Speaking eCommerce Tax With Boyuan Zhao Of PLTHORA Agency
Hey, bro! Thanks again so much for that great intro. Hey everyone out there, my name is Alan Chen, I’m a certified public accountant and we’re located in Los Angeles, California here in the US.
And just like Boyuan said, we basically offer what we call an all-inclusive package to basically take care of all your compliance needs right and we only serve one niche, just online and ecommerce businesses and we’re really focused on it and what our competitive advantage is. I think over what we call a generalist or just a you know an accountant that you may hire out there because with laser focus on just ecommerce’s online business.
We have a lot of data that we use to do comparatives from one online business to another to ensure that you always get the maximize tax savings that you deserve out there, and given that me and my partner stanford’s background and a lot of you know fortune 500 big businesses and i’m sure you guys heard the news out there like the Facebook and Google. The world is how they’re able to pay little to no taxes. We like to think that we’re able to take some of the things we learned from that and be able to apply to your business and say, hey the tax code is for everyone and you guys should be able to take a piece of that pie and apply it to your business and also take advantage and make sure you keep more of that money back in your pocket.
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By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.
So, I believe Jason asked this. He is currently living in the EU, but wants to sell and sell his product in the US. What would you say is the best way to set up a company and have a strategy?
Yeah, that’s a great question. We actually just signed an Australian e-commerce company with the agency and they basically have those similar questions. When we were going through the due diligence process with them, basically, what we advised them was that you know, if you guys are looking to set up in us, there are a couple of key reasons why you want to do that right.
One of them is that you probably have a high concentration of US customers, and because of that, you probably get a kick in the butt with foreign exchange rate fees that you get hit with your bank account, and another is that you’re probably trying to say hey man, these US e-commerce owners get great credit card benefits that I’m not getting because I only work in the EU and you know my credit card program sucks.
In the EU, it’s like how do I get these points? I see all these Instagram people are on first-class flights and hotels and lodging. How do I get some of that? I’m running just the same, you know, seven, eight-figure business at this point.
So because of those reasons a lot of eCommerce owners from outside the u.s are attracted to start us LLC. At this point and one of the key benefits and advantages that International has over said like me who’s into domestic in LA, is that they can choose any state they want to start their business, right. Like I’m physically located in California so I’m forced to start at California LLC. But don’t do that California sucks, we pay some of the highest fees with setting up a corporation in all the United States.
Like I can literally make no money this year for you and I have to pay $800 in a franchise fee to the state of California, I can make no money I still do that. so anyway, for international guys because you guys can choose any state to incorporate in the U.S, the three most recommended states to do that one is Wyoming, one in Nevada, and one in Delaware depending on what kind of business structure you’re trying to do, right.
And the reason why these are the top ones is that they provide benefits such as low fees and ease of setup. And sometimes also you have to be anonymous right, and that’s kind of that’s important to some of the business owners out there if they want to be not very. I guess that was sort of linked up to their business in the US. Because they’re also like it’s like, hey you know if things all go down to the gutter, how do I make sure I disassociate my business that’s the worst-case scenario?
But sometimes they do still be anonymous right so those three are the most recommended ones, especially in Wyoming and Nevada. They have no state income tax too, so you have nothing to worry about. If anything you just have the federal stock part to worry about.
The anonymity thing I know is quite important to drop shippers. I think Delaware might be the move for them right?
Yeah, so Delaware is a very well-known state to set up your corporations. It’s like most people know, I would say in all states. The reason is Delaware is just so business-friendly. It’s like the first day to be like, hey anyone, come to have a business in my state, and it’s best if you’re trying to set up what they call a C-corp.
Right, if you’re doing a c-corp, you want Delaware because that’s where all the businesses go. Right, all the Facebook, Amazon, they all have a Delaware C-corp along with maybe their in-state one right now. And the reason why you want to go sequel is that they just have the loosest rules over like board members over your like a statement organized or organization.
All those things, they just have to say, hey, like fail a couple of things and you’re done right, because no one wants to be burdened by paperwork. And some of the other states are like, yo you got to do all like 50 forms and all that stuff. I was like, yeah you can take care of this in one week. Just pay us your fees. You know, that’s dope!
