the token price appreciation or not and
withraw that amount take that amount
sell it and make sure that you have
funds to cover the income tax that you
will need to pay now the question man
come what happens if the project is a
rug so let's assume you get an air drop
you wake up the next morning and the air
drop when you got it was worth $11,000
but now worth one so with a 20% income
tax you would have to pay $200 but you
don't have anything that you could have
sold because you didn't even know it
existed or you were asleep now
technically you would have to pay that
tax even though you had nothing to do
with the adrop but more and more
regulations are coming in different
countries for example in Germany if you
did not have anything to do with the
adrop you do not have to pay the income
tax so pay attention to that and check
the regulations in your own country but
that's not all because you still have
the capital gain tax so let's stick with
the example that the coin that you
receive is worth $1,000 when you receive
it next morning you wake up it's at $1
the income tax we talked about what is
the capital gain tax because the tokens
that you received you received it at
$11,000 and they went to zero or $1 if
you can realize that loss you have $900
or
$1,000 offset to your capital gain taxes
so if you can realize the loss meaning
you can sell the token there is still
liquidity or if there is no liquidity
you can send it to a simple burn address
you can Google burn addresses and send
the token there then you realize the
loss and you can have use that to offset
your capital gains in the future so if
there is a project that rug you and you
lost $11,000 and you have a project that
you made $1,000 on you have to pay 0%
capital gain tax again remember that has
nothing to do with the income tax I know
I know I know I know it's heavy I
understand it's heavy but we have to
talk about this because it will come and
bite Us in the S so a little briefer I
have good news because there are events
that are non- taxable in crypto and we
can take advantage of number one on
long-term Holdings I talked about this
but if you hold your coins for more than
12 months on most jurisdictions you have
lower or no capital gain tax number two
transfers if you transfer between your
wallets whether it's centralized
exchanges or decentralized exchanges you
do not have to pay tax on those
transfers number three gifts if you
receive crypto as gift there is no tax
obligations on that but if you give the
gifts that counts as spending therefore
you will have to pay the capital gain
now what if you got tagged or an
exchange went bankrupt that you had or
you lost seed phrases to the wallet that
you owned well in that case you cannot
write it off as a loss so you cannot
offset your capital gains however you do
not have to include that in your
reporting so if those coins are still
there and you cannot sell them you
cannot realize the loss therefore you
cannot offset your loss but again you
will be able to leave that out of your
Taxation and you don't have to pay taxes
on those coins important to not though
that there are jurisdictions that allow
you to offset the cost basis the
purchase price of the crypto that you
lost so that's also pretty cool so by
now probably or of you either turn off
the video or just sitting like this
thinking what the did I do so let's
start figuring out how we can clear
ourselves for the past years number one
very important there are a lot of
volunteer reporting opportunities right
now because there is no regulation
because the tax agencies don't really
know how to deal with this whole thing
they allow you to volunteer report taxes
that you have not reported and they
don't give you penalties you will still
need to pay the tax however you don't
have to pay the interest and you don't
have to pay the penalties so check that
out in your country if you have that use
it second you have to start sorting your
data here's what Chris says the first
thing is you now have to get all your
data and that means in most cases have a
list of all your hot wallets that you've
used just the public addresses get
access to let's say CSV files from your
centralized exchanges or API Keys read
only API Keys all the that means is
whichever software you're going to use
now to calculate this and do your work
on you can enter API key and secret and
draw that data directly from the
exchange but the focus here is on
complete data if you have gaps in your
data so in in calculating crypto taxes
there's one phrase that we use and
that's cost basis is King you need to be
able to prove your cost basis and the
more complete your data is the better to
organize your data there are a lot of
software you can use Chris said they
tried a bunch and coin Le work the best
you can try coin Le he says it's not as
simple as they say that you just plug it
in and it works but you can try that in
my personal opinion the best thing is to
use a company and here is why most of
our clients attempt this themselves um
and mostly they attempt this on coly but
they realize at some point that it's a
lot more work than they thought because
you still have to do a lot of
pre-processing on your data you still
have to manually intervene you have to
go our reconciliation team after our
data phase they go through every
transaction and make sure there isn't a
transfer that's been missed the moment
you miss a transfer so let's say you use
coinbase and you use Mex C in two
totally different jurisdictions so maybe
the csvs that you used because one of
them don't support apis is UTC plus two
time zone the other one is GMT 0 now
those transfers might not be picked up
