Crypto for Tax Pros

Crypto tax expert Amir Marmar of JFDI Accountants breaks down the complexities of cryptocurrency taxation and shares guidance on when tax professionals should handle crypto cases themselves versus partnering with specialists. He explains key concepts like wallet-level reporting requirements coming in 2025, the challenges of DeFi and staking transactions, and why traditional tax software may not be enough for complex crypto cases. This episode provides practical insights for tax professionals on evaluating crypto clients and understanding the latest IRS guidance, including Revenue Procedure 2024-28's move away from universal accounting methods.

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• (00:00) - Welcome to Federal Tax Updates
• (01:56) - Amir Marmar's Background and Expertise
• (03:04) - Crypto Accounting Challenges and Success Stories
• (07:49) - Crypto-Friendly Government Policies
• (14:06) - Understanding Crypto Wallets
• (23:36) - Blockchain Basics and Tax Implications
• (29:38) - Complexities in Crypto Taxation
• (37:19) - Understanding Lending Protocols and Tax Implications
• (39:24) - Exploring Staking and Its Tax Considerations
• (41:11) - Liquidity Pools and Market Making
• (43:01) - Challenges in Crypto Accounting
• (44:11) - IRS Guidance and Tax Positions
• (46:02) - The Role of Tax Professionals in Crypto
• (49:39) - Steps for Successful Crypto Tax Engagements
• (52:50) - Upcoming Changes in Crypto Tax Reporting
• (01:04:53) - Contacting JFDI for Crypto Tax Help

Connect with Amir
https://www.jfdiaccountants.com/
https://www.linkedin.com/in/amir-marmar-20b76726

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Connect with the Roger and Annie on LinkedIn
https://www.linkedin.com/in/rogerharrispbs/
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Creators & Guests

Host

Annie Schwab, CPA

Franchisee Operations Manager at Padgett Business Services

Host

Roger Harris, EA

President at Padgett Business Services

Guest

Amir Marmar

CEO at JFDI Accountants | Global Leader in Crypto Accounting

What is Federal Tax Updates?

CPAs, Enrolled Agents, and Tax Preparers can keep up-to-date with the latest federal tax information while earning NASBA approved CPE credits and IRS approved CE credits by listening to the bi-weekly Federal Tax Updates podcast. The hosts Roger Harris and Annie Schwab have over 75 years of tax experience between them, which has been featured in various media outlets including Wall Street Journal, USA Today, The Morning Business Report, Bloomberg Business News, and Accounting Today.

There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Roger Harris: Hello again everyone. It's time for another federal update podcast, Federal Tax Update Podcast, and I'm joined, as always by Annie. Annie, good to see you again. How you been?

Annie Schwab: I'm doing pretty good, Roger. We're getting close to year end, and I'm not going to lie, I have not finished my Christmas shopping.

Roger Harris: Well, I haven't finished because I haven't started. So I guess you got to start before you can [00:00:30] finish. So, uh, we're excited today to have a special guest about a topic that I know I have a lot of questions about, and we have a lot of questions about, and we've got an expert here to answer every question that you've ever had to think of. And we'll get it all done in 50 minutes. But, Annie, how about introducing our guest for today's podcast?

Annie Schwab: Oh, I'll be happy to. Today we have the pleasure of having Amir Marmar with us. He has over 25 years of accounting experience. [00:01:00] He is the founder and CEO of Jfdi Accountants, which is currently recognized as one of the best accounting service providers for blockchain and cryptocurrency companies. His expertise includes lots of things that I don't even know what they mean, so I'm just going to read them. Um, token planning and tax optimization strategies. Token compensation. Payroll. Internal controls. Mining of accounting trades, swaps, zero basis token tracking for companies, [00:01:30] and more and more and more. Um, I will say that Amir has guided many companies to their successful exits. He's helped clients optimize their tax result taxes, resulting in millions of dollars of savings. And he has identified and collected missing money for his clients and a slew of other wins and celebrations. And and he's here today with us. Um, Amir, I'm going to let you introduce yourself. But that last sentence there a slew of other wins and celebrations. I feel like that's [00:02:00] really the core of what we've got.

Amir Marmar: Yeah, well, one, thank you all for having me here. Um, I'm definitely always excited to talk about crypto accounting. I'm super passionate about it. Um, you know, I think, as you mentioned, um, at the core of Jfdi, Jfdi stands for just fucking Do it. So we're already uniquely different, starting with our brand name out the gate. And, um, you know, today, uh, we're, you know, a leader [00:02:30] in back office for the biggest, uh, crypto, Web3 and blockchain companies in the world. Uh, so we have, like, two big divisions within Jfdi. One is our enterprise division that's focused on working with these, you know, large style organizations. Um, it's not simple. Uh, it's not just your standard vanilla Delaware C Corp generally. It's like a multi entity structure with offshore entities as well. And then we have a separate side of the [00:03:00] house, which is our high net worth division, which is more focused on less the book preparation and GAAP accounting and IFRS, but really about tax analysis and reporting, which is like the Segway as to how we all met was through an individual. Um, so.

Annie Schwab: Tell us a little bit about that. It's it's an interesting story. Great story. Paget.

Roger Harris: How Omier and Paget got connected so exactly. Give us the give us the cliff notes version [00:03:30] of how how that turned out. And we have one very happy client because of your involvement.

Amir Marmar: Um, yeah. Um, and again, just background as well, like jft like is kind of scaling and growth through referrals only. There's no outbound. So, um, I work currently with a pageant tax preparer, um, tax practitioner work with him on 2 to 3 years on, you know, a separate Quiet and it sounded like someone within the pension network. Another tax professionals [00:04:00] said some advice for their own customers. So they reached out to Chris, who I've been working with for a few years here. Who's the pageant tax pro? Um, and once he heard that the issue with the current customer was crypto, the first thing he thought about was connecting Dave to me, right? So the short version is, is there's a customer, uh, that you all serve as, as a tax firm, uh, that had a really complicated tax issue and has been battling [00:04:30] the IRS for, I would say, close to five years. Um, also sought out leading and crypto native, you know, tax firms to really assist. Um, he's partnered up with 1 or 2, but couldn't get the result that he needed. Uh, worked on this for to five years. So the CliffsNotes version is, uh, in about two months time, I decrypted the entire puzzle, identified a core issue with the IRS [00:05:00] that will forever change all audits. That has to do with, like a specific data set that everyone overlooked in 4 or 5 years. And this person was the end goal. The customer who I got emotionally attached to, you know, was owing the government probably over $2.5 million in back taxes and penalties and interest. And by the time I got done, I calculated that he's paid $0. So that's kind of the impact that you have when you find [00:05:30] someone that is extremely knowledgeable about crypto accounting and bookkeeping and can really like, you know, solve the problems at the root versus, you know, well, name names, but other providers in the space.