What’s that, what’s the difference between like different structures so as for LC and. And also, what would you recommend for the different types of e-commerce or, for example, if you like online businesses, if you’re an agency owner, or if you run an e-commerce brand where you have an in house product, right before like the typical kind of drop shipping.
Yeah, that’s a great question. And when we get laid out. So I guess just to go from the foundation or build-up, is that when you start a business and you just go into it like without even registering as a company, right where you are known as is just you’re just a sole proprietorship, right, where you’re running the business yourself, and you’re representing the business 100% Right, and that’s fine. We’re just starting like you’re just trying to test the E-commerce niche right we’re just trying to test out the right ages, right into your like the slight dip your toe into it, but this is where I recommend that as soon as you scale at all, right at all.
I will recommend you do so Amelie, why, where LLC stands for limited liability company. And what that does for you is like the name suggests, it limits the liability in the business right so what happens here. So stage itself, some kind of battery. The battery leaks, right and it hurts a child, right. And what does that we’re gonna do well, they’re gonna sue your business. Right. And if you are just a sole proprietor, then what they’re gonna do is they’re gonna go after everything you write. And what that means is your personal assets like if you have a house, car, if you have any kind of asset, they’ll go after it all, if they can’t.
Now you don’t want that to happen to you, that’s a nightmare scenario. So what you want to do is you have an LLC set up, it limits the liability of right when you are going to have to pay if you get Sue when you go into bankruptcy so that they can only go after your business. Right. And they’re gonna be in business in which all your personal stuff is safe, right, you’re both, they can’t take the old guy’s business assets. So that’s why it’s most likely the setup, and because analysis just has the most simple, right, it has most likely the least paperwork to deal with. You don’t have to do a lot like the board directors things you’d like to see. I’ll go into that too.
So after LLC. The next step I would say, up from LLC is an escort. When an escort is, it’s basically a hybrid of an LLC in a C corp. A-C Corp you think of it as like the most visual business setup you can do for all the fortune 500 companies they have and add a certain monetary level, you may also want to just get involved into this, when you go over them. But, at the starting out you want to be out. Now one way to escort does that you wouldn’t get as an LLC as an S corp, has, has something very special, and that when you are a business owner, especially that you had to pay what they call it self employment tax, right, because you’re, you’re, you’re a business owner and US government finds all kinds of ways to tax the self-employment tax for itself. So, that is pretty big. And that’s on top of the federal and state and sales tax and all those things. Right.
And so what the Escort does is it kind of lets you avoid some of that self-employment tax right. We’re basically waiting for you to escort you get to say, you get to declare that you, yourself, is an employee of your company. And as an employee of your company, you can avoid half of the self-employment tax, so about 7.65%. Now here’s where it gets really complicated. You had to come up with a reasonable salary. Right, you have to say.
Hey, I’m doing this, that’s my company so I think I should take a salary of 70. Right. And let me give you examples of saying your company’s doing a million, say your margins around 20% Right, so your take-home average is 200,000. Now, normally all children of that net profit will be subject to that 15.3% of self-employment. Now you’re an escort.
Only half of that. So, only seven points, 7.65% of that is now subject to it. But beyond that, you can actually take a piece of that, 200,000, and say that’s your salary. Right.
So say you’re using your worth about 80,000 a year as an employee of your company. That means only that 80,000 Now is subject to self-employment tax, the rest 120,000, it’s just going to be dividends to you as a business. Right. So think about the impact, as your business grows. And you can invoice 7.65% of whatever your net profit is. But the PST is a little part where you might want to hire a professional, you know, a CPA wouldn’t count figure out for you is, you can’t just come up with a number on the light blue right because by doing the math right now you’re like okay, 80,000 is subject to the self-employment tax, why don’t I just make $1 Right. Why do I just say I’m only like. I only want to take a $1 salary and dress an elephant, it’s not that kind of setup, and that’s the thing.
Like, no, no one’s you only pay $1 You know as CEO of fortune 500 companies, right. So you have to come up with a reasonable market value of whatever skill you think you are, you’re contributing to your business, and that’s more comparable to other people at your level, doing the same thing. Yeah, so that’s why that number is key because the IRS will audit. If you come up with the wrong number. Right, so that’s why a lot of companies I’ve seen, especially the agency, were switching to an escort. Now a C Corp is the reason, C Corp is very complicated because of a lot of paperwork. Right. A lot of things you got to set up, and a lot of a lot heavier. So I would say to anyone starting, don’t go see. Go out. See COVID Say, you have to scale this, you know 789 figures.