by the software so now it's taxable
events because if you cannot show it's a
transfer it's a taxable event and you're
not tracing that cost basis so it's
super important that you very carefully
go through every transaction same thing
when you're bridging many times bridges
are not picked up because you you have a
different token coming in many times
even though the data is in software like
that we have to open up the relevant
scanner and we have to look in depth
what actually happened in the internal
transactions to figure out what happened
there talking about bridges today's
sponsor is the most seamless Celestia
Bridge Trestle Celestia is the new shiny
thing if you watch this channel you
probably heard it a million times it's
kind of like a layer one blockchain that
is adopting a completely new approach
and therefore can be categorized as a
model or blockchain now model or
blockchains and Celestia as well is
completely new and it's in a very early
stages of development but it aims to
facilate transactions much faster
through specialized blockchains and
therefore much more securely but
Celestia is kind of like a closed
ecosystem it's very difficult to get
into Celestia ecosystem from different
ecosystems and here is where trestor
comes into the picture so Trestle
mission is to allow seamless connection
between ethereum chain and Celestia
chain through Trestle users can expose
themselves to Celestia on ethereum chain
using rep Tia or rep Celestia and earn
repa by holding Trestle so with the help
of trestle anybody from the ethereum
ecosystem will be able to get exposure
to the Celestia ecosystem without having
to bridge over to the Celestia network
if you're bullish on modular blockchains
and if you're bullish on Celestia you
probably have to be bullish on the
bridges as well now as I said modular
blockchains are completely new and
therefore not many people understand
them in a traditional blockchain world
you could call Trestle as a bridge
however in the model of blockchain world
Tres is not just a bridge but it's much
more than that it's kind of like a layer
one itself if you scroll down on their
side you will see trestles for Celestia
pillars number one manage repa repa will
now be available for ethereum users to
purchase on ethereum chain allowing
exposure to Tia without having to bridge
over to the celestial Network this is
what I explained Tia Bridge seamlessly
and securely swap between Tia and
ethereum earn red Tia you will be able
to earn red Tia through staking Trestle
obviously when people use the bridge
there is a small fee and that fee gets
distributed to the stakers and then
Trestle chain which is very very
interesting for me Trestle will be
releasing their own roll up chain on
Celestia trel's incubator will onboard
new teams onto the Celestia R up on
chain so it's not just a project not
just a bridge but they will create an
incubator to help Builders go and build
on a Celestial blockchain they
constantly announce their Partnerships
as well most being Milky Way Zone which
is the biggest liquid staking protocol
on Celestia or Caldera which is also a
very prominent player in the modular
blockchain space they obviously have a
token called Trestle very very early
stage again this is one of my DJ plays
this is one of the zero or hero plays in
my opinion if you're bullish on the tech
of Celestia which I think is fantastic
I'm just not sure if it's retail
friendly enough to be huge disp but if
it is or if you want to invest in the
long term I think this can be very very
interesting the good thing about the
token as well is that you can stake it
and gain yields on their website you can
go to staking what's also interesting is
that they use staking length to
determine the amount of coins that you
are going to get as rewards so the more
committed you are to the network the
more coins you get and therefore the
higher your Roi is if you're interested
on the project I advise you to read your
docs they have everything very nicely
outlined welcome the mission overview
bridging process tokenomics and whatnot
they have an audit for the bridge as
well which is also super super
interesting very important I do hold a
tiny bag as a DJ play for myself there's
only one thing I don't like is that the
team is not dogs however I still think
the risk reward is there and if they
pull it off and if they become the main
bridge on Celestia this can be very very
lucrative what you will see on the
software is that it also doesn't support
a lot of things like many times There's
issues like the salana a salana Recon is
very manually intensive a osmosis Recon
is very manually intensive the whole
Cosmos ecosystem and it's just the way
they structure their data so then we
have to use a bunch of scanners use a
bunch of our own software to figure out
what's actually going on so if you do it
yourself be prepared from the start to
have patience and understand it's not
going to be quick if you're going to try
and do this quickly you are just going
to get frustrated if you believe you
have the mental fortitude to go through
with this here is how you should do it
if you have been mostly holding and not
trading that much meaning you had a
trade here and there you sold them both
but that's not the main reason why you
are in crypto and you don't have a
million metam mask wallets and Phantom
wallets and five exchanges and nonky
exchanges here's what you should do just
to touch on one other thing you said
let's say you only had coinbase and
binance us there's a good chance you can
use the software connect it and it's
going to be perfect that is possible and
maybe you add one metamask wallet evm
