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How Is Kentucky Offering Tax Breaks For Crypto Miners IN 2021?

The cryptocurrency tax laws, are known to have been historically complex for cryptocurrency investors, miners and traders. There haven’t been many legislations that are entirely dedicated to the cryptocurrency mining businesses. Several issues regarding the earnings, investments, savings, and taxation of the cryptocurrency mining industry haven’t been addressed by lawmakers in extensive detail.

However, things are now gradually changing and US lawmakers are trying to improve the legislation associated with the cryptocurrency tax and cryptocurrency mining businesses. In this brief article, we’ll take a look at how cryptocurrency earnings have been traditionally taxed so far. We’ll also discuss the new cryptocurrency tax breaks that have been legislated by the State of Kentucky and what is the driving force behind the new law.

General Tax Laws For Crypto Mining Earners

The cryptocurrency earnings have been classified and taxed as property. While these rules are easy to understand and follow due to their common practice, they haven’t been able to address some key issues regarding cryptocurrency mining.

In general, all expenses associated with a cryptocurrency mining operation including electric, hardware, software, wages, etc. are tax deductible.

Tax Breaks Offered By The State Of Kentucky

The state of Kentucky is giving tax breaks to cryptocurrency miners. According to a recently signed bill, cryptocurrency miners can get tax exemptions by investing at least 1 million dollars into the cooling systems of their plants. These cooling systems are integral to cutting down the energy utilization of cryptocurrency mining plants. This is a great opportunity to get additional tax benefits for investments into cryptocurrency mining operations.

You can expect further changes to various other taxation laws relating to cryptocurrency taxes and cryptocurrency mining.

Wrapping Up:

Taxpayers should very carefully consider all the cryptocurrency tax factors while participating in any cryptocurrency transaction.  It is important to consult with an experienced cryptocurrency CPA regarding your specific portfolio and/or business.

Here at Camuso CPA, we offer cryptocurrency tax services nationwide. Our team is highly experienced in cryptocurrency. We were the first CPA firm to accept cryptocurrency as a form of payment during 2017. Contact our team today to discuss your portfolio in detail here.

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Cryptocurrency Taxes & Decentralized Finance, Tax Guide To Trading, Lending, Borrowing

The cryptocurrency industry, and as a result, cryptocurrency taxes are constantly evolving. Decentralized Finance (DeFi) is a rapidly growing area of cryptocurrency that provides access to financial services, including trading, borrowing, and lending, without middleman like traditional financial institutions. This has provided many financial options for traders and long-term holders.

As with any evolution of cryptocurrency transactions, it is important to understand the tax implications of Decentralized Finance activities. Cryptocurrency tax is generally a tough topic for many investors and even tax professionals. Since the IRS has not given specific guidance for DeFi, this article is based existing cryptocurrency tax guidance and our interpretation of current tax laws.

If you are not familiar with the taxation of cryptocurrency transaction, read our Cryptocurrency Tax Guide before reading this article on the tax implications of various DeFi transactions.

How To File Cryptocurrency Taxes for Your DeFi Transactions

Our team at Camuso CPA can import data from Decentralized Finance platforms to calculate your interest, lending income, capital gains and losses. All that is required to start this process to the have the ETH addresses that were used for your transactions.

Cryptocurrency Tax Advantage & Disadvantages for DeFi Transactions

There are many tax benefits to using DeFi that you will read throughout this article as we cover different facets of decentralized finance. Some of the most notable benefits include borrowing against your cryptocurrency as collateral to maintain tax holding periods, avoid triggering taxable events by borrowing, rebalancing portfolios without triggering taxable events and favorable tax treatment with some lending protocols treated as capital gains.

There can also be potential drawbacks to Defi including unexpected income generated from token distributions and taxable events triggered wihen minting tokens.

Cryptocurrency Lending: Providing Cryptocurrency In Return For Interest

If you lend cryptocurrency or contribute it to a lending platform you will be liable for income that you earn for lending the cryptocurrency. Lending your cryptocurrency does not trigger a taxable event as if you sold your cryptocurrency, but the income you generate will be taxable.