And at this point, I should try to raise money right to go visit from a bigger point of legitimization or you’re trying to exit the business right when you want someone to value a business at a valuation. A sequel basically subject you to a lot of what they call like financial regulations, and you get to go do an audit of your business right, but because of that, you’re very legitimate anyone’s going in to, you know do due diligence like business one wanting to basically buy you out, are gonna be more trusting that you know you’re running a legitimate business because you are seeing. And that’s really the space you kind of want to go into a C Corp, is when you are thinking in those directions you have those goals in mind of a leader pacing your business, you know, getting acquired going through a merger or just trying to go make public money. Take a company public.
Those are the routes why you went to a sequel, so when you’re just starting, you know, if you’re, if you’re especially if you’re in the six-figure range right five-figure range. Go LLC. Once you do have a substantial amount of profit in your business, try to look into export is the right move for you. And then of course once you blow up, you need that sequence.
So, I have noticed that I would say, I’m sure you’re going to hire a lawyer with some kind of visor that would tell you hey you got it right because the state has LLC means that you know your numbers, what they call an audited, right you know worldwide. It means that you can literally go in, like say an accounting software that we’re keeping your balance, you can change whatever you want, right, say you know you just pump up your revenue by $50 and change your expenses a certain way. No one’s verifying those numbers. That’s the problem. I’m already in a C Corp. Those things are regulated right, they’re expecting you to go to an audit right and so third party so the company.
So I started my career as an auditor right at Ernst and Young. And that’s all we did. We go into these fortune 500 companies, and we’re like a third-party verifier where it’s like we’re telling anyone, any investors stockholders. Hey, you can trust these numbers, because we audit, you know, we tested these numbers correctly, right, doesn’t that you as an investor that gives you more trust and then your small business LLC, or you’re trying to invest it and you’re like, oh I’m supposed to trust that this is how much money you made, you know, how do I verify that you know, you don’t have a third party person saying, this is right, this is true, right.
Another question I got asked on Instagram and I think how to legally evade tax?
Evasion is like. Sorry I would I have a big reaction right evasion is like the word you don’t want to use, right, Evasion, in the sense, the very definition is you’re trying to escape, paying taxes, right, it does usually have a negative connotation to it, but what I didn’t want this person would really want to do is, like how to defer tax, or how to not pay us, to minimize their tax obligations, right, and that’s really the two strategies that I would say that they should do to widen, is how to minimize it’s really about education, and knowing the tax code, right, knowing every single tax deduction available to you, to your business, especially, understanding your specific business setup, whether it’s e-commerce witters agency what other types of online business, what’s available to you.
And then, of course, understanding the credits, like, let me give an example. During the COVID last year, right, when we’re helping our clients to give tax returns and all that stuff, like magma randomly just because you don’t have to save the world it was in, there were all these COVID credits available. And some of these are crazy, and it was so easy to, you know, be qualified with one of them is, literally, if you feel yourself being in danger of getting COVID, or if you feel like someone might give you COVID while you’re running a business.
This credit basically lets you take sick leave, and you’ll pay, they’ll pay you to take sick leave your business and pay your damn Max off 10 days, so you just get a credit for that, like I think it was like, they can be up to like $3,000 back for your business just because you like. I asked my client, hey, at any point of the year that you feel like doing dates like COVID pose a danger to, I guess, ADESA did you know I guess I’ve known him. That’s the answer I want. I don’t want you to say no if you say no I know I legally can’t take credit for you. If you feel like you’re in danger in any way you want to take a day off. Go for it.
The credit for this is like I, as a CPA, I asked the questions, but when a client provides answers okay feel like doing danger visualization takes six days off. Hey, I’m gonna find out credit for you and make sure you get your maximum taxes. So there are things like that, like, Hey, you don’t want to miss out on that. If you’re not educated not to be able to tax loss, digest, easy to eat $3,000 You’re not getting back. Right, so that’s one way.
