Honestly, a statement needs to be made on this.
Because it's sad.
I mean, people really got hurt.
And the SEC is meant to protect people.
Now, the protections weren't there.
The rules were unclear.
People got hurt.
And now you're giving them even more hurt by not being able to write this stuff off.
Welcome to BitBoy Crypto!
My name is Ben.
I'm getting ready to go to LA.
You guys are getting ready to watch an interview with my guy Lorenzo.
Shout-out to Lorenzo and his company for sponsoring this video.
But in this video, you're going to get some tips on how you can really make it in crypto.
Let's get it!
Alright, guys. I'm joined by Lorenzo here from Lorenzo Tax and also from Origins Group.
Do you want to tell everybody a little bit about yourself and what you do?
Yeah, for sure. So I'm a CPA.
I'm really focused in on the crypto space for some time now.
And that's where our firm is based on.
We're helping people in this crypto world navigate this really complicated space.
I mean, it's ever-changing.
And I feel like every other week, especially now, I mean,
you know, this is dated, you know, 3/15/23 right now,
so, I mean, by next week, we'll probably have something new to talk about.
And that's where we help people out with is getting their crypto taxes figured out,
actual tax compliance and preparation,
and then the area that's most exciting is really tax planning.
It's, okay, we've made this money. What do we do about it?
How do we structure this to be, you know, compliant but tax-efficient at the same time?
And then, honestly, it's just we're not--
we don't have some crazy large firm.
We have 15 people working for the firm as of now.
And so it's not a huge, huge firm,
but we do really quality work.
It's really meeting a lot of interesting people.
This space leads you in a lot of directions.
You know, we work with celebrities, sports athletes,
I mean, just regular everyday folk, but just interesting people.
You know, it's more than just a client.
You know, you could have a CPA for your whole entire life.
So it's really very much more relationship-based business,
which is a lot of fun.
Yeah, I definitely think, you know, networking and making contacts is something good to do.
But you've been in the space for a while now.
- Yeah. - And, you know, I go back quite a while myself.
And I remember, like, back in 2012, 2013, 2014, like, you know,
the whole point of crypto was not to pay taxes.
You know? So, like, nobody--
I think it was before 2014, like, everybody just kind of grandfathered in with what you did.
I know you've been doing taxes in crypto since 2016.
How have you seen the space change?
And how have you seen things get more serious when it comes to, you know, the tax world?
- I think it went through some runs, right? - Yeah.
In 2016, 2017, you had that little like ICO craze.
People were getting locked up for it.
- So it was actually kind of serious back then too. - Yeah.
But people were getting--
and that's why I actually got started in the space.
You know, I had a buddy that was working on a project, on an ICO project.
He had some friends that got in trouble.
And he had crypto offshore and offshore exchanges.
And he wanted to bring all this back
and, you know, he contacted numerous accounting firms,
big accounting firms, and no one knew what to do.
And so one of my friends calls me, "Lorenzo, I need you to learn this stuff.
I want to work with you. You've been doing my taxes."
But he then goes,
"And, honestly, trust me, if you listen to me and actually do this,
you're going to make a lot of money in this space. It's a big need."
And I'm happy I listened to him
because, ultimately, my experience has led to here, but it started there,
which then he introduced me to a bunch of his friends
because he was running a crypto group in New York, in Long Island.
And from there, a bunch of his friends were in the same situation,
so they became clients of mine.
So back then, which was interesting, in 2017, they came out with a rule
because it was hard to swap in between coins back then.
If you swap between Ethereum, Bitcoin or Litecoin,
it technically wasn't a taxable event pre-2017,
which is a really interesting rule.
People don't realize that. Like, back then,
it was just difficult to get in and out, so you had to swap
in order to get out of certain projects.
So they're not treating those as capital events.
But now is much different.
So back then was pretty serious because the rules weren't clear,
people were raising money, and they were getting in trouble for it.
Honestly, more so than today, I feel.
Well, the money was real big for the ICOs.
And I think one of the big differences between now and then
was all the rules were kind of-- they're very unclear.
And so Americans were allowed to invest in a lot of stuff
that Americans shouldn't have been allowed to invest in.
And I think when it comes to, you know, the SEC, for instance,
and a lot of people don't, a lot of people don't get this, you know,
is that the SEC,
they don't actually do their job.
But their job is actually to protect investors, right?
It's to protect investors and hold the people that launch projects and exchanges accountable.
Well, so if you are an American and you are allowed to invest in something
that really technically only foreign entities should have able to invest in,
like, you are fine.
You could have made that money. It's okay.
But a lot of the people that started this stuff and the exchanges, like, they were held liable,
and those were the people that were going to jail/prisoner over some of this stuff.
So, does that sound right to you?