Roger Harris: So right. So other providers and the IRS had been working on this case for years. Uh, the client, I think you told me was getting ready to consider selling his business just to pay the tax. And now you get involved by knowing the rules and two plus million [00:06:00] dollars of tax penalty and interest disappear. So like I said, that is a very happy client and we are very happy to to get to know you. And that's why we wanted you to do this podcast, because we're all having to deal in this area more and more, whether we choose to or not. And we need to figure out what, what's our knowledge level, when to get engaged, when to call someone like you, what are some key things? And so, um, we want to thank you for, for helping us today. And kind of one of the reasons [00:06:30] I think this is going to be more top of mind, and maybe you understand this comment better than I do, but since the election, I have heard the term that the new administration is going to be more crypto friendly. So I don't know that I really know what that means. I didn't know if the last administration was friendly or not, but from from an expert's opinion. What does being crypto friendly as a government mean?

Amir Marmar: Yeah, I mean, I can explain it, right? Like, [00:07:00] I'm going to just explain like some of the immediate effects that we've seen post-election without getting political in this discussion. Sure. What I can say is, you know, first and foremost, there was a big Bitcoin conference. I believe it was in Nashville. I can't remember if it was in Tennessee. That was like Pre-elections. And you know Trump definitely went there. He's really big into the cryptocurrency scene. So is Elon Musk, who was part of his kind [00:07:30] of group of advisors and stuff who's been really supporting Dogecoin. But like what I can tell you is that like post-election, there was like a huge rally marking sentiment within the crypto industry has been high. Bitcoin shattered a record, broke $1,000. Ethereum just broke 4000. Um, and what generally happens in the industry and I'll explain what else is going on within like regulatory, which is what's driving the markets up. The [00:08:00] first like the markets have like gone up. So generally when you have your top two currencies that hopefully all the world knows now Bitcoin, Ethereum go up a lot of you altcoins which is all the other coins mostly all trail up as well. So that's already good. Two is um, and the last two years, 2022 specifically 2023, the industry has been in a really bad funk. Uh, you had someone like Sam Bankman-Fried, who the world didn't really would the world trusted. [00:08:30]

Amir Marmar: And he went and talked to politicians. And government is labeled now as a fraudster. Right. Like exactly like a lot of bad stuff that's happened in a few years that really gave investors a bad vibe and a distrust in the industry. This industry is really built on trust. Um, you have now, I'm going to talk about the effects you're already seeing with this new regime and presidency. You had Gary Gensler, who's setting up the SEC, who really was cracking down on blockchain and [00:09:00] crypto companies. I have a lot of clients. So I dealt with the SEC successfully. Um, but I've dealt with them. So under the hood I can't discuss in detail, but know what that feels like to get a letter when you didn't do anything wrong. Right? So they were preventing my clients, right? My target client, blockchain and crypto companies from launching tokens here in the US. So I talked early when I started on my intro that we're not Delaware C Corp, right. There's like the standard sort [00:09:30] of cookie cutter that people set up like a Cayman BVI type of structure. People are going to Panama. So a lot of these companies were one deterred from. A lot of founders and co founders were deterred from launching a company or creating a token. So that's happened. So some of them were undeterred and considered an offshore structure.

Amir Marmar: Then you got tax stuff that's in play. How does that work? Is this affiliated disaffiliated. You know, fdii a bunch of tax stuff that, you know, gets pretty technical. Um, [00:10:00] so really, you know, like the doors were like pretty shot. But the new regime, Gary Gensler already stepped down. Um, so they're going to try to appoint someone to head up the SEC that has like blockchain and crypto experience actually understands the technology. It's not bad, right? It's meant to be like a privacy. Um, right. And less like show up to a bank, like, give you an example. Like you need a loan, right? Like a mortgage. [00:10:30] You're going to have to sign a form, you know, 80,000 times, fill out a bunch of paperwork and blockchain. You can just literally take a loan in a matter of like two minutes. You can get some collateral and some smart contract. I'll introduce some technical terms, they just borrow against it and have that at your disposal in two seconds. So like what I'm seeing in like the changes in the landscape, while we're saying it's crypto friendly, you have won leaders of this country that understand the technology of crypto and are [00:11:00] favorable to crypto to now you're having like changes going down below, uh, getting rid of individuals that are like blocking the crypto industry from evolving from expanding.

Roger Harris: Yeah.

Amir Marmar: We also had a big, big thing that affects the current client of mine. Uh, it's, you know, a project that is high profile. Um, there's a lot of viewpoints on it, but they just, uh, Coinbase was actively suing, uh, I can't remember [00:11:30] the government or whatever, but it had to do with the tornado cash protocol. Uh, it was, I know, labeled as a mixer. Um, but they just, uh, you know, appealed and won. This was a project and this impacts the direct client of mine. They didn't do anything bad in the world. And his court case with the DOJ's in April. Um, it's about like being able to be a developer and build technology. That's what it's about. Like almost like freedom of speech freedom. So what [00:12:00] we're seeing is like this project that was sanctioned on, like, I think I remember the day August 7th, like I believe 2022, they just unsanctioned the project that is so huge for the industry. Uh, technology is out there and it's meant to do good. So what we're seeing is a lot of like positive signs to the new regime. And, you know, to me, as an accounting provider that focuses on blockchain and crypto companies, I couldn't be excited [00:12:30] all around. There's a lot more, you know, to unpack. But that's the high level.

Roger Harris: So for. So generally speaking it's going to be a more favorable environment. I guess you could equate it to the same thing that, uh, the new administration is talking about in terms of energy and drilling more for US oil. So we're going to open the spigot. More and more people are going to probably get into crypto. So we need to do a better job in our profession of understanding at least the basics, or understanding when it's time for us to step aside and to know when.

Annie Schwab: You're [00:13:00] in too deep.

Roger Harris: Yeah. About that. This is as far as I want to go. Let me ask about a couple of terms that that are you know, I think we got to start with some very high level and understand a few terms. And one of the terms like, I know I carry a wallet, but I don't think in Bitcoin what I'm carrying has anything to do with bitcoin. So you know a couple of terms. What's what's wallets what's addresses. You know what are those things. What do those mean when we hear it in the world of crypto.

Amir Marmar: Yeah I think that's [00:13:30] a good little segue into the definitions under the hood because I saw many like Tom pack. Right. But yeah, I agree with you. Like obviously your wallet is tangible, right? Like, you can pick it up. It's got various, I imagine, credit cards. I'm not sure if people carry cash these days. I know, not much.

Roger Harris: Yeah. Not much.

Amir Marmar: I try not to. There's no room. I just the cards, you know, cashless, right. Covid changed the world. So cashless and touchless. So I would say like, you know, your wallet is tangible and crypto it's more intangible. [00:14:00] It's a digital wallet. The way I think someone can visualize it. In my opinion, these things have existed for a very long time and you still use them every day. You just don't feel it. The way I would equate to digital wallet. It's no different than logging into your Bank of America login for your personal bank accounts, your own Wells Fargo log in and you're seeing that money's there. Think about it. Can you touch that money? No, not this second unless you go into the ATM. Right. So [00:14:30] I equate like first like the wallet as being digital. No different than using like your banking app and seeing that money's there. So that's probably the first way to just use an analogy here is into that. The thing is there's a lot of different wallets, right? And there's different security that's attached to some wallets. So I want to I'll share a few. That's worth sharing okay. But like, you know, individuals like there's wallets that live in your computer.