The other is of course deferral of tax rights and there’s a lot of different ways you can look at these road taxes, as one thing is, the US has a lot of programs called retirement programs. Right, that’s built into the tax code, where basically you can take a chunk of your income. And basically, you can not pay that chunk now and pay it later and actually use it to fund your retirement account, right, one of the best-kept secrets of, what a business owner can take care of is what it called a solo 401k plan, a solo 401k is only available if you’re just a, like a single member, owner of your business right, it doesn’t work if you haven’t like multiple partners your business. Maybe it was a one of yours is a one-man show your business. Basically, it allows you to take around $56,000 of income and defer, and not pay taxes on it in the current year, and then just pay it later on when you.
When you take it out of retirement. So basically you get to save the money now, put it into a retirement account, let it, let it grow right, put in some time notifying an ETF whatever you like. And later on, when you actually retire, that’s when you, when you do get taxed on it, hopefully by then you will exit your business and your taxable rate is much lower. When you’re running a seven-figure business and it doesn’t matter to you so much for the time being. You get to take the $56,000 out of business profit and not have to pay tax on it which is incredible, right.
So I think what this person is looking for is solutions like that to help, you know, may not pay as much tax obligation this year.
if you’re just, you’re deferring your income during the year. Yeah, there was no, there are no taxes you’re paying now, right, until much later when you actually retire and they want to take that money.
Right, that’s the only point you would get taxed on it. Because one of the things when you choose all of the resources are specific to the US. I saw something where it’s like the Agatha poll where you would like to read the whole thing for 10 days. Yeah, that’s something you can do, for sure. I know what you mean is that the Airbnb loophole is what they call it right.
Another few questions I had were around, as to the best countries structure for tax, and also out what, when, like profit-wise, should you start thinking about maybe moving your business to another country or renouncing your citizenship.
Ah that’s a great question and it’s Sorry it’s a little long-winded because, like, country by country, this applies to So, so differently. So I’m just going to talk strictly on the US side so if anyone was us. I would definitely pay attention to this part. So if you are a US citizen right, you’re a little bit screwed. Just because in the US, they have hands. You know, like it. It literally does not matter where you’re located in the world. The US wants to tax you on it, and that’s what they call tax on your worldwide income.
Right now, what you should do a US person usually are jealous of other countries, is because they’re set up as what they call a territorial tax system, right, you could think of that as like Singapore, Hong Kong, those type of countries where they only tax you for the income that you make in that country within the borders of that country, right, so if you say your income. All right, Singapore, right, and you make a sale in the US, Singapore doesn’t care. Singapore only cares that you have a customer in Singapore. And that guy, pay you money.
That’s what you have to pay tax, crazy right us is saying, I don’t care. I don’t care where that, you know, you made that income get paid for, I don’t care where you’re located anywhere, are you going to be, you’re going to be a Sweden, you can be in Japan, you been any country money your business, as long as you’re a US citizen. We’re still taxes on that right now, a way to, I would say get away from that is, you have to go, and neither one is renouncing your citizenship, right from the US, or two, you have to go and buy a tax residence in another, another country, right, so there’s a lot of countries that can help you do that, I want to rattle off some cool things out with the legendary like Costa Rica.
Costa Rica, Dominican Republic, the United Arab Emirates, Panama, Malta, Switzerland, Cayman Islands. They all have different amounts on the Cayman Islands. I think you have to make a $250,000 real estate investment and that you’re getting sort of a long-term residency into that country, you know, so there are different ways you can set up your business outside of the US. And, and, and not be taxed heavily so what you would do is, you have to go through this complicated, I would say complicated you have to go through this business structure right where you kind of move your parent company into that country.
Establish long-term tax residency in those countries, and that you start, not having to pay the crazy US tax rates right, I saw those countries I named our low tax rate, like 10% Well, guess what, no tax rates at all.
I know the second part of your question is kind of like, you know what, what profit levels, right, would you go to one of these countries, I mean yeah, It obviously, the US is, is one of the higher tax rate countries in the world. So I would say anytime you have Start making above 500,000 in net profit is when you start thinking about, hey, do I need a more complicated tax structure entity wise, where, you know I don’t have the US as my main parent entity.
