🎙 Passive Cash Flow Podcast EP.190 | Stop IRS Audits: The Truth About Crypto Tax Software
In this episode of the Passive Cash Flow Podcast, crypto tax expert Janna Scott explains how her research into the inaccuracies of mainstream crypto tax software led her to develop a more precise tool that successfully halted IRS audits. If you enjoy this content, Like and Subscribe for more!
Janna Scott is the founder and visionary behind DeFi Tax, a groundbreaking platform designed to bring clarity and compliance to the complex world of cryptocurrency tax reporting. With a career rooted in precision and innovation, Janna’s journey began in December 2021 when her accounting clients raised concerns about the accuracy and reliability of existing crypto tax solutions. Driven by her commitment to excellence, she embarked on a rigorous two-year research initiative, collaborating with leading institutions like the SEC, IRS, and prominent universities to uncover and address gaps in crypto tax compliance.
Janna’s work has set a new standard in the industry, earning recognition from regulatory bodies and academic experts alike. DeFi Tax is now celebrated for its audit-ready reporting, direct blockchain data integration, and user-centric approach. By combining her expertise with a deep understanding of the evolving financial landscape, Janna has made it her mission to empower individuals, businesses, and institutions to navigate cryptocurrency taxes confidently. Her dedication to precision, transparency, and client protection continues to shape the future of crypto tax compliance.
Contact Janna Scott:
Website: https://defitax.us/
Facebook: https://www.facebook.com/defitax25/
LinkedIn: https://www.linkedin.com/company/defitax/
Instagram: https://www.instagram.com/defitax
X: https://x.com/defitax_us
Reddit: https://www.reddit.com/user/DefiTax_us/
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🧠 Topics Covered:
00:00 — Introduction to Crypto Tax Realities and the IRS
03:46 — The Discovery of Inaccurate Crypto Tax Software
09:01 — Presenting Research to the SEC and IRS
13:12 — The Risks of Future Audits and Building a Solution
18:54 — Why Current Tax Products Fail and How DeFi Tax is Different
24:31 — Crypto vs. Real Estate Tax Strategies
29:42 — Compliance, Tax Evasion Risks, and Final Resources
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⚠️ Disclaimer:
This is not a solicitation for funds, tax advice, or legal advice. This is not intended to be, and must not be construed to be in any form or manner a solicitation of investment funds or a securities offering. Peoples Capital Group LLC is NOT a United States Securities Dealer or Broker nor U. S. Investment Adviser is a Consultant/service provider and makes no warranties or representations as to the listener or viewer. All due diligence is the responsibility of the investor.
Transcript:
00:00:00:03 – 00:00:19:17
Janna Scott
The IRS knows who you are. They know that you bought crypto. They can see your AGI. They know how much money you’ve made. That’s how they’re going to establish who to audit. And they’re going to go down the list. While we were meeting with the IRS, we also asked them, how do you do your audits? Turns out the process they had was completely inaccurate.
00:00:19:20 – 00:00:25:18
Janna Scott
So our research actually stopped our audits.
00:00:25:20 – 00:00:39:20
Aaron Fragnito
All right, ladies and gentlemen, welcome back to the Passive Cash Flow podcast. I’m your host, Aaron Frank Nieto. We have an interesting guest today, a crypto tax expert, Joanna Scott. How are we doing today?
00:00:39:21 – 00:00:44:15
Janna Scott
I’m good. Exhausted. Taxes are taxes are no fun sometimes.
00:00:44:17 – 00:01:02:19
Aaron Fragnito
Oh, I am so glad I don’t work in taxes. I hire people like yourself who are smarter than me when it comes to tax strategy and tax filing and, pay the money to do something I don’t enjoy or fully understand. So that’s, and that’s what a good entrepreneur does. So, glad to have you on the show here.
00:01:02:19 – 00:01:19:17
Aaron Fragnito
You know, I wanted to have you on the Passive Cash Flow podcast because I was like, okay, I know a little bit about crypto enough to have lost some money there. Now we’ve made a little money because crypto is up. We actually own a Bitcoin here, People’s Capital Group. But I was like, what? What’s up with the taxes on crypto?
00:01:19:17 – 00:01:38:17
Aaron Fragnito
I was like, I don’t understand that at all. So I have a lot of questions for you myself. And by the way, to our listeners and our viewers, if you’re enjoying our content here on the Passive Cash Flow podcast, be sure to hit that subscribe button or that like button and share with a friend. If you’re getting value out of our episodes, we’ve come out with a new episode every two weeks here.
00:01:38:22 – 00:01:54:16
Aaron Fragnito
We’re on YouTube and all major podcast platforms. But yeah, let’s get into it here. How did you, get into this whole crypto tax business? That’s a pretty crazy strategy and business monitor. So how did you get started in this on accident?