Amir Marmar: These are like browser based wallets. [00:15:00] One of the biggest ones that the world knows is something called MetaMask. It's literally like a little fox icon. I'm looking at it, you know, on my desktop. Um, and basically your wallet is essentially a computer, believe it or not, because what a wallet is, is it contains something called a private key. And that private key is some encrypted seed phrase or something really long. And when you actually download this thing on your computer, uh, your computer [00:15:30] carries that decryption key. So it's a secret key, so you can actually install it on three computers, Each one of those computers becomes a wallet. It could be the exact same thing. To be honest, it holds the same money. So it's like logging in to like your old Fargo from your home or from your laptop when you're traveling. Right. Like, you're still able to access and do wires and transact in it. But there's other types of wallets. Right. So there's like these digital web based computer type wallets. And [00:16:00] then there's actually like physical devices that exist. Um, you know.

Annie Schwab: So how many wallets do you generally like your clients in general? Do they have like hundreds of wallets?

Amir Marmar: Yeah. So like I would say like the high level. And I'll answer the question. Uh, yeah. We do complex stuff. So there's kind of these digital wallets and hardware wallets. The hardware wallets are, like, tangible. It's like a USB stick. Got it. You can stick it in your computer. Um, and that becomes the key. Versus your computer storing a key. Um, and [00:16:30] then one more thing to just play around for, like, security, there's different types of wallets wallet from a security perspective, and one of the more common security methods is what's called a multi-sig wallet. So it's called Multi-sig for multi-signature. So you can set rules like you would as an accountant. You know, back in the old days when I worked 20 years ago in corporate, you know, like in order to sign a check, maybe if it was over 10,000 require two signatures. Right. Like your controller [00:17:00] signed one. If it's above a threshold, the CFO signs one. So they created that in crypto and it's called the Multi-signature wallet. And you can set rules like hey, in order for crypto to be signed we need three signatures. So you can create a committee of 7 or 5. You can create a committee of ten. And so you need six signatures. So there's a lot of like customization that you can have within the wallets. Um again all these topics that you could go on forever. So I'll switch to your question. Um, you know, like [00:17:30] my client base, um, like Jfdi. I the case like we met on two. Right where like, it's really complicated. We handle the most complicated human beings. So I'm happy to take some easy ones. But, you know, I've done anywhere from someone having 2 to 3 wallets to someone having over like 150.

Roger Harris: And I think you had mentioned in one of our earlier calls, and I know we'll circle back to it later as we're analyzing a client that comes to us. A good first [00:18:00] question is how many wallets do they have? Because the more they have, if I remember, what we talked about is kind of a signal of the complexity of the client that you might be dealing with. Is that did I say that properly?

Amir Marmar: Yeah. I would tell you this, as you know, as I've grown jfdi more institutionalized it, which meant started by myself helping a friend. And so they were 25 plus full time, right. Um, I still do like sort [00:18:30] of all the sales stuff, so. Meaning like I'm doing all the venting and due diligence, promoting myself. So I have a lot of experience in this. But in order to understand, like your client. Right, even from a tax lens, I'm sure you guys have like your general questionnaire, right? And when you send that questionnaire, then you know this, the client will fill it out. But then when you start working with them and you discover more, but at least from like a higher level, use that question here as an intake form that [00:19:00] lets you know, like who's about to sign up for services with Paget, right? You know, like they got some offshore investments. We start like creating an engagement for success. Right. So I can tell you for me it was you know, I would say 95% of our clients are, you know, all pretty much crypto native. Um, yes. Like one of the first questions I ask is how many wallets do you have? But that question alone isn't an exact indicator of the of the complexity [00:19:30] and the volume at all. So it's like.

Annie Schwab: People ever say like, I don't know, like, oh, I have between 20 and 30 or like, I feel like I would be lost in the how many because it's kind of easy to create one, right?

Amir Marmar: It's extremely easy just to create a blockchain. You'd be surprised. Like creating a blockchain. You can click a button. So I would say like just click on like the wallet. No client actually has like the true indication of how you actually have every single one I can [00:20:00] give you like different examples, uh, in projects part of working through like on a detailed level and thoroughly, um, we discover wallets like no better than other, um, I would say on a project where someone gave me an initial list. This is true. Like within 60 to 70 wallets they owned, we discovered about 70 to 80 along the way, uh, that they forgot about, uh, we'll talk about wallet hygiene. I think that's like a good, important topic [00:20:30] to discuss as well. But I'll tell you. Like why? Uh, one the tax payers, the TPS like, don't keep great records. Uh, over the years. I think now there's a lot more attention that, you know, the IRS is targeting, uh, crypto taxpayers for audits and stuff. So I think they're starting to become more self-aware. I need to take notes and write stuff down. Uh, to they forget, uh, there's, like, a swirl of things. A lead up to this. It's never malicious, by [00:21:00] the way. So when I scope them out, it's not like I think they're maliciously withholding information from me to get, like, some lower quote or fee.

Amir Marmar: I think there's just, like, true honesty to what I just said. They forget they don't have great records. But, you know, I can tell you, like, we're extremely thorough about our work and we have like a multi-stage process that eventually leads down to a list of interactions with the wallets that I was given to wallets outside that I wasn't kidding. But you got a free wallet address, so [00:21:30] we usually at that point sit down with them and go through and like, hey, here's these transactions with this wallet. And then they look like, oh, wait, that's one of mine. So guess what? Now you're not done. Now when you add that into the analysis, that's going to lead you to finding more wallets that are third party. It's like, wait, what's this one? Oh, wait, that's one of mine. So you can start seeing how perpetually there's like a web of addresses. And you can start with five and you can. This is pretty common. They'll give me eight. I usually do like a mark up already in [00:22:00] my head of how off they are. I got that good like just based on the feel of the conversation, like, oh yeah, this person was like 15 or something.

Roger Harris: So it doesn't surprise me that they're not good record keepers in when it's crypto, because most people aren't good record keepers with something they understand. So just, you know, how many checking accounts do you have? Do you think everyone would know that off the top of their head? And sometimes they can't even get that right. Much less how many wallets? One term we use a lot. And I just want to I want to hear from you for everybody because again, we don't know the audience [00:22:30] how much they know about crypto. We talk about blockchain. What is the actual correct definition of what a what blockchain is for?

Amir Marmar: I mean, the way I would describe it, I'm not a technical person. So you can ask, I'll give you the best, you know, that I can describe.

Roger Harris: Because we all hear it and we all use it. And I don't even know if we know what we're saying and if we're saying using it the same way. Yeah.

