Cryptocurrency, Private Placement Life Insurance and Expanded Worldwide Planning
The EWP Stories Video Series
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Welcome. The blockchain concept has given birth to crypto currencies. This is a relatively new phenomena in our lives. Yet taxes have been with us since early dynastic Egypt and probably before. Recently passed tax legislation in the U.S. is a cause of concern for all those who hold crypto currencies. Similar laws are being passed by governments throughout the world. For this recent U.S. tax legislation, we include below excerpts from Robert W. Wood’s excellent article in the Cointelegraph.
What most of you don’t know is that there is a simple and straightforward solution to these new taxes that has existed since the 1980s. The beauty of this solution is that it is asset neutral, meaning even though crypto currencies are a new asset class, this solution wholeheartedly welcomes crypto currencies. For this solution, crypto currencies are handled the same as any common asset class like stocks, bonds, and real estate.
What is this simple and straightforward solution to the grave tax problem that is facing crypto currencies: Private Placement Life Insurance, or PPLI for short. But not just any PPLI policy. The solution is a PPLI policy that is structured to embody the six principles of Expanded Worldwide Planning, or EWP for short. Our firm, EWP Financial, was an early adopter of this powerful yet conservation asset structure.
This series of videos will give you the basic principles of a properly designed EWP asset structure. An EWP asset structure is the perfect solution to the recently introduced tax legislation in the United States that threatens to wipe out a good portion of your gains in crypto currencies. An EWP asset structure is equally effective if you are a tax payer in a country outside the U.S. In this video, Part One, we introduce you to EWP Financial and our unique approach to asset structuring.
By Robert W. Wood
The new law redefines “cash” to include “any digital representation of value” including cryptocurrency, but in an anonymous system, is this going to work?
The Infrastructure Investment and Jobs Act (H.R. 3684) put crypto in the crosshairs, where Congress and the Internal Revenue Service (IRS) hope to scoop up enormous tax dollars. This reporting regime is projected to rake in an astounding $28 billion over the next ten years. No other provision in this massive recently enacted federal law is supposed to produce tax dollars that are even close. If you don’t think that means the IRS is coming for your crypto in a very big way and that Congress is trying hard to facilitate it, think again.
The crypto community was outraged when the measure was first proposed and tried to push back hard. That effort resulted in some narrowing, but the provisions were enacted anyway. Some people are still talking about a repeal effort, but that could prove to be a hard sell when $28 billion is on the line that the Biden administration may need. As enacted, Form 1099 and other reporting rules don’t take effect until December 31, 2023. Even so, since Form 1099 reports are done in January for the prior year. That means 2023 will be a big tax year.
And with 2022 right around the corner and 2021 tax returns due soon thereafter, it’s a good time to get your tax affairs in order. Key new questions are whether you are a broker, and who is. And how will these sweeping onerous reporting rules be applied? With potential civil and even criminal penalties, you can bet that most exchanges, and others who might be in doubt about whether they are brokers subject to the new law, may resolve any doubts in favor of reporting. Surprisingly, exactly what constitutes being engaged in a trade or business may be open questions too.
The broker reporting on Form 1099-B pales in comparison to the new cash-like reporting form requirements with their staggering criminal liability. In 2014, the IRS announced that it would treat crypto as property, not as money. The reverberations of that rule to your taxes are huge. That’s the reason just about every successive transfer or trade of crypto (even for other crypto) triggers more taxes. Yet ironically, Congress and the IRS are now taking a page from cash reporting.
For decades, transactions of more than $10,000 in cash have generated a requirement for any business to file an IRS Form 8300 within 15 days, to report the cash transaction to the IRS. Buy a car with more than $10,000 of cash, and the car dealer has to report you. If you go to the bank and take out your own $10,001 in cash, the bank is required to report you to the IRS. Pay a consultant with more than $10,000 in cash, and your consultant must report you to the IRS.
Of course, the IRS being interested in crypto is nothing new. Everyone is already required to report crypto gains to the IRS. There’s even a “do you crypto” question on every IRS Form 1040 or individual income tax return now. It’s often compared to the “do you have a foreign bank account” question that appears on Schedule B, and that has led to many criminal convictions for the IRS, and big civil penalties.
The new requirements are sweeping. And although there is a grace period until Dec. 31, 2023, many changes will be needed to make them suitable and applicable. The new law mandates that a recipient of more than $10,000 in crypto who is in business must collect, verify and report a sender’s personally identifiable information within 15 days. If you don’t, you can face fines and even criminal liability.
Saying that you are an investor and not in business might seem to be attractive if you have strong arguments on that point. However, there is an enormous body of tax law on that topic, with some discernible standards, and the stakes are big. Will any of this be easy in what is often an anonymous peer-to-peer system? Probably not, but there will likely be fear about the new rules, and some degree of filing to be safe rather than sorry.
Robert W. Wood is a tax lawyer representing clients worldwide from the office of Wood LLP in San Francisco, where he is a managing partner. He is the author of numerous tax books and frequently writes about taxes for Forbes, Tax Notes and other publications.
This article is for general information purposes and is not intended to be and should not be taken as legal advice.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
In our next video, Part Two, we continue with our theme of financial architecture. You will also be introduced to the regional representatives of EWP Financial, and how they serve the world’s wealthiest families. This knowledge is essential to all those who wish to keep their profits from crypto currencies, and not give back their earnings in the form of unwanted taxes.
If you found this video useful please give us a like, and click on the subscribe button below. We look forward to connecting with you in Part Two. Thank you very much for joining us.
To learn how the wealthiest families in the world conduct their financial affairs, please call +1 530 692 1007, or email us at email@example.com.
At your convenience, we can arrange a call to discuss how our unique blueprint can vastly enhance your asset structure.
The opinions expressed in this video are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual on any financial structure, investment, or insurance product.
by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial