Expert Council Q&A for 8-11-22 – Epi-3143 — 3 Comments

  1. I would think those IRS compliance officers are probably going to be heavily focused on crypto trades too no?

    • Yea likely anyone with a lot of trading volume, etc. Though actually stocks are easier pickings because the wash rule applies to them and it does not yet apply to crypto.

      I expect more shit like this. I do a lot of business in Paypal and Strike I also have some relationships paid into those that are more direct. Some of those generate a 1099. Now PayPal and Strike also generate a 1099K. Alright now that money is duplicated.

      Say Paul Wheaton pays me say 4500 bucks this year in referrals. He’s gonna cover his ass and send a 1099 and that 4500 is also in PayPal. I am not going to report 9K am I.

      Several of my “give us more money” IRS letters were from this early on when the first 1099Ks started to be spit out by Merchant account providers which was done under what? A bill to crack down on tax cheating say the “Tax Cheat Bill”? Nope the Patriot Act did this.

      So for a few years I would get these basic letters of demand. My CPA Richard would right a “kindly fuck off” response explaining the duplication. After a few years this stopped, I expect this type of thing to start again.

      Most of this be it trading, small business, etc. is like I said not going to be audits. The MSM is using the word audit to include these demand letters, they are not audits. They literally say “this is not an audit” on them. In a real audit you or your CPA/Attorney sit down with an auditor and must produce proof of any claim they question.

      You had these meals, where are your receipts. Okay this meal, this 900 dollar thing, who was there, what did you discuss how did it relate to your business. You claimed a basis of 34K on this bitcoin you sold, when did you buy it, how did you get it, etc. It goes on usually for weeks. We literally pay for an insurance plan every year in case this happens. They can go do that shit with Mary Johnson and she is VERY GOOD and if needed an attorney gets involved.

      Again though most of the money they collect beyond the voluntary is not from actual audits, it is from letters of demand. Most people simply do not know how to respond to them and just pay.

      An audit is like being sued for something you might have done, have to prove you didn’t do and you have no recourse against the other party (ability to counter sue for costs) even if you are proven 100% right. It can cost more to fight that to pay, it is literal mafia tactics against the people by the state.

      The target is 1-12 million dollar businesses and most of the time an owner of a business like that is making into their own pocket say 75-200K, they are not “the rich people”.

  2. I was a practicing CPA for 43 tax seasons, Jack, and you are spot on!

    I told my clients, “Never pay a demand letter without checking with me!” At least half the time they did not owe anything. Maybe 2/3 of the time.

    Thank you for your genius and your willingness to teach us.