Amir Marmar: So I'll try to give you the accountant's version of a blockchain versus like a lot [00:23:00] of my clients will give you like the real technical definition. But to me, I look at it as more of like a network that tends to be like more peer to peer, you know? So I'll think about it as like a collection of a bunch of, like, computers around the world, all that type of stuff. And then, you know, there's within blockchain to again, most of these topics themselves like wallets, because they're all like topics we could talk for hours on, but within like the block chains, let's just say I refer to it [00:23:30] as like a network. Peer to peer. Right. There isn't, you know, like I guess like there is like some centralization, you know, within there's like centralized exchanges versus decentralized exchanges, you know, like decentralized exchanges. Individuals I've heard of like a Coinbase, Gemini, Kraken and a bunch of others. But, you know, I think about it as like a peer to peer network. And if I want to send you some money, I can just click one quick button and send you some Bitcoin or Ethereum. And as long as I have your wallet address, [00:24:00] even some stuff that we discussed earlier and that could be anonymous, as long as no one knows that you hold this like 40. And these addresses are generic, jumbled, you know, combination of letters and numbers zero x 44 characters for like Ethereum and stuff. Zero x ABC 235, you know, like so there's like, you know, anonymity, but you can get doxed, right? So that sort of wallet address behaves with like your centralized exchange. You know, that's where [00:24:30] the focal point, you know, that's how the IRS eventually texts individuals.

Amir Marmar: I think when they do these, like John Doe summonses to centralized exchanges, don't try to share information. Some don't. But look, the blockchain itself to me is, you know, just like this network. Um, and there's there's different types of blockchains. Let's just call like a layer one blockchain. And those are the ones that you would know, like the Bitcoin chain. The Ethereum chain. Uh, Solana is another popular one. Avalanche um as well. So there's like a slew [00:25:00] of like these layer one chains. It's like your original sort of ecosystem and network that's kind of built. Then on top of that you can have a layer two chain. So these are tools that commonly refer to. So these are like projects or companies that don't want to create the initial framework of like the chain, but they like what that chain has to offer. So when you first launch, like, a project, uh, one of the core components of, like, a, you know, a crypto companies, they [00:25:30] try to figure out one. It's a key decision that the founders and co-founders face. Do you launch your own chain for your project, or do you build on top of a preexisting chain? So some will will start their own and some will build on top. So the ones that build on top are called like a layer two. There's a lot of projects on the Ethereum chain or L2's. Um, arbitrum optimism and, you know, a bunch of others. And then there's like L3. So again, you can keep building. Then there's someone that will build on the L2. So you can see how [00:26:00] this gets.

Roger Harris: Keeps going and going.

Amir Marmar: Right. The key to the chains though, and again no leads to like a lot of the topic. I think the world is shifting here is like the whole tax analysis reporting and how difficult it really is. Right. Because that's what I feel at some point tax pros want to understand. But a lot of like the chains that have been around for a longer period of time. I believe Ethereum launched. I'll call me on this, but my memory is good. 2016 let's say when they first launch is like [00:26:30] eventually you have what's called an explorer. The explorer is like one of the greatest tools for an accountant, right? Just assume you want some chain, which is again, like supposed to be a decentralized ledger. That's what a blockchain really is. It's a decentralized ledger. That is.

Roger Harris: Where everything's there, everything's recorded, and everything that happens.

Amir Marmar: On the ledger and the whole world can access it, right? So if other technical people were to describe it, you know, that's what it is. But imagine you just had [00:27:00] no way to query the data. How would you do your job. So that happens. The key is like you have like an explorer. So like one good explorer for the Ethereum chain is etherscan. So to me, when I have clients that are like more Ethereum chain native, it becomes a little bit easier because the data that I can pull is more accurate and complete versus the Solana chain, which is a great chain. It's probably, you know, scaling like fast, you know, [00:27:30] like scaling more users, more transactions, more volume. But there's some issues with, you know, a few of the explorers, they give you like excess transactions that you don't need in your analysis. So you kind of have to sometimes use multiple explorers to triangulate the data and figure out where you're missing to get a complete to get completeness. And then you have new projects that will launch that have very little explorers. And then when eventually they launch something that's like really bad. So [00:28:00] it's like, how do you suppose to figure out how to like account for the transactions. So hopefully that gives you like again, this also talks about like volume and complexity a little bit. When I look at like, you know, a prospect what do I look at. You know for them okay. How many wallets do you have.

Roger Harris: Yeah. And I think that's something we don't have the some of the sophisticated people that would come to you. So and you kind of walk through what are we what are the kind of things that when someone comes to us, how do we [00:28:30] determine whether we take them on what to look for, what to ask? So I would say I.

Annie Schwab: Would say most of the clients that come to Paget offices are maybe 1 or 2 years in doing very little, probably like mining, I would say where they've got generally they bring you printouts and all the printouts look different and nothing's really identified so well. And they're basically [00:29:00] anticipating that we as tax professionals can interpret this. Um, you know, we can interpret a 1099 B from Charles Schwab. Right. But these crypto reports that we get are so unique that we struggle to even understand, to be able to know what am I pulling from these reports to put on the tax return? And so now we're relying sort of on the communication with the client, like what does this mean? What did you do. [00:29:30] What you know, what do these numbers represent. So that we can try to interpret the data and then report it. And so it puts I think tax practitioners who are not, you know, not familiar with all the different printouts from all the different places, um, staking and mining and trading. And, you know, you get all these terms, some of which are easier to understand than others. And I'm guessing the terms just the market is just growing and there's [00:30:00] going to be something new, another term, a new this a new transaction or or strategy or.

Amir Marmar: Yeah, I mean, look, you touched on like a good point. Um, and again, everything we talk about is pretty loaded. We can go into one little slice and talk. So I'll keep it high level. But one of the things that you touched on is the markets are evolving. Once you have something like figured out, there's like five new things. And I'll talk about later [00:30:30] about the new Rev proc 2024.

Roger Harris: From the IRS. Right.

Amir Marmar: The universe. We'll save that for the end. But that's like a good example of how like there's a couple a couple of factors that would make pageant not just you. Um, all all tax firms. Big Four and I work closely with all the top anywhere from small medium to large tax firms as well. So this is like a huge pain point, just so you know, not sure which is [00:31:00] pageant. Just feel like the world of like tax professionals. Um, so just at least understand that no one feel bad. Um, but the industry moves at such a fast pace once, you know, I got the term DeFi figured out or sci fi. And you know, there's a bunch of stuff that's like always evolving. And guess what else is like a hindrance to lack of authoritative guidance from the IRS.

Annie Schwab: From the.

Roger Harris: Irs. They're like 2.

Amir Marmar: Or 3 years behind. They know it. Um, and then once they give you some guidance as to, [00:31:30] you know, how to do something, then you know, there's the next thing for them to tackle. So anyway, there is like a lack. So it's hard. So here's the part that I feel is unfair. Um, I would think within the realm of crypto tax individuals, there's probably use cases of being able to put together a, you know, an 89, 49 a schedule D, like pretty easy if if [00:32:00] your customer is just doing simple stuff, that means like, I'll give you the most basic simple case. The simple case is they just take money and cash. This is like the simple starting point. You just move it to like a Coinbase. You know, so you know how much they put in, right? So there's like a click. This isn't your normal use case though. That's like the sample we we start with. And then the complexity just tacks on. And that's the unfairness to you guys which I'll talk about. But the simple use case is okay, let's say a mirror takes $100,000 [00:32:30] and I wire that to Coinbase.