I want maybe I want that somewhere it was more tax-saving that was very commonly done right, what a lot of big corporations they have, they have like devil web of the corporation set up everywhere right you have one in Malta, they have one in Ireland, right, they should have one in September when the islands down there, and that’s the whole reason right, they, they usually tend to associate customers in those countries, and like to say Europe, they will leave the profit outside the US, right, they will leave the money outside of the US, and never bring it back into the US and dusty attack so that brings into a whole different setup which you have to go through.
I would definitely say you make sure that’s worth it like you make sure your business at a point where you’re constantly bringing in very large six-figure net profit before you start going down that path, because they’re bringing a lot of geographies, like structure and get set up to make sure that you are going down the right path and you are actually getting enough value right benefit of doing, of doing.
What is the most efficient way to take profits from your business, and kind of like reduce your tax burden?
Yeah, it’s a great question, and there’s a lot of strategies behind correctly allocating the money out of your business. To maximize tax efficiency. Right. And the number one way you kind of already mentioned, is leaving it in the business is, is one of the most tax-efficient ways. Right. So if you can find a way to reinvest that money, that’s great. If you. Number two is you can find a way to diversify. That’s great. What I mean by diversification is, you know you’re running in ages. Right, well you’re running e-commerce. Is there a way you can use that money to buy another business? That’s tax-free.
Is there a way you can use that money to buy real estate and become a landowner right to rent out properties we’re going to the Airbnb business? Is there a way you can put that money into stocks and bonds? Right. Is there a way you can diversify your money so that cash turns into essence, right, because I think that capital gain makes right have low gain rates is a lot lower than what you get tax on as an ordinary tax rate, right? So if you’re an LLC all that desktop use you just pass through as they call it and don’t ask you what’s your view, or your personal tax return, right and then you have to pay a very high tax rate up to 38% in the US right. But then, if you get by a smart way where you’re, you know, finding ways where you can find other vehicles, capital tax rate vehicles, right like stocks, bonds, you know, invest in paintings if you want some, I think some of them are even doing like crypto.
Right. You know, that is very popular right now for limits If you want to grab some Pokemon cards, you know like the whole NBA thing, you know, but But seriously, that is a strategy right now is, don’t take it out in cash, put it in other things, and then, like, I’m not sure if you heard for her when they call the one problem where real estate is, they’re like, hey, Alan, what happened to my, my need to sell this, you know, when I sell that real estate, Doesn’t that try to cash again, while the strategies for that the rich is not going to pay the tax they come up with things like. So one of the strategies that you can use is what they call kind exchange like kind of light kind exchange. Yes, a light kind of exchange is a very high network strategy, right, where you have a property and you know you don’t want to do what you want to do you want to sell it, right, but instead of just directly selling it with cash.
What you do is you put it into a marketplace facilitator system, and you exchange it with another similar property. So say you only want to make it. You can go and get a similar property value around the same amount as your property in New York. And instead of any cash shaking hands. You’re basically just, it’s like Pokemon Trading plays all your trading places with another guy, and there you go, you just have a new property, but guess what, no cash changing hands is like-kind right you’re changing the same kind of hobby with another kind, and that’s a great way to defer tax right and you can keep doing them right now, your property 10 years later, you’re like, not I’m going through yours, I want to go to California, you need to keep doing that.
So then eventually you know you’re really just to get get to get to a point where you’re going to like the estate tax, as state laws right we’re just passing it down to everyone’s inherited property, you got to figure out that part but, but for you, you’ve never had to pay tax on it ever on this a million-dollar, real estate investment that you put in, right.
But at that commies. Maybe it’s been generating income for the entire time. And that’s a whole another subject, you know there’s a lot of great real estate tax deductions to take and why real estate is so attractive is that there’s a lot of tax deductions. When you’re doing real estate, right, when a primary one may talk about depreciation, right, the hidden deduction when they call it, like the one that’s like not really easily explainable but all real properties into SSC depreciation for the wear and tear on a property right, so that’s what I would really suggest, if you really had to take money out of your, of your, of your business. You can, but the tax rates are gonna hit you.
Right. And then, of course, if you’re an international. I would say, find ways to avoid the foreign exchange rate which can be as much as three to 10%, more, more your profit going into that you can usually try to avoid that, right. So if you’re, if you have a high concentration of agency or EECOM customers in the US, definitely separate us LLC, so that you have like we Stripe account USB health setup, but then all your customers, when they hit that, and they will go to your US bank account, and that you never get hit with foreign exchange risk right, and then you just use that money to fund your expenses, right, that you never have to take it out to your home country. The dice never hit it on instinct. And really that’s, that’s a three to 10% Add, add to your net profit and.
