0:00

The next time you chat with your bank

0:02

or your client's bank, ask them how to join

0:04

their partner program, how to get partner perks, how

0:06

to get cash rewards, or if they can list

0:08

you in a directory to help you get more

0:10

clients. I bet money that they would say, no,

0:13

we don't do that. But if Relay is your

0:15

firm or Clients bank, they would say, yes, we

0:17

do that. Stay tuned to hear more from our

0:19

sponsor relay relay later in the episode. Literally

0:24

the Treasury Department was hacked

0:27

and nobody's talking about this. This

0:29

should be the biggest headline on

0:31

CNN. Coming to you weekly from

0:33

the on-pay recording studio. Hey everyone and

0:35

welcome back to the accounting podcast,

0:37

your weekly news roundup for accounting

0:39

and tax professionals and the number

0:41

one podcast for accountants in the

0:44

world. I'm Blake Oliver. I'm David

0:46

Leary and Blake. Today's episode. Did

0:48

you notice the number is very

0:50

special and significant? 420 I have no idea

0:52

what that is I try to find a

0:55

significance of it David I tried to find

0:57

a cannabis really accounting story for this week

0:59

and it can find one so Too bad

1:01

and I think your suggestion was we should

1:04

have brought on Scottish Toronto from a county

1:06

high to bridge the gap at this episode,

1:08

but it did not happen either so well

1:10

I feel like I'm high or something right

1:13

now because the news has just been wild

1:15

like I have no idea what is going

1:17

on I came down for breakfast a few

1:19

days ago and my son greets me and

1:21

says, dad, Trump saved TikTok.

1:24

He'd been watching live streams, streamers

1:26

on like YouTube talking about

1:28

this. This was all the

1:30

news on what was it

1:32

Sunday morning. And this might

1:34

be the single greatest piece

1:36

of propaganda that I've ever

1:38

seen in my life. This

1:41

is the message that greeted

1:43

TikTok users after it was

1:45

restored. It says here, welcome back.

1:47

Thanks for your patience and support.

1:50

As a result of President Trump's

1:52

efforts, TikTok is back in the

1:54

US. You can continue to create,

1:56

share, and discover all the things

1:58

you love on TikTok. So

2:01

what happened is that on like

2:03

Sunday night late, Tiktak shut itself

2:05

down because of this law that

2:08

bans Tiktak in the United

2:10

States that Congress passed a

2:12

while ago, and then turned

2:14

it back on midday. on Sunday

2:16

after Trump said that he was

2:18

going to, as president, you know,

2:20

extend, give them that extension that's

2:23

part of the law. But here's

2:25

what's crazy about this. And we

2:27

talked about this on the show.

2:29

There was actually no requirement in

2:31

the law that TikTok shut down the

2:34

app. The only thing that TikTok

2:36

was required to do is to

2:38

remove TikTok from the app store.

2:40

So the app could have functioned

2:42

completely. It could have continued to

2:45

function for those who had

2:47

downloaded it, but Tiktok chose

2:49

to disable itself and then

2:51

turn itself back on, thus

2:54

making Donald Trump the hero

2:56

to millions and millions and

2:58

millions of Tiktok users. And,

3:00

you know, to be fair, us as

3:03

well in a sense that we got

3:05

8 million views on Tiktok in the

3:07

last 365 days and 310,000 likes. It's

3:09

been a great platform for us, but...

3:12

That was not part of the law.

3:14

People should know that. So you

3:16

hear you have this Chinese company, basically,

3:18

I don't know if they were coordinating

3:20

or what, but they gave Trump this

3:23

massive PR bump. And I think I

3:25

texted you, as soon as you sent me

3:27

this image of that, and I said,

3:29

Trump's running for his third term

3:32

already. He's courting new voters from

3:34

a whole other generation. Welcome

3:36

to our live stream viewers. Don't forget

3:38

you can join us live. Follow us

3:40

on YouTube. We are at the accounting

3:42

podcast. Hit subscribe and that notification button

3:45

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3:47

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3:49

us. And you'll get the episodes before

3:51

anyone else. Also, you can earn

3:53

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3:55

to this show. Go to the

3:57

earmark app. You can download it.

4:00

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4:02

Play Store, or access it in your

4:04

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4:06

and earn a free CPE credit every

4:08

week for listening to this show. It

4:10

works for certified public accountants, certified management

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accountants. The tax courses on our app

4:14

work for enrolled agents, but be careful.