Amir Marmar: You already know what I invested. Then I usually call like trading. It's like kind of like a washing machine. It's like hey you know, what you put in is a bunch of stuff that happens that isn't, you know, like you could potentially calculate really easily within one exchange what the loss was. Right? You just need to figure out what the realized component is, what the unrealized component is for the tax loss. And then you can produce, you know, an 89, 49 that's [00:33:00] like your most basic use case, but that's like covers probably 0%, unfortunately, of our population of individuals. So what ends up happening? And again I deal with the hardest. So, um, what ends up happening is you have individuals that are in multiple exchanges. They also have again, we already touched on some terms. These kind of like their own wallets. So they're transferring funds around. So once you start doing that the complexity rises okay. How do I [00:33:30] track my basis transfer from my one account here.

Roger Harris: This one.

Amir Marmar: Right. So complexity starts rising. Um then they're doing a slew of treasury management and we call that DeFi decentralized finance. Now I already touched on it a little bit earlier. It's how easy someone can take a collateral loan that's DeFi without filling out any paperwork. You can just go and like, you know, this protocol called like let's say ave, Aave, let's say you have [00:34:00] crypto that you want to hold for five years, but you're just sitting there. You can borrow against it. You can just like stick it in some place. It understands its value. It knows that that value goes down. So it can do like a, you know, like a recall, just as if you're trading stock on margin if needed to cover, if there's like a huge decline. But let's just say I could take $1 million worth of Ethereum and I'm just doing nothing. I just want to hold it.

Roger Harris: It's just sitting there hoping it goes up, just like.

Amir Marmar: Literally take a 500 K loan immediately. Go take [00:34:30] and borrow like stablecoin. We all know Usdc and then convert that Usdc to cash and go do whatever I want with it. And that just sits there as a is a simple way. That's called DeFi. So I guess like that's when the complexity starts to rise because one is there is very little to no guidance from the IRS on the DeFi. They're actually working on it. I talked to someone at the IRS about a month or two ago when I did a different, uh, podcast for the Beverly Hills Bar [00:35:00] Association. Um, so they first they first focus on the regs, which we'll talk about was for like the centralized exchange component. Right now they're actively working on like the decentralized exchanges. These like things. And what are generally individuals doing? Treasury management. It's the most complicated form of belief to me of crypto accounting. There's like three kind of main types of protocols that they're interacting with. One is we just touched on the lending protocols. One is I can actually [00:35:30] contribute my money into that protocol and earn interest on it. Right. Because someone needs to borrow that. Right. So actually I can just contribute it and earn interest, just like you would with a bank account. So I can just contribute $1 million would be most like that example, not borrow against it, but loan it to the protocol so you can.

Roger Harris: Somebody else borrows again.

Amir Marmar: Again everything's covered because the technology is built pretty perfectly so I can earn interest. But these are like lending protocols. So there's like some lack of guidance as to like if I lend [00:36:00] my crypto, is that a taxable disposition? I can tell you that as we're talking about taxes, a lot of the lay of the land, the covers, you know, leaders in the space, we look at those as nontaxable events. It's like a functional currency loan. I learned a thousand. I learned a thousand units of something. I will get a thousand units. And that's something back one day. Therefore, I retain my original basis. I can tell you at least my level of thinking. So that's like.

Roger Harris: So you don't think that should be taxable [00:36:30] in the IRS is yet to.

Amir Marmar: Think that to opine. But again, this is uh, not only, you know, the way I feel, but talking to industry leaders, it's like, think about it. Like they'll see like say like, you know, a thousand Heath, leave your wallet generally like the software is may think that's an automatic taxable event, but you get the thousand ink back, right. Because you lent it and then you just claim it back. You're right back to where you started. Right. Think about it. So so let's say there's these lending protocols.

Roger Harris: Except for whatever except.

Annie Schwab: For the [00:37:00] interest. Right.

Amir Marmar: Right, right. That's, you know, ordinary income, right. So there's also characterization, which is pretty technical under the hood of like capital versus Mary. That's a long discussion in and of itself. But let's just say you've got this like interest component or some reward component that is all ordinary and operating. And then there's different rules. Again, everything is a rule. Okay. When do you when do you count the income. Is it accrued. So they've clarified some stuff like when you have dominion and control just obviously you know the [00:37:30] tax rules constructive receipt dominion and control like okay then you can take the income versus just the growing in some contract. We're not able to see it. And that's like the lending side. Then you have like two others. This is what's called staking right. You've heard the term staking.

Annie Schwab: You've heard that.

Amir Marmar: Yeah in rewards and all that. That's like you sometimes delegating your crypto, other people can vote. There's a lot of different things. You're just giving this to an organization and they can go and make money. So you're staking [00:38:00] it. So that's also like looked at potentially as as kind of like nontaxable when you first like state. The way I think about it, it's almost like a money market account. It's like designate this thing to make some money or yield on it. Right. So it's like, well, I need to send it to some protocol again to like cyberspace address so it can start accruing some of the rewards. And they're doing whatever they want, you know, with their contract every project is differently. You know, I'm looking at that as still like this transfer [00:38:30] is like Nontaxable just contributed. I almost look at it as I take my thousand units and I locked it up, sort of like constructive receipt, right? Like I can go to the ATM and pull out money. If I just click some buttons, I can immediately click a button and have my thousand back. So I kind of look at it as like, hey, the reward component, right? Ordinary get new basis and new coins.

Amir Marmar: But when I unstake and unwind and again, as you know, crypto is not simple. There's liquid staking. [00:39:00] There's other crazy stuff in there. It's what's called cooldown period. So like if you stay on track, it may take you three weeks to just unlock your money back. And liquid staking more you click. Your money is there in two seconds. So there's you know it depends like where you put it. And there's different rules. Every project that launches, it's clearly written. If you go and read it before you send money to like cyberspace. So anyway, there's this staking component and then there's like the last [00:39:30] component to treasury management, which is like liquidity pools. And that's common when you are creating markets like market making. So liquidity pools is like, you know, where I think things are like more taxable. It's like you contribute, you can contribute. Again, it's not simple. One asset you can contribute two a pair of assets because you look into celsum you look into become like an exchange, you're creating like a pool. And then Andy wants to buy something for my pool so she [00:40:00] can go and buy it. So I'm creating a market for you to either sell something that you want to get rid of, and I'm just filling orders and I'm getting a percentage of the fees as if I'm in exchange.

Amir Marmar: So we call them like liquidity pools. Uh, you know, one of my long standing clients has built one of the biggest decentralized exchanges called Uniswap. Um, so they have, you know, these liquidity pools, there's like a V2, v3. Now they're working on a V4. But the way the reason that becomes more taxable, just so you know, in [00:40:30] a scenario where I'm contributing assets because there is actual churn that you can't calculate that's happening in the liquidity pool. So that creates a taxable event. Think about like Annie creates a pool of two assets. Amir creates the pool the same two assets. And the world is just cycling through it. It's like an unstructured partnership. So that's the reason like that event is something to like flag because like then when I move assets to the pool, [00:41:00] that's where clients get whipsawed. You know, they don't realize it. Um, so, like, you would have to assess, like, the volume and the churn in the pool. And sometimes that's hard because that's all calculated in some machine that's going, you know, it's built inside the Sage.

Roger Harris: Doing all this stuff.

Amir Marmar: You don't get k-1s, right. So, you.

Roger Harris: Know.