The income you earn usually will be taxed as ordinary income but can also be taxed as capital gains depending on the facts and circumstances of the platform you are using.

If you are using Liquidity Pool tokens, these are scenarios where you may be liable for capital gains rather than ordinary income. This is due to the nature of liquidity pools, when you add or remove liquidity the transaction is structured like a token swap rather than income.

When transactions as taxed as capital gains this can offer potential tax benefits. The benefits include, being able to offset capital gains with losses and holding for long-term periods to receive favorable tax rates.

It is important to consult with an experienced cryptocurrency CPA regarding each individual Defi Platform and their tax treatment.

Cryptocurrency Borrowing: Receiving Loans for Cryptocurrency as collateral

Cryptocurrency loans offer great tax advantages for investors that are seeking liquidity without realizing taxable events or liquating their holdings. If you borrow using your cryptocurrency as collateral, you don’t realize tax on the cryptocurrency used as collateral since this is not a sale of cryptocurrency.

As long as your cryptocurrency is not sold or exchanged for another cryptocurrency, you will not realize a taxable event.

A risk associated with borrowing cryptocurrency is that if the value the cryptocurrency used as collateral goes down too much, or if the value of assets borrowed increases too much then you’ll trigger a margin call / liquidation. This would be treated as if you sold your cryptocurrency for dollars and will trigger a taxable event.

Cryptocurrency Taxes for Governance and Incentive Tokens

Many DeFi platforms now utilize governance and incentive tokens which are earned as income. When these types of tokens are distributed they will be taxed as ordinary income at the current market value. This value will also establish your cost basis. If you sell this token after holding it you may also realize a capital gain or less depending on the price of the token at the time of sale.

Wrapping Up

Taxpayers should very carefully consider all the cryptocurrency tax factors while participating in any cryptocurrency transaction, particularly DeFi.  It is important to consult with an experienced cryptocurrency CPA regarding your specific portfolio and/or business.

Here at Camuso CPA, we offer cryptocurrency tax services nationwide. Our team is highly experienced in cryptocurrency. We were the first CPA firm to accept cryptocurrency as a form of payment during 2017. Contact our team today to discuss your portfolio in detail here.

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Scale Your Tax Savings

The tax law favors business owners.

As you continue to grow your business you continue to further reduce your taxes.

This is only true if you have a properly designed and implemented tax plan.

There are many who miss the opportunity to take advantage of the tax benefits the government has in place.

These tax benefits make it very possible to legally reduce your taxes to accelerate the growth of your wealth.

Do not prolong your path to financial freedom by neglecting to proactively plan for taxes.

I go over this in detail in the video below.

We cover the following aspects of your business and more during the tax planning process:

✔️ Legal Entity Structure

✔️ Accounting Method Optimization

✔️ Sales Tax and Other Compliance Assessments

✔️Deductions

✔️ Retirement

✔️ Insurance

✔️ Legal Tax Loopholes

✔️ Recent regulatory change

 ✔️ Niche specific strategies

✔️ Advanced planning strategies

Contact me and my team today to schedule a one-on-one initial strategy call today to discuss your business.

Set up a time to speak directly with me here to get your tax planning accounting process in order:

>> Click here to apply for your Strategy Session Now <<

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Important Factor In Your Tax Planning System

One of the most important steps in maintaining a tax strategy is protecting your bottom-line.

This means implementing and maintaining a system that provides proper documentation to ensure the accuracy of the information you provide your CPA for tax reporting.

This will enable you to protect your tax savings and avoid unnecessary penalties and interest.

This will also help to maximize your tax deductions by ensuring no transactions are overlooked.

Are you maintaining a proper documentation and accounting system?

Set up a time to speak directly with me here to get your tax planning accounting process in order:

>> Click here to apply for your Strategy Session Now <<

This is imperative to protect your tax savings and avoid unnecessary penalties and interest.

I go over this in detail in the video below.