4:17

Just the federal tax ones work, you

4:19

got to look for that IRS CE

4:21

banner. It's a great way to earn

4:23

CPE and not have a crunch at

4:25

the end of the year. So go

4:27

sign up at your mark dot app.

4:29

And David, let's take it down

4:31

and then put a message in

4:33

our app. There you go. We're

4:35

not that sophisticated yet. David, let's

4:38

thank our sponsors who are our

4:40

sponsors for this episode. We have

4:42

relay, keeper, tax bandits and basil.

4:44

And we'll have ads for all of

4:46

them during the episodes. So stay

4:48

tuned. So stay tuned. Awesome. On

4:51

the Trump train this week, all

4:53

this news is Trump all

4:55

the time. He was inaugurated

4:58

as the next president of

5:00

the United States. And the

5:03

thing I really want to talk

5:05

about is this Trump coin,

5:07

because I feel like it

5:09

has not gotten the

5:11

coverage it deserves. This

5:13

is truly momentous that

5:15

the sitting president on

5:17

his inauguration day issued his

5:19

own and also one for his wife,

5:21

those coins are Trump and Malania. I

5:24

want to talk about that. I also

5:26

want to talk about KPMG becoming a

5:28

law firm in the United States,

5:30

and that's happening here in Arizona.

5:32

David, what's top of mind for you this

5:34

week? One of the day one initiatives Republicans

5:36

asked Trump to do was to

5:38

kill a direct file that looks

5:40

like that's not going to happen

5:42

now. I definitely want to talk

5:45

about that. And then looks like

5:47

Sage's copilot AI may have given. business

5:49

A's list of invoices to a

5:51

different business business B, let's say,

5:53

when somebody requested their list of

5:55

invoices. So we have to talk

5:57

about, you know, AI, it's not.

6:00

Leaking is a weird word to use,

6:02

but it's kind of like a leak

6:04

if it gives somebody else's data

6:06

from a different company, right?

6:08

Welcome Evan, welcome David. Hey

6:11

Ben, boring accountant, our favorite

6:13

live stream viewer. One of our

6:16

listeners is asking in the chat, what

6:18

is our broadcast schedule? Sorry,

6:20

R5HD. We don't really have a

6:22

broadcast schedule. We just get on whenever we

6:24

can. We're gonna try to do it on

6:26

Wednesday mornings. this year. We're going to make

6:29

every effort for it to be Wednesday mornings,

6:31

which will probably reduce our live stream viewership.

6:33

I think it was better when we did

6:35

Fridays, but I don't know, we might go

6:37

back to that. Anyway, the best thing to

6:40

do is just to subscribe on YouTube and

6:42

hit notify and we'll pop up for you.

6:44

Hey, Gator, NYC, good to see you as

6:46

well. Okay, David, I really do want to

6:48

talk about the Trump coin, but I know

6:50

that a lot of our listeners are

6:53

not that into crypto. So why

6:55

we start with sage co-co-co-co-co-pilot. and

6:57

this news because this really concerns

6:59

me. You were telling me about

7:01

this before the show started and

7:03

it sounds like SAGE's AI

7:05

gave confidential information to a

7:08

user from another company?

7:10

Yeah, so to quote from the news

7:12

report, a customer found when they

7:14

asked SAGE Co-Pilot to show a

7:16

list of recent invoices, the AI

7:19

pulled data from other customers' accounts,

7:21

including their own. Now, when they

7:23

say a customer Based on the

7:26

headlines of the articles, I'm thinking

7:28

that the customer was actually an

7:30

accounting firm. And so they made a request

7:32

and they got maybe their own clients

7:35

and the customers of the client

7:37

they were working in at that time.

7:39

It feels like based on really, it

7:41

doesn't say who the customer is, but

7:43

it feels like an accounting firm discovered

7:45

this. So they reported this up to

7:47

Sage right away. Sage actually turned off

7:50

Sage Co-Pilot temporarily for several hours

7:52

on Monday to address the issue.

