Blog of Jeff Vandrew Jr, Attorney-CPA

The Future of the Firm

Starting today, August 26, 2021, I am joining Unchained Capital as Head of Retirement and Inheritance, a new division for the company. I’ve been working closely with the Unchained team to support clients with securing the keys to their retirement, and couldn’t be more excited about fully integrating retirement accounts into their existing services to deliver an even better experience. We’ll also be working on brand new retirement and inheritance services together to support long-term bitcoin holders’ needs.

While this is an exciting new opportunity, it does also mean that I will be retiring from private law practice (which includes retiring from preparing tax returns). The rest of this post is designed to explain what this means for you. It is broken into headings based upon what services I currently or previously have performed for you.

Note that if we are in the middle of an active IRA, 401(k), or trust setup as of today, I am not leaving you in a lurch; we will see it through to completion. I will not, however, be preparing any 2021 tax returns.

Self-Directed IRA Clients (Not 401(k) Clients)

If I have in the past set up a self-directed IRA for you, your existing self-directed IRA will continue to function as it always has with your current custodian (Solera National Bank for most clients).

In the coming weeks, Unchained will be rolling out a fantastic IRA offering which will allow you to hold your own keys and will eliminate a lot of pain points found in most self-directed IRA products. Annual reporting requirements on you will become non-existent. You will have the opportunity to convert over to the new Unchained KeyKeeper IRA product, so be sure to stay tuned to unchained.com on Twitter for updates. That said, if you do decide to become an Unchained customer, in my role at Unchained I would not be acting as your attorney (or CPA or financial advisor, for that matter). And of course, you are never required to to become a customer of Unchained merely because I have taken a position there.

Please keep in mind the below information regarding your existing SD-IRA:

If your setup involves an LLC (as opposed to an investment trust), remember to continue filing your state LLC annual reports each year. Any annual report fees or registered agent fees must be paid by the LLC and must come from IRA funds.

If your setup involves an investment trust, remember to annually file your grantor trust attachment (which was provided to you at the end of your setup process).

If your IRA custodian is Solera National Bank, direct any customer service inquiries to: [email protected], 303-937-6426.

As always keep in mind the Prohibited Transaction, UBIT, and other rules. The version of these rules on my website will eventually be removed, so you should go here now and print a copy for yourself: https://keykeeperira.com/ira-prohibited-transaction-ubit-collectibles/

If you need any tax advice, please consult a tax attorney or CPA of your choosing going forward. If you have no one in mind, here are a few you can contact: Gregory A. Zbylut, Esq: (626) 708-1040, Alexandra Eaker Pérez, Esq: (619) 348-5944, Irving Kamsler, CPA: (718) 884-8333. Choice of attorney or CPA is ultimately your decision should you need one, and you may choose anyone you like.

Lastly, remember that any future contributions to the IRA or rollovers into the IRA cannot be made into the investment trust or LLC checking account. They must hit the IRA account first and be made through your IRA custodian customer service such that they are properly reported to the IRS. Any IRA withdrawals to spend in retirement likewise cannot be made from the trust or LLC checking account; they must be made with customer service at the IRA custodian so that they are properly reported to the IRS.

Self-Employed 401(k) Clients

Keep an eye out in the coming weeks for options to continue your document servicing and updates. In the meantime I will be continuing to service your plan.

Tax Preparation Clients

All individual tax preparation clients should already have copies of all tax returns that have been prepared for them. You may need these when you engage a new tax preparer of your choice. If you do not have a tax preparer in mind, you can contact Mike Leyrer at Heininger Accounting & Consultants LLC in Ocean City, NJ (609-398-8149). They are not attorneys, just accountants, but they are accepting new tax return clients currently. Ultimately your choice of tax preparer is your decision, and you may choose anyone.

Estate Planning Clients

If I previously prepared your estate plan and you need any documents reviewed or changes made, or need representation in probate, please contact an estate planning attorney of your choice. If you do not have anyone in mind, you may contact Christina Costanzo in Toms River, NJ at 732-552-0900. You already have original signed copies of all of your estate planning documents; I have never in my career held onto an original copy. If you have lost your original copy, you would need to contact an attorney of your choice to have new documents prepared. Choice of attorney is ultimately your decision should you need one, and you may choose anyone you like.

3 Step Guide to Holding Bitcoin in an IRA or 401(k) without Crazy Fees (and You Control the Private Keys)

Many of my clients want to hold Bitcoin in an IRA or 401(k). However, most of the “Bitcoin IRA” companies out there (BitcoinIRA, Kingdom Trust, BitGo, Regal Assets, etc.) charge large custodial fees for doing so.

Wouldn’t it be great to avoid all these issues by just holding cryptocurrency directly, in control of your own private keys, while still maintaining the tax benefits of an IRA or Roth IRA? This would allow you to cut out all of those middleman fees.

It turns out there is a way to do this, so long as you know how to avoid the hidden traps.

Do I need to disclose Bitcoin an an FBAR report?

A question I often receive is whether clients holding Bitcoin or other cryptocurrency are required to file Form FinCen 114 (colloquially called the “FBAR”).

Unfortunately, as with many cryptocurrency tax issues, the answer isn’t fully clear.

Self-Directed IRA Rules: A Simple Guide & FAQ

One of the most powerful tools you can use in retirement is a Self-Directed IRA. More specifically, a Self-Directed IRA with Checkbook Control takes this strategy even further, allowing you access to any investment you choose without needing approval from a custodian.

But even with access to “any asset you choose”, there are still three sets of IRS rules that you must follow. Keeping these rules in mind when using a Self-Directed IRA with Checkbook Control is even more important, since there isn’t a third party looking over your shoulder to monitor what you’re doing.

The three sets of rules (plus an extra one for Texans) are:

The Prohibited Transaction Rules
The UBIT Rules
The Collectibles/Life Insurance Rules
The Texas Franchise Tax Rules (in Texas Only)

I’ll address each set of rules in turn. (Quick note: If your self-directed IRA uses a trust instead of an LLC, all the same rules apply. The same rules also all apply to 401(k)s.)

Defer Your Cryptocurrency Taxes Using a CRUT

Has cryptocurrency become too large a portion of your portfolio for comfort? Have you been delaying diversifying a portion of your holdings due to the large capital gains taxes that would result? If so, a cryptocurrency charitable remainder trust may be for you.

The sale or exchange of cryptocurrency creates capital gains income. If the cryptocurrency has been held for over a year, this is taxed at 15 percent, 18.8 percent or 23.8 percent, dependent upon total income. You can try to to spread sales over many years,in order to “soak up” the maximum amount of income into the 15 percent and 18.8 percent brackets, however it’s really only practical to spread sales over a few years at most.

There is a better solution. [Read more…] about Defer Your Cryptocurrency Taxes Using a CRUT