Some areas to focus on to improve your documentation are:

  1. Ensuring your books are always update and reconciled at least monthly
  2. Scan and store all receipts electronically
  3. List the business activities performed in your home office
  4. Calculate and Document the percentage of your home used for home your office
  5. Track and Document your business miles in a mileage log throughout the year on at least a monthly basis to support the business use of your vehicle

Contact me and my team today to schedule a one-on-one initial strategy call today to discuss your business.

Set up a time to speak directly with me here to get your tax planning accounting process in order:

>> Click here to apply for your Strategy Session Now <<

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Are Taxes Are An After Thought? The IRS Cashes In On This!

In the early stages for investors and businesses cash flow is often one of the more challenging aspects to manage as you are building your reputation and pipeline.

As a result, investing in a properly designed and implemented tax plan often gets deferred to the future.

The problem is that all too often this temporary postponement turns permanent.

I go over this in detail in the video below.

There is a lot that goes into managing a business and often taxes are left as an afterthought when it comes to file each tax season.

As your continue to grow your eCommerce business any overlooked tax opportunities grow in size along with your business.

The best part is, increasing your tax savings immediately improves your cash flow.

Do not neglect you tax plan at the cost of your business and finances.

Schedule a one-on-one consultation at the link below:

>> Click here to apply for your Strategy Session Now <<

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Worried About Your CPA?

All too often I hear from prospective clients that their CPA doesn’t seem to have enough time for them.

Or that they had to pull tax planning strategies out of them rather than being advised on their specific circumstances.

If that is the case contact our team today.

We are proactive when working with clients on tax planning.

We have a proven tax planning system and structured check-in process to ensure we have consistent communication throughout the year.

You will not find a firm more responsive than ours when dealing with day to day matters.

I go over this in the video below.

Contact our team today to build a comprehensive tax plan.

If you are not proactive and wait until after tax season you will be too late.

Do not send Uncle Sam a tip this year when you file your taxes!

Schedule a one-on-one consultation at the link below:

>> Click here to apply for your Strategy Session Now <<

We cover the following aspects of your business and more during the tax planning process:

✔️ Legal Entity Structure

✔️ Accounting Method Optimization

✔️ Sales Tax and Other Compliance Assessments

✔️Deductions

✔️ Retirement

✔️ Insurance

✔️ Legal Tax Loopholes

✔️ Recent regulatory change

 ✔️ Niche specific strategies

✔️ Advanced planning strategies

Schedule a one-on-one consultation at the link below:

>> Click here to apply for your Strategy Session Now <<

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Make Your eCommerce Business Audit Proof

When it comes to audit risk, there are two factors to consider:

  1. There’s the risk of being audited
  2.  If you are audited, there’s the risk that adjustments will be made resulting in increased taxes, plus penalties and interest

Proper tax planning and tax return preparation can provide you with tremendous control over this factor.

When done right, identifying legal tax saving opportunities actually helps reduce your audit risk.

The key to tax planning is being proactive.

If you wait until tax season to address your tax plan, most likely, you are too late.

Contact our team today to build a comprehensive tax plan.

>> Click here to apply for your Strategy Session Now <<

The fear of a tax audit can make people do funny things.

I’ve seen people give up thousands in legal tax savings to hopefully avoid the possibility of an audit.

Many times at the advice of their CPA!

I go over this in the video below.

I regularly have clients tell me their prior tax adviser told them not to take a particular deduction because the deduction wasn’t worth the audit risk.

Then there’s the other side who take deductions they are unsure of and hope they don’t get audited.

Working with an CPA on tax planning will ensure that you legally minimize you taxes as much as possible while protecting against and audit.

Tax planning and tax preparation are two separate activities despite what many business owners think.

Building a dedicated tax plan is foundational to any serious wealth strategy whether you are an investor or business owner.

Contact our team today to build a comprehensive tax plan.

If you are not proactive and wait until after tax season you will be too late.

Do not send Uncle Sam a tip this year when you file your taxes!

Schedule a one-on-one consultation at the link below:

>> Click here to apply for your Strategy Session Now <<

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Top 3 Profit KPI’s for eCommerce Businesses

The decisions that you make as a business owner will decide the fate of your business, family, and overall life.