7:54

The Sage. Spoke person, spokesperson described

7:56

it as an AI blender, it's

7:58

a minor issue that only the

8:00

small amount of customers. And the

8:02

Sage Group also denied that it's

8:04

AI-leek sensitive customer information. Okay, so

8:07

I'm trying to figure out what

8:09

happened here in my head. Help

8:11

me picture this, David. So I

8:14

work at an accounting firm, and

8:16

I've got my clients on Sage,

8:18

and I have access to Sage

8:20

Co-Pilot, and Co-Pilot is the chatbot

8:23

that they've built that's connected to

8:25

the... Maybe you're using Sage for

8:27

your own firm's books. Tell me

8:29

the open invoices. And it went

8:32

and got your invoices, but it

8:34

also got open invoices from your

8:36

clients. Okay, but this is still

8:39

something that I am supposed to

8:41

have access to. Because my big

8:43

concern would be if it went

8:45

and got invoices from a company

8:48

that I am not associated with

8:50

at all and started telling me

8:52

information about that. And that's why

8:55

it's interested. So the headline said.

8:57

Let me read the headline. Accounting firm's

9:00

AI caught telling customers about each other's

9:02

financial records. And that's why I think

9:04

it was an accounting firm that discovered

9:06

this, because that was the headline of

9:08

the article, but the articles just say

9:11

customer. But you're right, the bigger concern,

9:13

if I have customer Joe's plumbing over

9:15

here and I have Catherine's kitchens invoices

9:17

show up in front of Joe's plumbing,

9:19

that's an issue. And that's kind of

9:22

what happened, but it feels like it

9:24

got rolled up to the accountant. who

9:26

kind of had access already. We don't

9:28

know. We don't know. I'm not trying

9:30

to put together. That's the problem with

9:33

all these things, these articles. You don't

9:35

get good quality reporting of the exact

9:37

issue. Yeah. Then maybe we can follow

9:39

up with Sage and ask, like, do

9:41

we have a contact there? Because this

9:44

is very concerning, is when I'm in

9:46

one file, one company file, and I

9:48

do an AI query, I should not

9:50

be getting results for any other company

9:52

file. That should be

9:54

there should be a firewall in

9:56

between them where the data is

9:59

not shared and this is the

10:01

of AI implementations that are not

10:03

done right is that if an

10:05

AI LLLM chatbot has access to

10:07

all customer data at once and

10:09

that is what is being queried,

10:11

I'm asking questions of that chatbot

10:13

and you know there's some sort

10:15

of guardrails like instructions in place

10:17

to only give information back about

10:19

a particular customer, that does not

10:21

guarantee that the chatbot will follow

10:23

those instructions. So unless you're walling

10:25

off the data somehow. you can

10:27

have leaked data. And people have

10:29

proven this over and over again

10:31

that you can basically hack these

10:33

LLLMs in different ways by giving

10:35

them the right prompt. And that,

10:37

for instance, is how the New

10:39

York Times hacked ChatGPT to give

10:41

them the full text of New

10:43

York Times articles. Open AI, when

10:45

they were building ChatGPT, chat GPT,

10:47

copied all the New York Times

10:49

articles and used them to train

10:51

ChatGPT. Which is something the New

10:53

York Times said you can't do

10:55

right there's suing open AI about

10:57

it and to prove it They

10:59

went into chat GPT and they

11:01

did a bunch of prompts now

11:03

if you try to do this

11:05

Chat GPT will refuse to give

11:07

you the full text of an

11:09

article Because it's got instructions, but

11:11

there's ways to get around that

11:13

and so the New York Times

11:15

did like hundreds of prompts thousands

11:17

of prompts and eventually they figured

11:19

out how to get chat GPT

11:21

to give them the full articles

11:23

so If you are working at

11:25

an app company and you are

11:27

designing an AI agent, you have

11:29

to make sure that the customer

11:31

data is walled off or this

11:33

will happen. So going by that

11:35

theory. enterprising

11:37

accounting hackers should be open. You

11:39

could go into if it's into

11:42

its assist or say just co-pilot

11:44

or any of these that exist

11:46

oracles. I forget what they're calling

11:48

theirs. Probably just called the Oracle

11:50

for net suites. I forgot what

11:52

they're calling. They should call it

11:54

Delphi is what they should call

11:57

it. But you could go in

11:59

and in theory say like, I

12:01

would like to see the open

12:03

invoices for. customer blah blah blah

12:05

blah even though you don't have

12:07

any access to that and see

12:09

if it gives it back because

12:12

it has the knowledge it just

12:14

is it making the right decision

12:16

at the time to give you

12:18

that which really it's that it's

12:20

the difference between knowledge and intelligence

12:22

because intelligence would recognize like wait

12:24

these are not your invoices why

12:27

would I give you them I'm

12:29

already explaining these on a report

12:31

for you just because I know

12:33

they exist doesn't mean I'm getting

12:35

through your invoices and that's that

12:37

difference of it has knowledge but

12:39

not intelligence but not intelligence. All

12:42

right, David, let's think our first

12:44

sponsor. It's Relay, this episode, right?