chain only ethereum you just fix one or
two things so many times when your
situation is very simple it's not going
to be a a month job but a lot of clients
have spent 3 months on calculating the 5
years that's outstanding because you Al
have to remember what you did in 2017
which is not that easy so it is quite a
manually intensive process and then also
you can use external analytical tools
and scanners to help you bolt out the
picture but practical steps is get all
your data put it into the software go
through all transactions and make sure
everything is correct pay attention to
the warnings and then once you are happy
you can generate your reports and then
that reports you need to discuss with a
local accountant or Tax Advisor to go
about correcting prior years but if you
are a Deen like us I mean we can't help
it first of all you got to subscribe
that's what you should do because we
bring you the best Alpha but you know
this already the second first step is
get all your public addresses get csvs
get your IPI Keys then subscribe to
something whatever you think is the best
reconciliation software put your wallets
in put your csvs in all the stuff that's
not supported start making your own
custom Imports that you need to import
then and then you have to go through
every single transaction and see what is
the software actually doing with it
seeing that if that market values are
correct if you're into meme coins
there's a world of hurt when you work
with these software because a lot of
them are limited on 16bit integers or 32
bit and sometimes mem coins have an
extremely low value and an extremely
high quantity so then market prices are
not picked up correctly so you have to
make sure many times we have to
intervene and fix market prices because
the wrong contract address is used to
determine the market price so you have
to also make sure your market prices are
correct so if you are into experimenting
and using you know bunch of phantom
Wallets on salana and you also into
osmosis and sui Network and all that
type of stuff it can quickly become
overwhelmingly complex because firstly
you open up a wallet for everything you
want to try and you now have to find out
what is all the wallets I've opened what
is all the exch all the the blockchains
that I've actually used what did I do on
this protocol and then you start with
yield farming and stuff where you now
have to remember you know I took this
then I locked it up and I got an LP but
then I staked this LP and I got another
type of token back and then if you go to
things like transaction volume because
you know how easily if you sit on DJ all
day you rack up four 5 600 transactions
in a day because you do one thing but
you're hopping between liquidity pools
to exchange something on a DEX and now
you get 15 transactions where it was
actually one so you rack up a lot of
transactions quickly so it can become
extremely complex just to even if you
look at salana like magic Eden and those
stuff in the past it's very diff
difficult to reconcile and I think again
don't do a half job if you're not
willing to understand and go back and
figure out what you've done then don't
do it yourself rather let somebody else
do it again I'm genuinely not trying to
self-promote you but teams like ours
they've been doing it for years and
they're doing it all day so they
understand how magic Eden worked in 2017
they understand the nuances with Cosmos
they understand the nuances with with
other things so be willing to put in
that work it genuinely pays off um in
tax savings and then also data volume a
lot of the software cannot handle volume
above a certain number it becomes too
slow and the Recon ation becomes too
painful so if you used Bots and you're
sitting with a million transactions then
you have to again understand aggregation
or bulking that you can bulk some of
those transactions together based on
certain principles so that you can get
your transaction volume palatable to
take it into the software but you can't
bulk or aggregate if you don't
understand what's the tax implication of
doing that and since we're still talking
about how we can clear ourselves for the
past years if you've been here long
enough and you've been involved in the
nft Mania and if you bought a bunch of
nfts that went to zero or you made some
money on nfts here's what you should do
and then we haven't really touched on
nfts nfts is of course a super important
factor as well because sometimes you do
bundle purchases where you pay a certain
amount and you get 10 nfts or you sent
out 4 e you get 10 nfts make sure the
software that you're using know that 4 e
needs to be split between those 10 nfts
for example and you don't sit with nine
nfts with alter cost basis sometimes you
burn nfds to get new nfds so that's kind
of a mint burn transaction now you have
to manually carry over the cost basis of
the nft you're burning to the nft that
you're minting otherwise you're going to
sell that nft you minted for 10 e later
and you're going to have a zero cost
basis so you're going to pay tax on the
full price and after all this you still
have to understand inventory methods and
liquidity pool regulations so what do I
mean by that so for example if I bought
Bitcoin in 2016 for $500 and I bought
Bitcoin in 2023 for $20,000 and I want
to sell them today at $70,000 which one
am I selling the one that I bought at
$500 or the one that I bought for
$220,000 or in the case of liquidity
pools if I provide liquidity and I get
LP tokens back is that a taxable event
well let's see what Chris says when
you've now figured out all of your data
you've reconciled every transaction you