00:01:54:18 – 00:02:14:01
Janna Scott
Yeah, I, I’m very stubborn, and I like to know a little bit of everything. And. Well, I like to know a lot of everything. So I’ve been in public accounting for over a decade, and I worked for the government. And after I left the government doing, Covid, I decided, listen, I’m going to do I’m going to work in public accounting.
00:02:14:01 – 00:02:34:20
Janna Scott
I’m going to help people instead of being on the other side. And, you know, punishing people. So while working with, with my clients. And it’s funny because I had crypto too. And believe it or not, it didn’t even occur to me at crypto taxes. And, I mean, I didn’t have enough to make a dent in anything, just played around like a lot of people.
00:02:34:22 – 00:02:55:18
Janna Scott
But one of my clients, did it pretty regularly, and he reached out and said, how do I report my crypto in 21? And I said, I have an idea. So I went down a rabbit hole. And like I said, I had crypto, I had this little small, you know, Coinbase account with, you know, that coin, 300 transactions, which just nothing.
00:02:55:20 – 00:03:13:11
Janna Scott
And I went down the rabbit hole and I looked up all the different products that are on the market. There are about 14 main ones. There’s a bunch of little ones, but 14 main ones. So I went and I said, you know what, let me see what they’re saying now. I went to a couple and I imported the data through API Oauth2, right.
00:03:13:11 – 00:03:46:02
Janna Scott
CSV, whatever they allowed back in the day. And to my surprise, on such a small set of data that really just constituted buying and selling and trading, the two products I started with gave me different outcomes and not different outcomes on the capital gain and income side. Like, you know, a couple dollars off here and there. No, actually, the variances that I discovered when connecting it to the other 12 products were between 35 to 120% variances.
00:03:46:04 – 00:04:11:11
Janna Scott
I mean, an example is and everybody in crypto knows that, you know, per year, 50 to 100 transactions is nothing, especially if you just have one exchange. You know, I didn’t have multiple ones. I just had one. So this product should have had an easy time, especially because these products are actually, partially owned by that exchange that I utilize.
00:04:11:13 – 00:04:36:21
Janna Scott
So they should be able to import the data easily and categorize it easily, easily, and have no problem. Yeah, but one of the products told me I have a gain of 20 $902,990 on like 78 transactions. The other product on the same set of data, same import, no changes. Everything told me I have a loss of $351. Well, and again it’s it’s a no transactions at all.
00:04:36:22 – 00:05:13:11
Janna Scott
Now imagine you’re regular trader that has thousands every year or more right. And multiple exchanges. So I was a little concerned because I was like this is not okay. How especially in 21? 21 was also the year where that little box on our tax return appeared that said, did you buy or sell crypto this year? That was also the year where the IRS received permission from the Justice Department to send out 1000 John Doe summonses, meaning they were they were allowed to reach out to privately owned businesses such like that.
00:05:13:13 – 00:05:36:20
Janna Scott
Any exchange, anything KYC, because none of the crypto was regulated by any, any government agency. So they’re technically privately held. They were not regulated. They were allowed to reach out to them, and say, you need to give us the data of U.S taxpayers that have touched crypto. So they have they just a month and a half ago received the third round back of responses.
00:05:36:22 – 00:06:09:00
Janna Scott
So they’re up to date on on what U.S. citizen what U.S natural what U.S taxpayer has touched crypto. So that’s what they got. They started their audits on they because they have a full list. And I know people think, oh well I use decentralized, I use MetaMask, I use ledger, I lose struggle, I use hardware, whatever it is doesn’t matter because at one point or another, unless you are the 1% that only purchases for peer peer to peer purchasing, you had to use something with the KYC.
00:06:09:02 – 00:06:43:16
Janna Scott
Even on on MetaMask, if you use Moonpie to sell or buy, there’s a KYC attached because your identity has to be verified for bank pulling it from a bank, etc. so your data is out there. They know they don’t know how much you have. They don’t know where you hold it. They know you had it. And and so, you know, I used the last 20, you know, the last quarter of 21 and most of 20, 22 to really dive deep into why are these products so inaccurate, what is the right way to do it?
00:06:43:18 – 00:07:09:23
Janna Scott
And I picked apart every single product I had. The details as to what makes them wrong, which is algorithms. On one hand, it’s algorithms. It’s, the way they pull the data, it’s the way they organize the data. And it’s it’s just they’re not in certain instances. And then a lot of them have features and we can go into that later that will automatically disqualified from being used in an audit and make it useless.
00:07:10:00 – 00:07:31:07
Janna Scott
Okay. Now in in a towards the end of 22, beginning of 23, I had everything figured out. I knew what each of the products were doing wrong. I knew what some of the exchanges were doing wrong, were doing calculations on their own. I even audited the product that is basically the accounting, bookkeeping, crypto firm tax form for the exchanges.