Amir Marmar: That's like doing, like, high level of like, you know, why crypto accounting could be really difficult? Because most of these individuals don't want to just sit on the money, but they're trying to, like, earn yield. They're doing other things there, like airdrop [00:41:30] hunting. Um, you know, there's like new projects that when they launch, they want you to be part of. So they'll give you, like more money to be in early to do this.

Roger Harris: And that's where you get around.

Amir Marmar: So again, there's a lot to unpack. But that's a good stopping point for me.

Roger Harris: Let me go back and I want because I can already I can't hear them because they're not here. But I can hear people on the outside yelling, ask this question. Ask that question. So let me ask. Go back to some of the the basic questions. The first example where you put $100,000 in and you're [00:42:00] buying and selling within that 100,000, that's the kind of thing that's pretty straightforward. It's like short term long term gains or losses. It's not currency. It's it's a transaction. So the IRS has guided us on that. So that's pretty straightforward. Yeah. Now you mentioned I put I've got let's say $1 million worth of crypto. And I use it to secure buying a house. Has the IRS said that's taxable. Have they said nothing. [00:42:30] What what happens when I use it as collateral to buy something else. Has the IRS given us guidance on that yet? No.

Amir Marmar: You just have to take a position for right now and then hope it falls into a more likely than not, you know, substantial authority, right? There's some analysis on positions, whether it's reasonable basis, substantial authority more likely than not. Right. So I think right now the world's taking positions, but the guidance will. I know they're working on that, those set of rules. So hopefully in the next year or two those [00:43:00] come out to clarify. But you know, just get back to that point that actually Annie brought up is like, you know, the tax professionals are set up to fail because essentially, the individuals that are doing more than the basic trading just need someone to prepare the books. Right. There's a difference between an agent preparing like ABC Forbes financial statements and books versus filing the tax returns. Right? That's where the world gets blended. So these individuals that become like way [00:43:30] harder to calculate and deal with, they're coming to you with printouts, right. Going back to what Annie said, hey, that seemed to be like a foreign language. And printouts are bad. We should probably start using potentially a software as well to assist with specific use cases. Not all. Um, but really like the unfair component Is that these individuals again, that we talked about aren't keeping good records. No, don't have good wallet hygiene. What that means they're commingling [00:44:00] in wallets. The key thing is like good wallet hygiene. Um, keep a record of that, and then they're dropping this on you with, like, you know, an accelerated timeline, your multi-client provider, that you're actually forced to become a bookkeeper, and you're not. You're just a tax person. So that's like where the firm's like, jfdi come in. It's like we are experts in preparing, like the crypto analysis and reporting in the books. So I think like once it's not fair for the taxpayers, nor [00:44:30] do they understand it. Again, it's not like the militia. They don't in the world.

Roger Harris: They don't they feel like they should, but they don't. So yeah.

Annie Schwab: And it's changing too fast to even keep up.

Amir Marmar: Yeah. The regulations obviously again, we could talk about that could be a good segue into the rev proc 20 2428. Yeah.

Roger Harris: This is where the survey. One last question because I want to verify what you just said. It sounds like what you're saying for the average tax professional, that's not anywhere near your level. If it's much more than that. [00:45:00] Here's your 100,000. I'm buying and trading in that 100,000 where we know just in our brain. Think of it like we bought $100,000 worth of stock and we're selling some shares, buying some new shares. We do that every day. We really have to question whether we want to go beyond that, because there's lack of guidance. And we'll talk about what the IRS is coming out with. It's better to just send them to a firm that specializes you or someone like that, because it's not just the tax return, it's all the back [00:45:30] record keeping that leads up to getting the tax return done that we need to to not think that we know how to do, just because we know how to fill out a tax form. Yeah, I.

Amir Marmar: Would, I would say like someone like you, Roger just needs to get good on the vetting out process and maybe update the questionnaire so you get the sense of like, you know, your crypto like sort of like easy, moderate or difficult. And I can tell you like, [00:46:00] you know, the list is narrow and small, but a sort of partnered up and collaborated with a few firms where sure. And one includes the big four as well. So it goes that big. I've been working, you know, with Deloitte for like 6 or 7 years. Um, and certain tax individuals will make a recommendation or referral to a prospect to just chat with Jfdi so they can basically what's the benefit for a tax professional or a tax [00:46:30] firm to potentially work with us as well? The tax preparer takes less risk, right? When you know, like the work is like detailed and accurate, you know, you can comfortably sign the return. And that's the uncomfortableness that you're feeling when you're meeting someone where you just don't understand. You don't speak their language. You know, that's just the way it is. And you know I do. So there's definitely like a few tax firms that I'm sort of collaborating with. And they're just sending us again, I've talked about how our path was always [00:47:00] referrals to today. They don't force the prospect to sign with your FDI. But they flagged the complexity and it says it's worth you meeting, say a mirror jfdi to see if they can like prepare again your crypto books and reporting and then we'll file the tax returns.

Amir Marmar: And then again we reason we get those referrals is our work is known to be high quality and as accurate as can be in the space. You know, that's something that as I scale my own firm, I never [00:47:30] like, really chose to scale GFI. I was just slow and incremental so we can maintain full control over quality. I built my own tooling and some software internally that I use for these engagements. I know, you know, including the client of ours like a mutual client that we now share. But that's that's the key to success. Like long term, the stuffs like, honestly, it's really, really difficult. You know, I'll tell you like, you know, I'll give you, like, the high level and like, like a minute, [00:48:00] you know, I wrote like a, you know, 5 to 6 stage process to what, like, you know, executes a successful engagement for a crypto taxpayer. And I'll list it out for you. So one there's like the data gathering component, right. First is get that data. And for them they're giving you, you know, printouts. That's bad data standardization I'm going to get like nine pieces of paper a data that comes in different shapes and sizes. And I want to standardize it into a clean and perfect [00:48:30] so I can understand it.

Roger Harris: Everything looks the same, right?

Amir Marmar: The third step they all miss, including on the case. The famous case I brought up. No one reconciled the data. That's how I knew there was something wrong. In that case of like five years, no one chose to reconcile the inventory when it should have been zero. At the end of the tax year 2018, and I saw a bunch of like numbers and they would make sense. You got to reconcile it because once you do that, you got completeness, right. Like beginning inventory plus transactions equal ending. So [00:49:00] that's the part they missed. But that's like step three. Um categorizations. We just talked about how complicated it is. You got defy and write.

Roger Harris: All these different things.

Annie Schwab: Each one's got a different tax treatment.

Amir Marmar: Right. Right. And that's like you creating a ledger of like, every inflow and outflow, um, you know, internal transfers disregarded. Guess what? You're not done. Then you got, like, the whole cost basis reporting. Now you got all the ordinary income figured out, like airdrops and mining. We're talking about all this stuff. Staking DeFi. [00:49:30] Now, if the whole, you know, crapload of currencies, you got to calculate all the tax slots and the gains and losses. And then the last part is, you know, reporting and records. And I can tell you it's like, that's the steps that I built. And I can tell you in of itself, like every one step, we actually covered the complexity of data gathering to be difficult. Like the explorers you built, we've been touching around. Every one of those steps could be like fully loaded. And guess what? When I go to a new client, it's like, hey, I need you to start a 23. [00:50:00] This is common. The 22. That's not the year I'm starting. It's like a first year audit. You inherit the balance sheet opening balances, and I got to look back. You got to go all the way back. So I would say like, you know, like the tax pros should be built to do exactly what you guys are doing. It's really like, you know, ingesting the information, helping them with strategic work so they can tax plan correctly. Right. The knowledge that I don't have, you [00:50:30] know, like I've gained a lot of tax knowledge and, you know, became pretty good at it though. Now tax pro you know, so that's that's you guys come in. So that's why the pair kind of works great you know. Yeah that's hopefully something that more crystallizes how.