must understand the relevant inventory
methods that is allowed in your country
back to our example we're selling one1
Bitcoin that we purchased in 2018
adustment to the example is we purchased
more Bitcoin every year and here and
there and there and we're selling our
first Bitcoin now which Bitcoin am I
selling is it my oldest one is it my
most recent one is it my most expensive
one or is the average of all all my
Bitcoin now this is country specific but
if we use the us as an example you can
use First in first out l in first out
highest in first out and average cost
basis so then that Bitcoin if I use
First in first out that Bitcoin comes
from my oldest Bitcoin so my holding
period is longer but my cost basis might
be smaller so my gain bigger if I use
last in first out I'm selling from my
most recent purchased lot of Bitcoin
highest in first out I'm selling my most
expensive Bitcoin so my gain is smallest
but maybe my holding period is also
shorter so now I'm into shortterm tax or
I can use an average and that is of
course just an average of your crypto
and this on countries some countries
make it simple like Germany you're only
allows to use First in first out UK only
allows to use average cost with shared
pooling Canada you only allows to use
average cost Australia bit more
complicated if you seen as an investor
you can use First in first out last in
first out highest in first out or if
you're seen as a trade that has to be
first in first out but you need to
understand what your country allows so
that you can play around and see what
works what gives me the most tax optimal
situation for my data and not be blinded
by that also check how does this
influence your short-term gains versus
long-term gains because in Germany if
you can go more to longterm you don't
pay tax uh in the US longterm you pay a
lot less tax etc etc so you have to
understand the inventory methods then
you also have to understand your
country's specific stance on things like
liquidity pools uh staking pools Etc
because if you look at any gray area
when you for example enter a liquidity
pool with usdc and eth and you get an LP
token back is that a taxable event or
not if you're going to be conservative
you're going to take that as a taxable
event if you're going to be more
aggressive because it's gray in your
country you can argue it's not because
you still own that underlying pair now
you want to make that a non-t taxable
swap where you transfer the cost prices
of that underlying pair to the lp when
you exit do the same so you only realize
that gain or loss when you actually
trade that for crypto or Fiat and then
if you have crypto in a rebasing
protocol you're going to see on the
software I'm now taking this out of my
protocol but there is a missing cost
basis because they say I'd never had
that much crypto because it doesn't
account for the rebasing so now you have
to manually adjust that rebasing and
handle that as income and this is all
good and well but if you are a proper DJ
or if you are an OG DJ you're sitting
with a situation where you have to do
this for 40,000 transactions since 2017
and I honestly think some people just
give up and they're like okay I I'll
rather take jail time now if you're
clear and you're done and you say you
paid all your taxes you're done what do
I do going forward so I don't get into
this crazy mess but number one you got
to keep track of all the wallets and
exchanges you use have an Excel sheet
put in the wallet addresses put in the
exchanges put in everything that you
need to be able to recover the
information any time number two through
that keep track of all your transactions
and holding periods so prepare for the
tax year if you know that you have held
something for more than 12 months you
might want to consider selling it if you
know that you don't have these rules in
your country you might want to consider
selling earlier also if you have a lot
of loss on different positions you might
want to consider selling them writing
that off as capital gain and leveraging
that on the coins that you have massive
gains on but of course other than
everything we talked about there are
additional tips that Chris is bringing
us that can help us minimize or
completely wipe off our taxes we need to
talk about tax loss harvesting so what
this means is I've made I'm in the
current tax year my eth position is
looking amazing I'm planning to sell
that or I have sold it and I made
$100,000 gain on that my xrp position is
looking horrible so I haven't sold that
but I'm sitting with an unrealized loss
there of $100,000 so that means I my
inventory that I have of xrp let's say I
have 100 tokens I paid for that $200,000
way back it's now worth in the market
$100,000 but I haven't sold it I have
sold my eth and I sit with $100,000
gains the moment the tax year tick over
the next tax year there's nothing you
can do about it but what you can do now
is sell that xrp so that you get get
that loss on your books and that loss
will now offset the gain that you made
on your e only thing to keep in mind
here that's what we call in some
countries wash trading what you need to
keep in mind is your country specific
rules in the US at the moment because
crypto is not classified as a security
wash rules do not apply so you can sell
your xrp immediately buy it back that's
your investment thesis to still have it
and you just put that loss on your book
you've own only incurred a network fee
but you got that loss on your books um
in some countries it it is a bit a bit
different like for example in Australia
you cannot buy back that same asset
within 30 days then that loss is not
going to be counted so if you sell if