One of the things that bothers me with the SEC that they've done,
- and I know you've had your quarrels with them-- - Oh, yeah.
they were truly insane, you know, but really, though,
if you really think,
now, the problems we're having is people lost a lot of money.
When it came to Celsius, FTX, even just rug pulls,
the little Instagram scams where everyone's asking you to give you money.
I mean, people fall for that stuff.
I've had horror stories.
And it's worse when you see older people.
Like older people that got hoaxed into these kinds of things.
I had a woman--
a family, they, you know, 70+, sold $3 million+ in investments,
real estate investments,
cashed out through a lot of it in crypto and got it all stolen.
Wow.
So it's like your life savings is gone.
And these protections aren't there, but now with how the IRS' codes work,
a lot of times you're not even able to write this stuff off.
And honestly, a statement needs to be made on this.
Because it's sad.
I mean, people really got hurt.
- And the SEC is meant to protect people. - Right.
Now, the protections weren't there.
The rules were unclear.
People got hurt.
And now you're giving them even more hurt by not being able to write this stuff off.
Even if you take the proper precautions of, you know, a police report
and filing it the right way. Like,
it is sad.
It's really sad.
And that's something I would love for them to come up and clarify a little bit more.
Yeah, I mean, I think definitely when it comes to, you know,
things like retail clawbacks, bankruptcy laws,
like, it's also backwards, the way it works.
Like, it's all geared to protect the corporations,
and the people that actually put all the money on the site,
which are the retail investors,
they're screwed.
Like, it will be lucky to get, you know, from what I'm hearing now,
it'd be lucky if we get 20%, you know,
because they want you to take a haircut on top of a haircut
on top of a lesser amount that they're valuing your assets at right now.
And it's just a mess, to be honest with you.
And I think that, you know, we're going to see I think a lot of these terms of services
have to get changed completely because you may not know about this,
but there's actually a law on the books right now, or a bill,
I think it was HR--
I'm going to butcher it.
I think it's HR 1453.
It has something to do with small business.
But it is actually--
they're looking at changing the clawback rules.
So what may happen with Celsius users
is you may get found that you have clawback exposure,
you've got to send money back to Celsius, which I would never send anyways.
But we may have to do that.
And then before you actually have to send it,
the laws are changed and they go back and they wipe out all the clawbacks.
So, do you think it's better to have a lot of these things regulated with laws?
Or do you think having, like, terms of services that are very clear and letting people choose
where they put their money?
Which one would you say is probably better?
I think having some regulation with laws,
make it clear.
Just make it defined.
Make it black and white.
Just you're on the left, you're on the right.
- It's either right or wrong. - Yeah.
And that's it, alright?
And there needs to be some differentiation from historical laws and what applies to crypto.
- And digital laws. - Yeah.
Like, it is what it is.
I know we can go and try and and use all the pre we've done that for now.
We've done that. We've used what we've done in the past
and tried to apply it to today's world.
And it clearly hasn't been working because people are still confused.
Granted, it keeps me in work.
It keeps me at a premium.
So I'm not complaining in a sense,
but I am complaining because it's for everyone
and I get these. I get it all the time.
People are just confused.
And they have so much anxiety over this whole thing.
Like, I'm much more of a money therapist
- than I am a CPA myself. - Yeah.
I sit there with people, and honestly they're like,
"Thank you. Thank you for helping me with this because it's been on my mind,
you know, for so long. And I just wanted to figure this out."
So one thing I want to point, and this is something that we do,
I don't know any other accounting firms doing this,
so, I mean, given out some, like, insight, knowledge here
for what people should do in handling a lot of these Celsius issues.
Like, this is a good, you know, alpha for just anyone listening.
If you have either a project, an exchange that went down,
you got rug pulled, you got money stolen, etc.,
you're unsure,
create a flowchart of all your wallets.
You know, you have your main centralized on and off-ramp,
let's say it's a Coinbase or Kraken, whatever,
then you get off to your MetaMask,
you get off to a BlockFi,
and you lost all your money there.
Create a flowchart of it.
If you have, let's just say, a quarter million dollars in BlockFi that you had there,
and now it's gone,
that was your basis in.
You bought in.
That was your money sent in.
Have that in the flowchart listed as money in, money came out,
this is what's net,
this is what was left over in there.
And BlockFi just came out with someone.
They're going to give some money back to people.
I mean, it's not a lot.
You're getting prices of $16,000 on Bitcoin.
They literally give you the bottom.
But if they're giving something back, then it's easy to calculate your loss
- because you know what you're getting back. - Right.
And that's what's the best thing, is getting that documentation.
Yeah, it's wild.
The amount of taxes that some people are going to have to pay on money
that they don't even have right now.
You know, it's just so funny,
like, Alex Mashinsky, always, like, reassuring, like,
"No, your money is still there."