00:07:31:09 – 00:07:50:23
Janna Scott
Wow. And and we paid all of them. We paid their fees, we gave them data and we reviewed it all. We also audited 53 of the so-called crypto tax experts out there. You can find law firms and accounting firms alike gave them 2 or $3000 for them to turn around, take our data and put it into $100 software and give it back to us.
00:07:50:24 – 00:08:11:07
Janna Scott
Right. And pocket, you know, 20. So we did our homework now in 22, 23, I, I didn’t want to do anything with it because I just wanted it fixed because I can anybody who has any common sense will see what the outcome and the damages will be. The IRS knows who you are. They know that you bought crypto.
00:08:11:09 – 00:08:39:18
Janna Scott
They can see your AGI, they know how much money you’ve made. They can kind of estimate, oh, they probably put in a lot. That’s how they’re going to, you know, establish who to audit. And they’re going to go down the list. Now it is your responsibility to prove them wrong okay. Your responsibility to say you’re wrong. I’m right now, as I said, these products have features that will immediately disqualified from an audit.
00:08:39:18 – 00:09:01:07
Janna Scott
Plus they’ll give you a different answer. So how are you going to prove that? That they’re wrong and you know they’re right or wrong, whatever it is now. So what we decided to do is I, we reached out to all these products, including exchanges, and said, hey, we have this research. I want to give it to you for free so you can fix your product.
00:09:01:13 – 00:09:29:06
Janna Scott
We didn’t ask for anything. I said, just take it. Fix it, because it’s detrimental to your users. They all said no things. One scheduled a meeting with us with their CEO and tax attorney, and then they tried to sell us their product. So that wasn’t as well. Now. That’s when also the SEC got wind of it. So we met with the SEC and late April, beginning of May of 23, and we presented our findings and their response was, oh crap.
00:09:29:08 – 00:09:52:05
Janna Scott
It’s like, yeah, pretty much we met with the attorneys, so they sent us straight to over to the IRS and congressional committees. So in 23, we met with the IRS and congressional committees. While we were meeting with the IRS. We also asked them, how do you do your audits? Turns out the process they had was completely inaccurate. So our research actually stopped our audits.
00:09:52:07 – 00:10:11:14
Janna Scott
Wow. Oh my gosh. And it’s still it’s still halted them. Our research at this point has been peer reviewed by multiple universities, universities that work with the IRS that used our research, and 24 again, when the IRS tried to start the audits up again, they said, you can’t because you’re still not doing it right. Look at it.
00:10:11:16 – 00:10:41:20
Janna Scott
So everything has been peer reviewed. My findings, my research, everything that’s been published in tax notes. And it’s been with the congressional committees. So late 23, though, because I pull reports, I got into the habit of pulling reports from these, these products, every month or quarterly, depending on my timeline. In December and September of 23, I pulled my quarterly report, to check if they made any changes.
00:10:41:20 – 00:11:00:06
Janna Scott
And they did. They tried to fix it. They tried to fix what they were doing wrong. And this is the problem. Now imagine the IRS audits you and they say, and you say, listen, I tried my best. I use these products. Yes, it’s they’re inaccurate, but I tried my best. There was no other way for me to do it.
00:11:00:08 – 00:11:30:15
Janna Scott
And they say, okay, great. Show us the report. We’re going to confirm that you tried that. You use that report and, you know, maybe they’ll have a safe harbor for penalty relief, interest relief, whatever it is, if it was so, all these products. Now, though, this is where the issue comes in. If you use any of those products for 22, 21, 2020 or prior to prior to September of 23, those numbers that you used in those years will not match anymore.
00:11:30:17 – 00:11:55:01
Janna Scott
There’s now a 35 to 40% variance of what they originally or originally reported for you, right? You used on your returns. How do you justify that? We searched, we assigned up all the news letters. None of them. None of them went and said, and it would have been easy. Hey, the IRS made changes to the code. We corrected it.
00:11:55:03 – 00:12:20:04
Janna Scott
Now, you might have different outcomes from previous reports. You might want to fix this. It would have been an easy an easy statement, right? Yeah. Nobody did it. Nobody want the users. These products are multibillion dollar products, right. But these products are built by coders. The the core algorithm is wrong because it wasn’t built by people who understand the nuances and listen.
00:12:20:04 – 00:12:47:02
Janna Scott
It took me nine months to get the calculations right. You know, these products are not going to go back and admit that everything from the beginning is wrong, but the core algorithm and the core calculations have to be changed because they make billions of dollars off of people using it. So what’s the fix? Right? And when nobody cared, when nobody tried to fix it or they fix it without, you know, I’m still not right.
00:12:47:04 – 00:13:12:09
Janna Scott
I said, you know what? I’m just going to build my own. Okay? You know, I regret doing that because it’s been exhausting. But we’re up and running. We’re live, you know, and and we will handle audits internally. We are not we’re not going to do what what happened with with, the ERC credits where companies came out of the woodworks, made all these promises, and now the government comes back and says, no, no, we were wrong.