it's uh your xrp that you're selling you
have to wait 30 days before you buy it
back you can trade your xrp for
something else like salana or whatever
in Germany there's also currently not
wash trading rules so you can sell
immediately buy back UK 30 days South
Africa 45 days Canada 30 days so that
depends in your country but this is the
single thing that we've seen where
people consistently wipe out their
taxable gains legally if they understand
this you can so easily create those
losses on your books proactively same
thing in the US or some other countries
also if you sit with a bunch of tokens
that you paid $100,000 for being rugged
or whatever you cannot even sell it
there's no liquidity that's not a loss
that you can deduct you have to get rid
of that token you are allowed to send it
to a burn address because now you cannot
access it anymore and that's a loss
right there if you're sitting with a
bunch of nfts that you know that
project's dead you know this thing will
never rise up again but you paid 5 e for
it there's websites where you can
actually sell that nft for almost no eth
just to get that loss on your books or
you can burn that as well but by just
doing this proactively you you're
getting the losses on your books because
you now understand gains and losses so
this makes a massive difference kind of
proactively tax loss harvesting and then
also as I as I mentioned before just
being cognizant of your cost basis and
your holding period so when you make
this trade you are aware of what the tax
implication of this will be even if you
just understand what it will be roughly
that also helps a lot and then the big
question what about Polo digital
residency and stuff like that now if you
have not heard there is an option where
you can get a digital residency in for
example palao and you can kyc to an
exchange therefore avoiding paying taxes
I thought this was a fantastic idea but
Chris thinks otherwise I think that is
definitely has its risks of course
because it's it's all good and well but
if the IRS says it's not good and well
then it's not good good and well so it
depends your government many times you
call that you have two things you have
tax avoidance and tax evasion tax
avoidance is legal tax evasion is not
legal so many times what we hear tax
authorities say is phrase substance over
form so you've set up this form that you
are not a tax resident here but they say
substance is which roads do you use
which Public Schools does your children
go to which medical systems are you in
that is where you are paying tax you are
using this resources so be careful
because with those things we've seen
people being so confident in these forms
they've set up and then six years later
they absolutely screwed um so be careful
with those things I think a lot of it
it's it's it kind of aligns with with
Dows where are Dows taxed because it's
know decentralized lot of views on that
but typically tra Tres always traces
back to some Source or person involved
that is where you're going to be taxed
so I would say it's much better to be
compliant not try and do anything fancy
but once you are compliant be as
aggressive as possible with tax
optimization that's ultimately part of
your apy and then there was one last
thing I really wanted to know and that
is what comes next regulations will take
some time they are very hesitant to
bring out regulations while they don't
understand crypto well enough and then
having to amend that regulation so
that's going to be most countries last
steps giving official regulation
amending their tax act for crypto that's
going to be the last step the first step
we're seeing is enforcement where they
are partnering with private companies
they are pointing people from the crypto
industry to understand better and now
they're going to enforce and that's what
we're seeing with the IRS court cases
with court cases in other countries
they're saying give us this data we want
to understand because they know there's
a lot of unpaid taxes there so
enforcement is one thing we're going to
see over the next 2 to 5 years is a lot
we are going to see start seeing
movement on on tax acts being amended
like we are starting to see in some
countries now we are also going to see a
kind of an upskilling of the staff of
tax authorities so that they understand
that better and then of course the other
thing is the relationship with
centralized exchanges and the government
is changing all the while South Africa
is now before the end of this month they
are actually approving 60 centralized
exchanges under the normal Al Financial
regulations here and that changes the
relationship with tax authorities as
well so we will see a lot of guidance
coming out not amendment of tax acts yet
some countries we are but not a lot but
enforcement I think enforcement is
definitely the next phase I know I know
but we are at the end I'm sorry don't
shoot the messenger shoot the message I
know it's been tough I know it's been
long I know it's been difficult to
digest but I think we needed to talk
about it if you have watched this video
through the end I salute you thank you
so much for watching if you got any
value out of it please smash the like
button let me know in the comment
section if you learned something follow
me on Twitter I bring you moneymaking
tips every single day check out the
thread I wrote on taxation on my Twitter
page which summarizes everything that
we've talked about if you're there smash
the follow you won't regret it and most
importantly pay your taxes for real for
real thanks for watching I'll see you in
the next
one k
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