Roger Harris: We're giving out your contact information at the end of this. Because after this I got a feeling, I mean, particularly given the uncertainty on guidance of, you know, we're not getting paid enough and aren't expert enough to be making decisions on what positions to take. [00:51:00] I mean, I think what I would think and we'll get to the guidance while we've got a few more minutes to go here. Um, what I'm hearing here is stick to the simple stuff at this point. You know, the again, going back to that 100,000 trading, that sort of stuff. And if they get more sophisticated in that, they need to go, at least to you to compile the information to give us to prepare the return. But unless you really want to dive into it like you have, we need to stay away from from all of that. So that's kind of the message I'm getting [00:51:30] from this that I think I'm going to relay. I'm going to tell that to everybody and give them your contact information and tell them, don't call me, call Amir, because, yeah, I don't know how to answer.

Amir Marmar: But.

Roger Harris: Yeah. Before we wrap up, Annie and you guys talk about what the IRS is going to give us and see if that's going to help change my position that I have now developed in the last 50 minutes.

Annie Schwab: Well, I will say, um, for tax practitioners, we are looking for streamlined reporting. Um, but [00:52:00] I've learned that it's way more than just that. So what are your thoughts, Amir?

Amir Marmar: Yeah. And again, I've developed sort of my own internal software. So actually when I do deliver like reports which are already been through either, you know, financial statement audits, IRS audits, etc., they've all been respected and accepted. I can tell you that like 1,000%. But I structured them so they are like streamlined. And then they're always the same set of reports, [00:52:30] like you get a report from me that looks one way and then someone else who looks a different way. So I've kind of standardized my Recording. So it's like once you get used to it, it's like knowing where the light switch is on the wall. It's like conditioning, like you go in and flip the switch. But you know, I again, I can say that things are going to get better for sure. And then we could talk about maybe the rev proc as well. But things are going to get better. One is you know, there's software solutions that are out there in the world. [00:53:00] But again it actually takes the skill. It's a common mistake to know how to.

Roger Harris: Run the software and put the data in properly.

Amir Marmar: Right. I can tell you the biggest mistake is actually when to use the software. That's the mistake. A lot of the clients that came to me, basically most of all clients that we've gotten, they probably had a bad or negative user experience. Someone else I can tell you like either couldn't figure it out, lack of deliverables, couldn't handle the complexity, didn't speak their language. I can give you a slower list if they find this. That's you know why they get referred. [00:53:30] But the common mistake that the other providers are doing, they're overly relying on a software or I kind of focused on being able to also be able to do the work manual, and the hard way to prove.

Annie Schwab: That the software is doing it right.

Amir Marmar: Yeah, you can always do anyone, regardless of the difficulty. The main mistake they're making is, you know, the software is the crutch that maybe one of the only ways they know how to do stuff. So they're just stuffing a client into a software, like a cookie cutter system, building homes and think the software is going to do the work. So [00:54:00] actually, the most technical step when you need someone is to figure out if a software can actually handle that level of person. The simple ones. We talked about the trading. I highly recommend the software. There's plenty of good ones in the space, and if that's all they're doing, they'll calculate 8949. They can even pay two 300 bucks into the software. And they'll give you like a real clear 8949. But that's for the simple use cases. Once it gets complicated, you know, I like to rely on them. So anyway, [00:54:30] that's like what I've done is I've created my own custom software and I standardize reporting, So I balance manual, tedious work with the software component and don't overly rely on the solutions.

Amir Marmar: And that's how we've gone through all the hardest use cases. And this has been for now, like something I'm proud of. Um, so that's that's the winning recipe. The mistake I'm always sticking in my software is is step one is where they are wrong. Like profile, right? You profile a client and you're like, [00:55:00] hey, oh we need a. Net suite for them. Right. You got to first like think about like where stage of like a normal company is. And I'm talking about financials in the world. Right. And be like okay, we need an enterprise like an SAP or a NetSuite and intact. But you don't need that if you're a startup, right? You can go to QuickBooks or zero, right? But we're already doing that in the world as bookkeepers. I think where other firms have not gotten good in doing this is in crypto. They just automatically use a software and be like some actually sign up [00:55:30] thinking that the software will spit out numbers for you. And it's not just the software you need an accountant like you would.

Annie Schwab: You need somebody that's knowledgeable.

Amir Marmar: Yeah, exactly. To actually, like, know how to use the software adjusted. So again, I use multiple softwares, but I spend more time like the matchmaking component. Um, and then, you know, we talked to Ben mentioned this like a few times, like, you know, once you think you got it, figure it out. And complexity, you know, is, you know, [00:56:00] within range. Then you got, you know, new rules changing. And, you know, there's the ref proc 20, 24, 28. It's gone into effect in about, what, three, four weeks when we celebrate New Year's. Yeah. New year. Um, so then the world gets a little bit more difficult, which generally I kind of enjoy. Yeah, I love hard stuff, and I do still think Jfdi does it on like a high level. So when things get complicated, I think it's [00:56:30] another way for jfdi to separate from the pack so candidly how I feel. But I can tell you that the rev proc is changing and moving away from something known as a universal method of accounting. And now we're talking about like the cost basis methodologies, how to.

Roger Harris: Calculate cost, right.

Amir Marmar: Fifo, LIFO. Right. There's a bunch of methodologies again, that existed in the world. We got some clarity, uh, again, from a cost basis accepted [00:57:00] methodology. Uh, no different than believe stocks. Uh, the IRS will respect two methods. One is Fifo and the other one is the specific ID method which exists, I believe, in like stocks and everything else. Right, right.

Roger Harris: Right. First in, first out. Or somehow you can track it by number, specifically the specific cost.

Amir Marmar: Like a spec ID, but what you can do with the spec ID, it means you can use alternative methods other than Fifo and said that like what's called like standing [00:57:30] order. So in the past, when individuals didn't know there was individuals using like a LIFO approach, right. Last in. First out. Individuals were using in first out. But they didn't know up until recent like hey would that be accepted? We always thought like Fifo spec ID, but spec ID can allow you to choose a different method than Fifo, set that order in place and let it carry. So now like there's crystallization. But the biggest thing that a lot of the softwares [00:58:00] we're doing is what's called like a universal Fifo method or a universal LIFO. So what that meant is when you have ten wallets or 20 wallets, we just lump them all in into one ledger like of one currency, let's say. And my clients have 50, 60 currencies. There are tons of different blockchains. So the complexity, again is hard as can be. But let's just let me give you like a good example so you understand the rule change. And I'll keep it simple. So let's just say for our example, [00:58:30] Roger, you hold Bitcoin and you have it in two and two wallets. We'll just keep this example simple.