00:13:12:09 – 00:13:34:07
Janna Scott
You need to pay us back. Post reports that those third party companies filed were, you know, fraudulent or inaccurate, but they’re, they’re they’re gone with a 25%. Right, right. So because you can imagine if, let’s say 53 million Americans get audit letters, even just 15 million, the companies that will come out of the woodwork screaming, we’re a crypto experts.
00:13:34:07 – 00:14:02:17
Janna Scott
We can help you, defend you. No, not a no you can’t. Can you sit in front of the IRS and manually calculate and prove them wrong? You can’t, I can’t, and they know I can because we’ve had multiple conversations. We received a request for information. We received a request for proposal from them. They know, you know, the universities have backed us ultimately up and and these people that come out of the woodwork, they’re just going to exploit the people that are desperate, that don’t know how to handle it.
00:14:02:19 – 00:14:20:19
Janna Scott
You know, and and that’s the whole goal of of the software. I never wanted to build it. I tried to give it away for free for people to say I did. I have and listen everything I say, I can back up. I have the emails, I have the I have the documentation. I have everything that backs up the universities.
00:14:20:19 – 00:14:41:17
Janna Scott
I’m more than happy to be consultants and and and repeat. And I repeat what I, what I’m saying right now, you know, it was just about protecting people because I can see, you know, like we talked about a little bit before the recording conservation easements and all these strategies, you know, I, I, I can read the fine print.
00:14:41:20 – 00:15:04:22
Janna Scott
I’ve seen it. I work for the government. I’ve read enough, you know, precedent court cases. I’ve seen enough that I can read between the lines and I know what to look for. And I see people away from things that I’ve seen will fall apart and what the outcome will be. And so far I have been right. And my clients are happy that I’ve been right, because I steer them away from things that could potentially ruin them.
00:15:04:24 – 00:15:27:19
Janna Scott
And as the same with this, it’s like we saw what happened with the ERC credits. We could also see what happens now if the IRS gets ready for the audits and letters are going out again, you know, there’s a minimum of 15 million active traders in this country. But there’s a there’s a maximum of 53 million people who have touched crypto in this country.
00:15:27:21 – 00:15:29:05
Aaron Fragnito
Wow.
00:15:29:07 – 00:15:44:19
Janna Scott
So if you and then I’m not saying that have a lot, you know, they might like, you know, they receive something here and there. They they dabbled like I did, you know. But that is they, they again, the government doesn’t know how much. They just know you have it.
00:15:44:21 – 00:16:07:19
Aaron Fragnito
At People’s Capital Group, we help you invest in real estate, build your wealth by owning professionally managed apartment buildings in the northern new Jersey market. We want to show you how owning real estate is attainable, even for the busy professionals that don’t have the time or experience investing in real estate. Now, we only work with select people who are serious about building wealth.
00:16:07:23 – 00:16:30:13
Aaron Fragnito
So find out if you qualify at People’s Capital group.com. That’s that’s a pretty wild story. So so this tool you’ve created to properly identify your tax burden from buying and selling crypto through the year, is it is it ready or are you still working on it? What what’s the, Because this is sounds like the ultimate solution.
00:16:30:15 – 00:16:38:15
Aaron Fragnito
I mean, you even stumped the IRS with this. You know, I’m surprised they didn’t like, like, you see, in the movies. Like, they hire you, like, can we hire you? You know, somewhere.
00:16:38:17 – 00:16:49:05
Janna Scott
They first have to admit, they first have to admit that they did something wrong. Because, believe it or not, and in they actually contacted with two of the products before.
00:16:49:07 – 00:16:50:02
Aaron Fragnito
Right?
00:16:50:04 – 00:17:10:09
Janna Scott
They had contracts and spent money on them and two of them that are the worst. I mean, but those are the two worst filing. That’s and they already spent money on it. So first they would have to admit that they’re wrong. And I’m not sure that they want to. Right. Yeah. Which I don’t care. Oh my God I’m not.
00:17:10:09 – 00:17:26:14
Janna Scott
You know I wouldn’t even be on a podcast with you. I just wanted to fix it. I don’t even want to do podcasts. My, my my marketing team makes me do that. There’s nothing against you. I just, you know, I’m just I just get very much, like, worked up because it’s been such a long road and so nothing has been fixed.
00:17:26:16 – 00:17:46:23
Janna Scott
Yeah. And you know, ultimately my, my product is done. It’s done. It’s ready for for people to sign up. And so the individual version is done and you can recalculate. And we have a lack of features. And what I mean by that is let me give you an example. Let’s say you write a $10,000 check, okay. Comes out of your account.
00:17:46:23 – 00:18:03:24
Janna Scott
It’s gone. Can’t do anything about it right away or not. Can cancel it after that. That. That’s it. Now you go to your bank and you say, or you sign in to your online banking and you say you owe like that $10,000 check. I’m going to edit this transaction. I’m going to remove some zeros and let’s change it from US dollar to yen.