Like, "It's not gone. Your money's not gone."
Like, "It's there."
It's like, yeah, it's even worse though because it's in purgatory.
- So, it's like technically-- - Clearly. You said it all. You're right.
- It's like purgatory. - Yeah.
Like, technically, you haven't lost it yet because it's technically still there.
But it's not there. You can't take it off.
So you don't have it.
And it's just a circular problem that you would think
the government would be able to step up and like,
see that, oh, wow, these old laws don't really seem to apply and work
when it comes to digital assets in today's modern technological world.
Like, maybe instead of having a security law from 1933,
maybe we should change it to be this millennium.
I don't know. Call me crazy.
Well, what-- let me ask you this.
What have you seen as some of the biggest problems that, you know--
- because I'm sure the channel gets questions. - Yeah.
I'm sure people come and ask you these questions.
What have you seen has been like the biggest hurdle?
The biggest hurdle is just people not knowing what is taxable and what's not taxable.
And I think that the rules have changed a little bit over the years.
You know, in general, they're the same,
but it scares people away from trading,
scares people away from--
you know, I know some people that have never even moved an asset
because they're scared of tax implications.
And I think just clearing up that fear
and having people understand what they can and cannot do
and what is and isn't taxable, you know?
And I don't know that.
You're a tax guy, so I'm sure you see a lot of this.
I don't know what your feelings are on this.
But for me, like, I hate seeing people make decisions based on fear.
- Like, I hate that. - Yeah.
And that drives me crazy. Like,
look.
If you have to pay taxes,
that's a good thing.
That means you made money.
- Like, you shouldn't-- - Sure.
you shouldn't not want to make profits because the government have to take some.
- That doesn't make sense. Like, - Yeah.
You're still making profits.
So, to me, for people to understand what is taxable, what's not taxable
and then the extension of that,
like, when they understand those rules,
now, they know how to operate and not operate out of fear.
I think those are the biggest, biggest hurdles I've seen.
There's two things that I see with clients right now
and why they're very happy paying me to help them out.
One, they lost a lot of money.
They don't know what to put down and be confident on that.
So if the IRS ever asks,
"Hey, I lost X,
but I don't know how to get to this because when I put it into the software,
it's telling me a number that I know was wrong,"
and I sign off on that.
I do the calculation if they're audited.
We have a--
I can directly represent the client so that they're happy.
Like, "Okay, I got this loss. It's on my books.
I know what I've got to do going forward to make money so now that it's cash-free--
it's like tax-free money now, profit."
Or, two, you made money,
and we're providing a good value to you because we saved you through good planning.
And they're happy to pay us because they've made the money.
And then they ask me, "What's it going to be next year?"
And it's, you know, there's difference.
There's compliance.
It's just every day, just let's file a return for you.
And then there's tax planning, where it's--
you made $2 million when we saved you a million bucks.
So, what is it worth for me?
It's not-- I'm not a--
you know, $1,000 return may save you a million bucks.
- Yeah. - So it's just--
if they're going to pay me money, it's because they're happy that they saved it.
And that's big.
To save people that kind of money.
I mean, if you went from supposedly owing 40% down to 20%,
it's all about zeros, right?
Percentages are percentages.
So if you have--
if you tack up more zeros, 20% is a big number.
Yeah, I think anything people can save is definitely, you know, advantageous.
And I know a lot of times, you get with the wrong tax people,
- and before you know it, you know. - It gets you to more problems than anything.
Absolutely. You know? I mean, you're looking to save money,
and then when you end up, like,
"Wait, I actually owe more now than I would have I would use H&R Block."
- Like, you know, that's a problem. - Yeah, tough.
Ben, let me tell you, I'm going through an audit right now.
I mean, I was telling you before.
This, this thing's $2 million, $3 million trades right here.
IRS agents pretty cool.
We're working together.
Once it's done right.
- But I've also spoken to some that are tough. - Yeah.
Man, they're like,
"This is the rules. I don't want to hear it."
Like, no negotiation kind of thing, just straight.
So it's kind of luck of the draw a little bit, but I mean, you've got to be ready for it.
And you're doing stuff with regulation.
I mean, what are you trying to propose here right now for it?
What can we expect?
Like, what's something that, you know, we could brace ourselves for at least trying to go for it?
Yeah, well, I mean, right now, what we've been told is that
the stablecoin bill has to be before anything else.
But what we're working on is a digital asset commission.
So it's--
you know, our original plan was supposed to go up under the CFTC
and it's going to be two CFTC commissioners,
two legal experts,
and then three high level crypto people,
crypto representatives,
so we would have a hand in choosing,
make sure they're right people,
- not the wrong people. - Yeah.