Would that be an opportunity for them to boost their level?
Yeah, absolutely. I do want to mention this, that tax strategies, super important, right, it really can boost your profit by another 550 percent. Like, that’s, that’s just what we see commodity companies and all the data we have, but before you can get to that point where you need to establish with business, it’s actually clean bookkeeping, right, you got to know. We get calls from a lot of business owners that we asked them hey what’s yours, how much sales you have, I think around this. Okay, how much, how much, what is your operating expense, I think I have 10,000 for ads and 20,000 for payroll and they don’t know how much money you’re taking home. Like, I think I have enough you know I’m still running my business like I still understand numbers, and that’s a very dangerous game to play, they’re gonna eventually get into cash flow issues right if it’s trying to expand a business and they don’t know how much cash they have on-demand, they know how much cash they keep, keep in the business to keep it running, and how much they can safely withdraw for their personal enjoyment with just living expense right.
And what I’m trying to educate our clients on is unique clean bookkeeping, because you want to know your numbers, you want to know your margins. So you know that, are you actually running a healthy business right like this client explained to me. He doesn’t seem like it’s funny at all 5% No, there’s no way you get sustained during the year. What’s the point? What’s the point of working so hard, being an entrepreneur if you’re just gonna be taking home 5% Am I right, so this person I would say, do a thorough audit of your finances see where the leaks are, why is it that 85% is because it’s caused it goes through so it’s too high, it’s because there are certain winners and losers as part of a mix, that’s actually dragging him down. Is it because he’s not doing a great job running Facebook ads, his payroll is too high.
Where’s the least wise is at this point, right, is it too many fees is too much like transaction fees right. Is it because he’s dealing with foreign exchange rates? Right. What part of his business is actually dragging him down. These are the saddest parts before we go to the tax part. The tax is kind of like the icing on the cake. Have you run your business well day to day and understand your numbers, right, and then once you have clean bookkeeping. It makes your tax life a lot easier because that’s what you do right, you take the numbers.
When you clean bookkeeping and then you know how much tax, have you ever realized that the United States? Right. Yeah, so I would go on a tangent here but this thing really makes me irritated is like lotto date like, you know, they can come to the accountant, like April 10 Right in the US taxes through April, and be like, hey, figure out. Give me, Give me maximize taxes. That’s impossible. That’s impossible, right now because the only given five days, that’s already bad, but because all the tax planning takes place actually during the tax year, right, if you think about it, this past year April 15 2021 is when your taxes do well this year, pandemics May 17 the same concept, the tax year that you’re calling your tax for is January to December. 2020. Does that make sense? So really all the tax planning should have gone on during 2020
Right, so like when we went out with our client every month we do a consultation call with them, we give a tax recommendation report of saying, Hey, these are the things we’ve seen from doing your, your bookkeeping to doing your financials, these are the tax recommendations, we want we think you should, you should utilize, right, and then they start changing their behavior changing the way they run the business, make you more efficient, increase your margins, and that by the time we get to the tax that no time we’re like, hey, there’s no surprises, you’re gonna get a huge amount of tax savings, you’re doing all the right things during the tax year.
Right, so that’s also irritating when a client expects something, like when I get calls in April, I know, I know what kind of clients. They’ll be like, Oh man, here’s all my numbers. Here’s like last year when big magic actually doesn’t happen, there are some last-minute things we can do for you, but most of the stuff, if you didn’t do enough tax planning, during the year. That’s it. You know, I have a call with that client. I’m definitely gonna make the introduction for you just because, man, like, I want them to succeed from a numbers perspective. Yeah, I know the numbers, the guy knows five percent. I hope to help him by pulling in like, you know, burning the midnight oil to make that five cents, you know, I think that’s like including r&d and everything, but to be honest I don’t know.