00:18:04:05 – 00:18:25:11
Janna Scott
So now instead of a $10,000 check I wrote 100 $100 yen. Shattenkirk. Right. Ludicrous, right? Yeah. Absolutely. No okay. Can’t do that. These products. But one thing we know about the blockchain is whatever happens on the blockchain stays on the blockchain. You cannot fix it. If you send something to a wrong address you back. So sad it’s not coming back to you.
00:18:25:13 – 00:18:52:24
Janna Scott
All right. Now these products while they import directly from the blockchain, which means the data they’re getting is 100% set in stone. They allow you to do exactly what I just said, log in and edit it. And not just they they let you change it from Bitcoin to Ethereum. They let you add fees to it. They let you change the basis they let you change the every single aspect about that transaction, even a date and time timestamp.
00:18:53:01 – 00:18:54:05
Janna Scott
Why would they.
00:18:54:07 – 00:18:54:21
Aaron Fragnito
Do that.
00:18:54:21 – 00:19:19:00
Janna Scott
Twice? I’ll tell you why. Because they haven’t multiple things. It’s built by coders. They haven’t figured out how to properly categorize the transactions. That’s why they let you categorize them yourself. They haven’t figured out how to properly track basis. We have took me a long time, but we have. They haven’t figured out, for example, validator accounts. They haven’t figured out how to do that.
00:19:19:03 – 00:19:48:13
Janna Scott
We are the only product that that can catch, validate our accounts and actually removes burn fees, etc. but that’s a whole nother story. Now. What the steps we took to get this right is we have literally set up an account with every exchange that we could like. I mean, 90% of the exchanges and wallets on the market. We have set up accounts and ran test transactions through it.
00:19:48:15 – 00:20:15:22
Janna Scott
We have traded, we have staked, we have sold, we have bought, we have transferred another lot, you know, maybe ten transactions per maybe, you know, $5 here, $10 there. But we have done it because that way when we pulled the data, we knew exactly how to categorize it and to create rules for this. So we don’t have to guess, because every single API comes back with a different wording, different details.
00:20:15:24 – 00:20:40:11
Janna Scott
So you have to be able to do it. But that’s what we did. We actually went the extra mile to go and create all of these test transactions. So we can actually tell you what it is, and we don’t leave it up to, you know, you and possibly because if you if we let you in, you could possibly, commit tax tax fraud if you do something wrong, you know, and, and the IRS will not allow those products.
00:20:40:11 – 00:20:52:14
Janna Scott
They iOS doesn’t allow you to use QuickBooks in an audit, which is the exact same thing. You can manipulate data, you can change entries, you can make adjustments, right? Why would they allow these products that.
00:20:52:19 – 00:21:00:09
Aaron Fragnito
Way you can’t use QuickBooks in an audit like we use QuickBooks for all of our accounting needs and bookkeeping needs.
00:21:00:12 – 00:21:06:03
Janna Scott
So the IRS will ask for, actual receipts and they will ask for bank statements.
00:21:06:03 – 00:21:07:15
Aaron Fragnito
Got it? Got it. Okay, okay.
00:21:07:15 – 00:21:14:05
Janna Scott
So you can use it. You can use it for your bookkeeping. You just if you get audited you can say here’s the QuickBooks.
00:21:14:07 – 00:21:21:16
Aaron Fragnito
Yeah sure. Okay. Yeah. You got it back with the actual license. Yeah. We have the receipts and the bank statements. Yeah, yeah, yeah.
00:21:21:18 – 00:21:30:14
Janna Scott
So you can you just can’t utilize it in an audit. Like to say here’s my profit and loss right. Or here Smith because yeah. Well it kind of just, you know.
00:21:30:15 – 00:21:34:09
Aaron Fragnito
Right. What kind of defines an audit is like show me the invoice. Show me the receipt.
00:21:34:09 – 00:22:03:09
Janna Scott
Yeah, exactly. Show me the bank statement, which can’t be manipulated. Right. The IRS has a program where they run bank statements for to see if they were altered, you know. Yeah, there’s there’s so so that’s the same thing with these products. It’s like and so how do you go and prove the IRS wrong. If you can use any of those products because trust me I have done a manual calculation of 20,000 transaction transactions across multiple different exchanges and wallets.
00:22:03:11 – 00:22:30:24
Janna Scott
And it’s taken me almost ten days, almost two weeks depending on the, on the you know, nuances there to do it manually. Right. But I can but I can and I did because I needed to verify that all algorithms were right, you know. So I actually did the manual calculations in order to show that our, our software comes up with the exact same outcome.
00:22:31:01 – 00:22:53:22
Janna Scott
And I’ve done it over and over and over again. You know, it’s I, I’ve actually put work in because and this is the reason I know why it is, you can’t really say it’s the developers fault. It’s, it’s the laziness of the people who wanted to build these products. Yeah. Because when we try to work with developers, it took us a while to find really good developers who actually listen because a lot of them said, oh, it’s easy.