Amir Marmar: You have like I don't know four bitcoin and one wallet and six bitcoin and the other one you're probably happy that it's gone up a lot. So that's probably the first thing that is feeling. It's a Hunter K it's going to keep maybe keep going up. We don't get financial advice as we know, but we have four and 6 in 2 buckets. Right. And then let's say like in 2023 [00:59:00] or 2022 I only disposed of one Bitcoin. Um, in the old method pre rule change on a first in first out people were just using a global method. You just have a ledger that shows ten. You might have disposed the bitcoin for wallet two, but your first in was in wallet one. So they just clumped it all up and then it goes first in first out. So dispose it from like walleye wine. But [00:59:30] if you start reconciling your balances now on your own ledger by wallet, you're not going to match. Now you might have like a negative inventory, right? So in this method though there's simplicity right. If Roger has non bitcoin in ten wallets guess what. As you as the tax professional in the universal method I just deliver you one report for Bitcoin right. Right. You get one report for me 8949.

Amir Marmar: Roger has Bitcoin in ten wallets. First in first [01:00:00] out 8949. Stick it in there. That's not what's happening next year. So now we move towards a wallet level reporting. Which means that if you have Bitcoin in ten wallets and ten wallets are active I cannot give you one report. I got to give you ten, got to give you ten. So that's what could you imagine my client base that has, you know, 20 wallets, 50 wallets, 150 wallets. Yeah. Um, you know, so there's two components [01:00:30] to this. This is actually the main thing that I've been doing some talks on is around the January 1st, 2025 date. There's like the safe harbor rule that allows you to plan as to how you transition. Right. It's we're taught this conversation is for all individuals that already own crypto in the world. Anyone that starts next year, they don't have this issue with transitioning, because now I'm going to go back to Roger's example of like the four and the six, and we like sent one out [01:01:00] from wallet one. So now you have three and six. So while your ledger shows nine right, in this like universal approach, we're going to have to like reassign the basis say December 31st, January 1st I usually call it in between accounting periods zero and some softwares.

Amir Marmar: You know there's like this transition on New Years that has to happen where we should look at Rogers inventory of open slots. And we know that he owns nine Bitcoin and say [01:01:30] 100,000 bucks each. And then now let's say you own like three of 100,000 like six of 50,000. So we can manually assign those out. So it matches your on chain wallet like balances because we know wallet one is three and wallet two has six. And you can create strategy right. I may want to put all my high basis bitcoin and wallet to just during that transition. Right. And [01:02:00] then I'm going to put like you know low basis and wallet one. So there's kind of like the safe harbor rule. You know that allows individuals to kind of plan for like crossing over from this like universal method, uh, you know, over to a wallet level reporting. So you can see how the reporting now is going to be more detailed. Because like every wallet or exchange, think about Coinbase is a silo now, but that silo could have some holes. When I move some Ethereum or Bitcoin [01:02:30] from my personal wallet into the exchange. So Coinbase won't know what the basis is, but I will in my work paper because now.

Roger Harris: 25 for.

Amir Marmar: Internal transfer.

Roger Harris: 25 is the year we've got to go through transitioning from and perhaps changing our record keeping from.

Amir Marmar: Universal to reporting. So you can see like how much additional reporting potentially a tax for might get. So anyway I think that's hopefully a lot that we covered. Going to be a lot.

Roger Harris: Well [01:03:00] based on everything we have covered and we're running out of time. How does because I have learned I'm going to send you everybody that contacts me. How do you how do you want to be contacted? If anybody listening here today gets into to Bitcoin and gets a client coming in and they're not comfortable, how do they contact you? Anything they need to know. Don't call me if you're not doing this level or something. What? What message do you want to give to our listeners to, uh, make [01:03:30] sure they reach out to you?

Amir Marmar: Yeah. Um, honestly, there is, you know, multiple methods, but for now, I'll truncate it to two. One is we have a website. There's a contact form that's built on our website. So our website is jfdi accountants plural.com. Um and also we have jfdi.com. It'll redirect to the same website. So we have two. Gotcha. Two handles Jfdi accountants.com or Jfdi Co. And then navigate to the contact [01:04:00] form. It might say request a consultation. Uh makes you fill in some basic fields like your name a little bit about you know, how you found us and you know what issues or where you need help and that usually will land, uh, in a company inbox that's monitored. Um, so that's one way. A second way. Linkedin as well. If someone wants to reach out or connect with me on LinkedIn, it's a mirror. Marmar. My name is John Smith, so I would imagine there's very little Amir [01:04:30] Barrymore's in the world and Jfdi accounts. Um, although, look, there are scams that are going on in the world, right? Sure. Make sure you land on the right one. Yeah. Feel free to connect with me on LinkedIn and, you know, send me a message. Linkedin sometimes has a lot of spam, as we all know. We open it up, but I generally like filter through it to look for like real messages. I would say those are like two good ways to try to connect with your FDI. Um, or for you guys, as well as sort of how we, you know. Right. One of the pageant, [01:05:00] you know, tax individuals, you know, reached out and sent me an email. So that's a third method is if you're already working with your firm and satellite offices, you know.

Roger Harris: Or if they come through us, if they're one of our. That's easy.

Annie Schwab: Yeah.

Roger Harris: Yeah, yeah. Get them to you. Cool. Amir, thank you so much. This was. I mean, we could sit here and talk for another couple of hours. But what I have learned is I don't know enough to do this, so I'm calling them here. Yeah, that's that's.

Amir Marmar: A good way to do it. You know, I would say I can I'll help [01:05:30] as many as I can, uh, you know, and I appreciate the time this was.

Roger Harris: Oh, really? Thank you for thank you for spending your time. And, um, I hope you get a lot of contacts, because I think a lot of us don't need to try this for ourselves. Any last words before we wrap up? Yeah.

Amir Marmar: Look, maybe like a piece of advice. Um, yeah, this would be a good, like, short advice. Um, well, one for the tax pros, right? Tax pros just, you know, that our complexity. [01:06:00] And feel free to reach out to to me or Jfdi to see if we can partner up and help in the in terms of the tax payers themselves. Honestly, the advice is keep good records, maintain, you know, decent wallet hygiene, try not to commingle, um, and stuff like that, I would say. That's some good little short tidbits, you know, um, as we wrap up and again, I'm super passionate about this. Uh, thoroughly enjoyed discussing.

Roger Harris: Well thank you. The high [01:06:30] level.

Amir Marmar: Of crypto accounting.

Roger Harris: For any any any final thoughts from you.

Annie Schwab: Know, I my brain hurts. He, uh, he's he's taught me a lot and a lot. Now that I feel like I need to go research some more. So thank you so much. It's been a pleasure to have you. And, um, happy New Year and happy holidays to you. Yes.

Amir Marmar: Happy holidays. And, you know, um, you know, happy New Year to everyone as well.

Roger Harris: And thanks to everyone for listening to today's podcast. Tell your friends about the Federal Update podcast and join us [01:07:00] again soon for another one. Bye everybody.