So, back to the original point. Before going on this tangent, it’s really interesting that you brought up crypto as a way to reduce taxes because the only investment I have right now is, I bought lunch as a low-risk asset. Oh my god, like a Rolex, like it’s not to have that as an asset, and I have a. The rest of the reason I bought a watch was that I knew that’s slightly more. I didn’t want to just make you get to stabilize the craziness. I’m pretty sure all of that is. So, how can I make sure that I can utilize it from a business standpoint because with crypto it’s insanely hard to track, like, I don’t know if I take out 10k of paperwork? The government is like, what the hell because there’s no KYC or something like that.
How does everything like it’s a multi-faceted answer to this because we’re getting what you’re trying to allude to is like a way for the government to not know how much you’re taking in and out, my right kind of kindness but also it’s like, it’s really hard to track it as well? So for example if you invest in, like, really low market cap coins. Yeah, it can go up and down like crazy, right so it’s just a case of, let’s say, I don’t know. I play Dogecoin even riskier, maybe, I put in 1000 bucks. Some random coins I forgot the next two months. It goes to zero, why have another coin that taxes, it’s like the amount of cash coming in and out and the profit and losses are really crazy.
How would I go about cracking down on bookkeeping? Let’s say I make the loss. Would that be a tax?
Yeah, Great question. So, in the US, right. I think they’ve been trying, it’s still a wild wild west but not as much as a couple of years ago. Is that, like say you, I’m a US citizen and I have a Coinbase account right? Coinbase is now obligated to track all that goes in and out for you. Right. At the end of the year, I am supposed to send you a statement. Just give me a crazy long statement, and you know like a lot of trees, but it’s all gonna be there, like every single transaction you make. Now, I’m not sure how the UK will work, maybe, UK is not at that point, yeah, would they send you a, like a, just a bunch of taxable, like a tax statement one thing, yo this is audit in and out an audit profit and loss, made by the US they do that they would send your tax form. And so when I was trying to save crypto and real estate, they’re the same category that currently tack on to say that crypto is basically be treated as a capital gain or loss, as a capital, right.
So, what has vanished for someone who put money into crypto is that money that they gain, lose can all be netted out. Right so, say like you were saying you put 10,000 into a point and went to zero, okay that’s $10,000 capital loss, right, but then you have another coin that 10 Eggs he made 100,000 Well, back in that with that $10,000 capital. Does that make sense? So really you have 90,000 capital gain. At this point, and Asheville, that’s the part that’s subject to Rachel was capital to the capital tax rate, capital gains tax rate, which is a lot lower than your ordinary capital gain. I think the max is 20% Right and it goes from zero to 20%. While ordinary tax rate, what you get charged on your personal income tax, right, that goes from 10 to 38%.
So 80% variance difference there right so that’s why I still advantage, what you’re doing in crypto even though it’s not like a, like a recommendation that financial product, finance, recommend because of how volatile it is right, but hey, if you’re, you don’t know what you’re doing, and you can make it work for you. It can be a way to still diversify your earnings, still, you know not to take out cash directly from your business and yeah you can make a huge payday and then you get into right the right coin at the right time and projects, something like that right so because there is so many really good investment vehicles.
One of the things I got about two months ago at this point was, I don’t know if you’ve ever heard of Axies. I haven’t heard of it. It’s basically like a video game. You play, it’s kind of like you battle. You either do basically like to get rewarded SLP or axial access, and from that, you can actually create it, and use the currency in-game to kind of reinforce a couple of months ago I started, like, I have games, playing the game and grinding this for me, was the incentive, like these Pokemon. They’re called the axie, which basically is really expensive. So, people from third world countries can’t build them, Because each team costs maybe like 1.5, but they’re able to play the game that generates income. So that’s something that I invested in a while ago, and it’s like two to 3x, the initial investment. Nice. But I did it as I think currently it’s under me as a director because I was employed by another company who helps me manage all of this.
So like, how, how does that play out in terms of like attack strategy just because it’s, it sounds crazy right because I have, yeah, Caribbean people playing video games. I was like an investment. Okay, well, at the end of the day, it’s that that setups crazy by the way, but at the end of the day, I think, what matters is your, like, you as the investor holder, right, your gain and loss in the investment vehicle, right, so I don’t know how crazy it is opening the UK and how much the governing crypto right now maybe it’s like crazy, like a loser, and then the US. But if we’re talking about a US perspective, I would say this program of a US person was, what’s in it right at the end day it’s all about. I put in the $1,000, I now have a crypto axiom thing that’s worth $3,000 three times my money.