00:22:53:22 – 00:23:15:19
Janna Scott
It’s just, you know, algorithms is this I’m not. No, it’s not. Crypto has a lot of nuances. Accounting has a lot of nuances and access a lot of nuances. And you have to put them all together. Yeah, sure. Not as simple. And people, you know, they they see it very simple, straightforward. Now we have amazing developers who listen and to understand it as well.
00:23:15:21 – 00:23:38:03
Janna Scott
And so we managed to build something. The second thing that is almost ready is the bookkeeping version for crypto. So businesses can actually have their crypto profit and loss. They gain their you know, they can categorize it, etc.. And then we have an accountant version. So where your accountant or financial advisor, you can be invited, they can be invited, you know, back and forth.
00:23:38:03 – 00:23:49:16
Janna Scott
They can see what’s going on with you with your overall portfolio too. So you don’t need to let them into every single one of your while. As an as you can connect them all and they can actually see what’s going on there.
00:23:49:18 – 00:24:10:07
Aaron Fragnito
Okay. All right. Let’s just take a step back here. This is very in-depth. Interesting stuff. I, I’m so I’m following a story. So is this more for like people that are like really trading a lot of crypto because I feel like there’s a lot of people out there like me and you, perhaps that like, you know, I’ll dabble like I have a Coinbase account.
00:24:10:13 – 00:24:29:10
Aaron Fragnito
My famous story, by the way, is I was in Voyager and I had no idea what the risks I was taking. Not only did I buy a bunch of crypto at the height of the market, but beyond that, then Voyager filed bankruptcy. So, I got like pennies on the dollar for my investment. It was very frustrating experience of crypto.
00:24:29:10 – 00:24:29:19
Aaron Fragnito
I had some.
00:24:29:19 – 00:24:30:23
Janna Scott
Clients in that too.
00:24:31:00 – 00:24:48:18
Aaron Fragnito
And I totally missed the upswing as well. Just a big disaster. So I do like crypto. Like I said, People’s Capital Group does. We do want a Bitcoin. We bought it at 30, so we’re doing pretty well on our crypto. And but we always joke we should have just sold our real estate in Bitcoin years ago. But but you know.
00:24:48:20 – 00:24:59:06
Janna Scott
I mean looking back it’s like yeah. You know in 2017 when I bought crypto I’m like, why did I not keep it? Why did I not keep that $3,000 bitcoin.
00:24:59:08 – 00:25:17:17
Aaron Fragnito
Yeah exactly. Right now now where would you be. So that you know, so the bottom line is, you know, a lot of people are just kind of dabbling in crypto. I mean, I probably make like 1 or 2 trades a year. I, I don’t see my crypto portfolio is just, buying set. I’m not really going to be like trading actively.
00:25:17:23 – 00:25:30:24
Aaron Fragnito
Is this more for people who are like buying and selling crypto pretty actively, like active crypto traders that need to figure out what their tax burden is. Or is it for like the everyday, schmo?
00:25:31:04 – 00:25:53:08
Janna Scott
Yes or no? Right. It’s yes or no. So, and we have different subscription models as well, right. For people who are like you and me who just dabble in it. I mean, I need more now because I have something with every single wallet in exchange under my name. I have to actually go to different countries in order to get into some of them, because I couldn’t get in from the US.
00:25:53:09 – 00:26:02:18
Janna Scott
Yeah, I had to. I mean, it was a little insane. Trust me. I had to like, go to Germany to visit my family in order to get into some of them.
00:26:02:20 – 00:26:05:04
Aaron Fragnito
And you get to see your family right?
00:26:05:06 – 00:26:24:07
Janna Scott
I know, I know well, yeah, I but it was it was a whole thing to try and get into as many of my as I can that are no longer allowed here in the US. Used to be, but now they’re not. So ultimately it is for everyone, especially because of the you know, now that the IRS knows who has touched crypto.
00:26:24:07 – 00:26:45:09
Janna Scott
So let’s say you are somebody who has over $400,000 of AGI. Let’s say you only bought over, you know, combined over the last 20 years. Maybe you spent $20,000 on crypto. Okay, okay. There. But you show up on the list that you have crypto, that you have crypto account that you have multiple ones maybe maybe have a coin base Voyager.
00:26:45:09 – 00:26:47:17
Janna Scott
Maybe you have, you know, whatever it is, the.
00:26:47:17 – 00:26:48:20
Aaron Fragnito
Voyager anymore, that’s for.
00:26:48:20 – 00:27:09:10
Janna Scott
Sure. No, but but you know what I mean. They still have the list. Yeah. From, you know, since 21, you know, who knows what, what lists on that. You know, what names on what list. So. So they know now you will still get the audit. Right now, it’s still up to you to prove how much you had, what you had, where you had it.