So the whole thing of what we're proposing is,
what we're going to continue to propose, probably in a different way next year,
but it's that we actually there's people in crypto that we get a seat to the table.
Like, crypto needs to be regulated by people that understand blockchain,
- people that understand crypto. - Yeah.
Not somebody that got voted in, you're a doctor.
Like you're a doctor, now, you're a senator.
You shouldn't be able to determine what's going on with technology.
Like, that's not your wheelhouse, you know?
Maybe medical technology if you're a doctor, but certainly not blockchain.
You don't understand it.
None of your staffers understand it.
So let's have the people who understand it make the rules.
And if you have people that don't understand it
that want to argue with those people, like, sure, send them in to argue,
but at the end of the day,
we're going to come up with some common sense stuff
on how to regulate crypto that is done in a non-threatening way to the entire space
where we still get the innovation.
You know, we don't want to stifle innovation.
We don't want to stop people from trying.
I mean, it's kind of the same thing with taxes, right?
Like, you don't want to kill people's motivation to make money,
you know, you want to kill people's motivation to build crypto companies.
And so that's what we're working on.
And, you know, obviously, the crypto tax laws would follow up under that commission.
All the power from the SEC will be gone in crypto.
And I think that's what everybody wants.
So that's what we're trying to do.
So like I said, we've been told our stablecoin bill-- or the stablecoin bill will come first,
it'll have to get passed first.
So it gives us a little longer of a timeframe to start working on this stuff.
Now, we're looking at maybe being able to skip over the CFTC,
maybe create an independent organization
that regulates crypto that's separate from SEC and the CFTC.
That would really be ideal.
I mean, that's also as part of the problem.
- You got two people here. - Yeah.
- Who's taking the lead? - Right.
It's like you're tiptoeing between each other.
It's like make a decision.
Who's going to be the voice of reason?
Who's going to be the person, the go-to person?
So it's confusing.
- It really is confusing. - Yeah.
But you know, I've got to say,
I find it to be almost pretty easy at this point
because there are rules.
There are guidelines.
Now, there is a little bit of gray and clear.
What I mean by gray is like gray, it's like, okay, we know the rules, but is this right?
Like, you know, for example, an NFT project that lost all its money
but received, you know, let's say it received a couple million bucks on a drop,
and now their Ethereum dropped all the way to nothing
because they started at the peak. I mean,
- what do they do? - Yeah.
Right? When you have--
because income is you earned it
and then capital gains losses are two different things.
Right? So if you talk to a black and white accountant
that's going to say, like, "This is a rule. This is that,"
you can't offset a capital gain or loss with income, right?
It just doesn't offset it.
They're two different types of gain.
So that's a question that I would love to get very good clarity on
because so many people ask it
because an NFT project wants to be compliant.
They want to be helpful, but if they pay the taxes,
they're going to wipe out their whole treasury!
- That's it. End of business. Closed doors. - Yeah. What's the point?
Okay. So, why should we even be in business?
So it's either we're going to close the doors and call it a day,
or give us a shot.
Like, let us try this.
So I guess what, you know, that's kind of like what you were saying before.
It's like try to keep the businesses here that are working.
But these are the types of questions that we need answers for.
- A lot of CPAs don't understand that. - Yeah.
What I found is like hiring someone,
because, you know, we're growing, we want to hire people,
I almost rather find someone who knows blockchain, knows crypto,
and then teach them accounting
versus an accountant that knows accounting, and then I've got to teach them crypto.
Yeah, I think you're probably dead on there.
Well, Lorenzo, we've got to wrap it up for this interview.
Can you just tell everybody where they can find you at?
Yeah, lorenzotax.com.
We have--
then we have originsgroup.com, which is our private accounting firm,
which is more geared towards high net worth individuals and whatnot,
but we're actually offering--
you know, we did this with you guys.
Still offers a little bit consultation for people's work,
talk to someone on the team if you have any questions.
So if you go on the website, you can actually schedule a call
and have a free 15-minute conversation with someone from the team.
We also have a crypto tax course.
So if you're like a DIY type of person,
maybe you want to try to keep your budget in a certain place,
we have a crypto tax course on how to do it on your own,
which is pretty cool because you get the value of the firm in, you know, a course,
and we're constantly updating that as well with, you know, things that are changing
and new ways to calculate,
new ways to do types of transactions and how to deal with them.
You know, so that's a pretty cool opportunity if you want to get involved with that.
Awesome. We will make sure we get link down below for people to check that out.
And, Lorenzo, we will catch you down the road.
I'm boots on the ground, baby.
We've got to want to get on this regulation growth side.
- So I'll help out in any way that I can. - Yeah.
- Feel free to-- - Awesome. We'll let you know.
- Awesome, Ben. Thanks so much. - Alright. Thanks. Bye.