Everything that you do in your business should be planned and measured.

There are tons of different KPI’s, financial ratios, and benchmarks we can use to diagnose and assess your business to drive key financial outcomes.

Below I go over three fundamental profit KPI’s that every eCommerce business owner should be constantly monitoring.

  1. Gross Margin Rate

It is essential to understand and track gross margin on a per product and per sales channel basis.

This will drive key business decisions regarding profitability and allow for benchmarking against your peers.

👇 I recorded a video going over this below

Your Gross Margin Rate is:

(Revenue – Cost of Goods Sold) / Revenue

It is key to have an accounting system that accurately tracks cost of goods sold per product and per sales channel basis.

  • Average Order Value

Your average order value (AOV) is the average amount of money each of your customers spends per order.

Your Average Order Value Is

Sales/Total Number of Sales

The Average Order Value multiplied by your Gross Margin Rate show your average margin per order.

This will drive your marketing decisions since this will show how much you can afford to spend on new customers to keep their first order profitable.

  • Customer Lifetime Value

Customer Lifetime Value it is how much the buyers contribute to your business from the first order they place to the last.

The more valuable your customers are over the course of their relationship with your brand, the higher your return on investments made in advertising and customer acquisition.

At Camuso CPA, we partner with your company to not only handle your basic accounting but to provide ACTIONABLE and PROACTIVE financial insights that improve your business and increase your profits.

If you’re ready to take the next step in scaling your eCommerce business, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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Sherman Case Study: Cautionary Financial Lesson for eCommerce Businesses

When you are a business owner you are solely responsible for your financial future.

Without having a strong accounting system AND financial system implemented in your business you are destined for failure.

This means that you have to have a strong accounting foundation.

But also, key financial data and key performance indicators that allow you to understand your business finances.

👇 I recorded a video going over this below

Case Study

Founder Jody Sherman was able to get $1 million in startup funding.

Unfortunately, he was not an CPA or CFO and, in fact, did not even hire a controller until 2011.

While revenues were solid and growing, the cost of getting those revenues meant the company was losing money.

When an additional $12 million was needed to turn around and scale, investors walked away – they were getting no return on their investments.

In 2013, the company went into bankruptcy.

According to the company’s controller, the company’s aggressive discount culture and Sherman’s lack of financial knowledge dwindled away the company’s account to nothing.

This is why gross profit margin is critical because it immediately gives you an overview of how your current revenue is impacting the rest of your business, and whether it is doing so at a profit or a loss.

This is one of many key financial metrics you should be constantly monitoring and improving.

This has a far-reaching impact on your strategic and tactical options for how to run your business.

Yes, revenue matters but it is not what you make that matters it is what you keep.

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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eCommerce Businesses: The Only 2 Ways To Increase eCommerce Gross Margins

Gross profit margin is a key metric for eCommerce business owners to manage.

Gross margin is a two-part equation.

To improve gross margins for your e-commerce store, you can either increase your revenue per product or decrease the cost of each sale.

To increase revenue, you have to find opportunities to increase prices or average order value.

The specific strategies you should use here will be specific to your business circumstances.

👇 I recorded a video going over this below

Some examples include:

  • Add a recurring element to your sales to create repeat customers
  • Improve Your Product
  • Upgrade Packaging
  • Product Bundling & Discount Strategies to increase average order value

Decreasing your cost of goods sold is more difficult but possible.

The specific strategies you should use here will be specific to your business circumstances.

Some examples include:

  • Supplier negotiations for lower pricing
  • Reducing shipping cost
  • Reducing warehousing costs

Two keys to understanding and improving gross profit margin is gathering and interpreting data.

That is why it is key to invest in proper inventory management system to understand your inventory costs which compromise your cost of goods sold.

Additionally, you need to properly track your variable costs separately including freight, import, manufacturing costs, packaging and shipping.

This all should be tracked per each product, sales channel and customer.

We’re here to partner with you to take your company to the next level!

If you’re ready to take the next step, book your 1-on-1 meeting with me TODAY!

>> Click here to apply for your Strategy Session Now <<

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