00:27:09:12 – 00:27:34:04
Janna Scott
You know, so while this is my maybe not necessary for you to have consistent review on, it is still good to go on, see where you’re at, get your calculations out of the way, have it in case you get the letter for the audit. Right. Or contact, you know, go on when if you do get an audit letter, you know, to just have it easily out of the way because you you’re not at great risk.
00:27:34:04 – 00:27:45:22
Janna Scott
If you’re like me, not much is going to happen. I mean, I literally have more losses because I just transfer things back and forth left and right. I didn’t yeah, I lost more on fees than actually put in, you know.
00:27:45:24 – 00:27:46:11
Aaron Fragnito
Right.
00:27:46:13 – 00:28:31:08
Janna Scott
So because it was all just testing, it wasn’t for, you know, holding and making money. Yeah. Now the people that trade a little bit more, you know, not maybe a day traders and and very frequent, but people that watch it more and, you know, have maybe automatic, payments set up, things like that. You know, I think for those it should be a consistent review, especially especially because, you know, if you have more than 1000, 2000, 3000 transactions, you want to make sure that you have a good overview of what has been done in what years, because I see it all the time.
00:28:31:08 – 00:28:52:23
Janna Scott
You know, that little stupid checkbox that popped up on the return in 21? The issue with that is if you check no and you had crypto and you’re on that list, that’s gonna be a problem. Okay. You guys, if you read the fine print on your return. Right. It said very clearly, you know you, you’re this is the truth.
00:28:53:00 – 00:28:57:17
Janna Scott
You know I, you perjure just like you.
00:28:57:19 – 00:28:59:06
Aaron Fragnito
Yeah. Perjure yourself.
00:28:59:07 – 00:29:19:03
Janna Scott
You can you can fall under that that, that that’s what could be used as a precedent to put you into the tax evasion category. Yeah. Okay. Yeah. And the letters that are going out to people, they even say that, you know, it could be tax evasion, which is up to $250,000 in fines and could be three, up to three years in prison.
00:29:19:05 – 00:29:29:04
Janna Scott
Right. That you say that those letters state that, you know, hey, fear mongering, you know, at this best. But you know.
00:29:29:06 – 00:29:42:22
Janna Scott
I don’t think we should be held we and I mean, all of us, we shouldn’t be held responsible for not being able to report to something that the IRS couldn’t even get right.
00:29:42:24 – 00:30:14:15
Aaron Fragnito
Yeah, sounds very complicated, I agree. All right, Donna, this is interesting stuff. I’m sure there are listeners out there that this applies to who, are kind of dumbfounded by the whole crypto tax requirements as well. It sounds like basically all the other platforms out there, which there’s plenty of, are not giving back the right data to, crypto investors on what they owe or, you know, even worse, they might say they do owe taxes and they don’t, you know, and now they’re writing a check to the IRS.
00:30:14:15 – 00:30:31:23
Aaron Fragnito
They didn’t have to write, you know, and yeah, most people I know, for example, like when it comes to tax time, I just kind of like I’m not going to go in and like double check things. That’s literally why I hire a CPA. Yeah. He sends me a bunch of dorky signs and I sign them. And, you know, I just kind of trust our CPA.
00:30:31:23 – 00:30:41:14
Aaron Fragnito
And, I mean, my tax strategies vary in depth. We own a lot of real estate. I rarely owe any tax. So it’s like, okay, I don’t know any money this year. Great. You know I’m I’m.
00:30:41:18 – 00:30:42:01
Janna Scott
Like, yeah.
00:30:42:02 – 00:30:43:04
Aaron Fragnito
Where do I sign?
00:30:43:06 – 00:30:44:24
Janna Scott
Yeah I like real estate.
00:30:45:01 – 00:30:52:18
Aaron Fragnito
Yeah. And that’s why I love real estate. So I never really had any tax. So basically you know I own some of the assets. I just use that appreciation for all of that.
00:30:52:18 – 00:30:55:09
Janna Scott
Yeah. And now with the you know we’re back to 100%.
00:30:55:09 – 00:30:59:15
Aaron Fragnito
So yeah. Oh my gosh I’m swimming in tax write offs. It’s amazing.
00:30:59:15 – 00:31:01:14
Janna Scott
Yeah. So exactly. Yeah.
00:31:01:16 – 00:31:03:03
Aaron Fragnito
So I have to.
00:31:03:05 – 00:31:24:14
Janna Scott
You know, I see a lot of people who say, well, we have a really crypto fund, the administration unlike. Yes, but even if President Trump now says as of 26, crypto no longer has capital gain or loss or income. It just has tariffs. Whatever he wants to put on it, it does not change the fact backwards. Tax codes don’t get changed backwards.
00:31:24:16 – 00:31:50:23
Janna Scott
So that means the IRS still has the right under the the rules for 25 and back come after you because it was legally treated as a capital asset. So there’s gains there’s losses. There’s income. Right. So so do not please rely on having a crypto friendly administration because it doesn’t matter what he changes it to. Nothing. It’s it’s still it’s still free fall right.
00:31:50:23 – 00:32:09:16
Aaron Fragnito
All right. Those are two different things. Your your tax burden, the IRS and how much, the administration encourages crypto investing are two different things. Completely, of course. So, yeah. All right. So how can people learn more about your tool and your product here and your tax guidance and, and get in touch with your group and review your product, see if it’s a good fit for them.
00:32:09:20 – 00:32:31:01
Janna Scott
Yeah. So, we’re in a lot of social media. Don’t ask me exactly which one. Just look for defy tax. D c tax, and our website is d5 taxed us. That’s where you can sign up for the product. And you can see, a lot of different details on, you know, what we do.
00:32:31:01 – 00:32:53:10
Janna Scott
What what what we’re doing different. Give it a try. And, and we handle audits as well internally. So because we’re all licensed to represent, you in front of the IRS, so you we can actually, we go as far as we can defend you in an audit. Right? If we did your if we did your reports, we can defend you in an audit.
00:32:53:12 – 00:33:14:02
Janna Scott
So we’re not sending you to third parties that give out kickbacks like a lot of these other products. You know, I’m not going to, you know CPA because, you know, one of the products sent me there and and CPA charges me 5000. That product gets $1,000 kickback, right? We’re doing this internally. And because we can validate what we have done.
00:33:14:04 – 00:33:18:24
Aaron Fragnito
Yeah it’s amazing. All right. So DFI taxed us. Is that right.
00:33:19:01 – 00:33:19:10
Janna Scott
Yes.
00:33:19:14 – 00:33:28:21
Aaron Fragnito
Interesting. And you have different levels of subscriptions for people like me that are hardly trading crypto to the heavy hitters that are making money.
00:33:28:21 – 00:33:32:21
Janna Scott
Go back. Yeah. And we go back to your first ever transaction. Yeah.
00:33:32:22 – 00:33:43:03
Aaron Fragnito
Back to your first ever crypto transaction. Boy, if I knew thing what I know now, I would not have invested in Voyager. And invited all my friends to invest in.
00:33:43:05 – 00:33:49:06
Janna Scott
I know. Yeah, I oh, trust me, I have. I have some clients in that. In the same boat as you. All right.
00:33:49:06 – 00:34:01:24
Aaron Fragnito
Yeah. Thank you so much for coming on the show. You seem like a tax whiz. You know, you kind of remind me of, like, the Elon Musk of, crypto taxes. Like, you know, more for your own good. You know?
00:34:02:01 – 00:34:08:07
Janna Scott
Yeah. I’m going to get myself in trouble one of these days, but life is boring, right? Otherwise.
00:34:08:09 – 00:34:29:10
Aaron Fragnito
That’s good. All right. Excellent. Thank you so much for joining the show here. And to our crypto traders out there, check out Defy Tax. And Joanna Scott here. And, boy, what a what a crypto whiz, crypto whiz of a woman here. Incredible stuff. So, but of course, if you’re in the real estate space, you can go to people scalper google.com as well.
00:34:29:10 – 00:34:50:21
Aaron Fragnito
We always are helping investors build and preserve their wealth through new Jersey apartment buildings. In fact, we’re buying one right now and, northern new Jersey. And, it’s filling up quick. So if you want to save money on taxes, get a 100% bonus tax depreciation. So, for example, on a $100,000 investment, expect you would expect about a $50,000 tax.
00:34:50:21 – 00:34:59:00
Aaron Fragnito
Write off in the first year. They invest through, cost segregation study. That’s a whole different whole different podcast episode. But, that’s what we have going on right now.
00:34:59:01 – 00:35:03:20
Janna Scott
I do agree with that, too. Just that I, I use those strategies to pull my funds.
00:35:03:20 – 00:35:21:20
Aaron Fragnito
So we got Jan on board with the tax real estate tax strategy. I love it I love it, but yeah. Check out People’s Capital group.com. We got all our information there and check out Defy Tax Day us to save money on those or figure out at least figure out what you owe to the IRS and ideally pay them the right amount of money.
00:35:21:20 – 01:22:19:09
Aaron Fragnito
Not too much money and as little as possible. That’s the idea. Yeah, I don’t think so. Yeah, I don’t have a good day.
01:22:19:11 – 01:22:42:09
Aaron Fragnito
At People’s Capital Group we help you invest in real estate, build your wealth by owning professionally managed apartment buildings in the northern new Jersey market. We want to show you how owning real estate is attainable, even for the busy professionals that don’t have the time or experience investing in real estate. Now, we only work with select people who are serious about building wealth.
01:22:42:13 – 01:22:46:13
Aaron Fragnito
So find out if you qualify at People’s Capital group.com.