12:46

It's Relay, and if you want

12:48

to hit the banner for me,

12:50

I'll read the ad. Great. Get

12:52

a little sip of water first.

12:54

We don't want David to lose

12:57

his voice again on this episode.

12:59

Yeah. So between Blake and myself,

13:01

we now have three, four, five,

13:03

maybe six. business entities, 20 or

13:05

so checking accounts, dozens and dozens

13:07

of virtual cards, and it would

13:09

be impossible to manage all of

13:12

this if they weren't using Relays

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or Small Business Bank. Relay is

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14:01

can instantly spin up a new

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visa debit card and set both

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promo slash relay, that is accounting

14:39

podcast. promo/r-e-l-a-y. Thank you, relay. Let's

14:42

talk about the Trump meme coin

14:44

and the Malania meme coin. President

14:46

Donald Trump launched a cryptocurrency meme

14:48

coin called Trump, just days before

14:50

his inauguration as the 47th president.

14:52

The token was Originally priced at

14:54

$10 and quickly surged to a

14:56

peak of $74.59 before experiencing significant

14:59

volatility, and currently it is sitting

15:01

at $39. It debuted during the

15:03

inaugural crypto ball in Washington DC,

15:05

and the coin features an image

15:07

of Trump with a raised fist

15:09

in the phrase fight, fight, fight,

15:11

fight. First Lady Malania, Trump, followed

15:14

by launching her own meme coin

15:16

called Malania on Sunday. That one

15:18

has not done nearly as well.

15:20

It is sitting at $3.81, and

15:22

I think the folks who bought

15:24

into that one are not too

15:26

happy about that one. There's like

15:29

a criticism that it was a

15:31

rug pull, meaning the holders of

15:33

the coin dumped it onto the

15:35

market and pushed the price down.

15:37

in order to enrich themselves. But

15:39

I want to talk about this,

15:41

because a lot of the coverage

15:44

in the mainstream press has been

15:46

about how Trump is now a

15:48

crypto billionaire because of this. And

15:50

I want to explain what that

15:52

means, because it's not like real

15:54

money. It's on paper at this

15:56

point. So there's a billion dollars

15:59

supply, or sorry, a billion coin

16:01

supply of this Trump coin. That

16:03

is what is available on the

16:05

Solana blockchain. Okay? Or what could

16:07

be? And organizations affiliated with Donald

16:09

Trump that control this coin put

16:11

200 million into circulation. And it

16:14

started selling for what, $10 or

16:16

something and then it's gone up

16:18

and down, right? But they sell

16:20

it to people who buy it.

16:22

Just like Bitcoin, right? Just like

16:24

Ethereum, any of these coins. And

16:26

so the market price of that

16:29

coin is currently, what did I

16:31

say? It's seven around $48 or

16:33

$58, something we're in there. It's

16:35

$39 and $0.11 at this very

16:37

moment as we record. Okay. If

16:39

you multiply the circulating supply of

16:41

2 million coins by that price,

16:44

you get a market cap of

16:46

7.8 billion dollars. So if everybody

16:48

were able to sell all of

16:50

their coins for at that price,

16:52

that's what it's worth. What that

16:54

means is theoretically, because Trump holds,

16:56

his entities hold 80% of the

16:59

supply in reserve, that is worth

17:01

if they were able to sell

17:03

it at 39 dollars, 31. 0.28

17:05

billion. Okay, now that's the number

17:07

that gets tossed around, but of

17:09

course, if that happened, if the

17:11

Trump organizations did dump 80% of

17:14

their supply onto the market, it

17:16

would of course crash the price.

17:18

And I was trying to figure

17:20

out like exactly how much money

17:22

did Trump make from selling these

17:24

coins. And I asked a friend

17:26

who's... been in crypto for years

17:29

and years. And he says, actually,

17:31

it's impossible to figure this out.

17:33

And if anyone knows how to

17:35

figure this out, I want to

17:37

know. But because these wallets addresses

17:39

are really hard to trace, right?

17:41

You have the original wallets, I

17:44

guess, that issued the token. And

17:46

we could try to figure out

17:48

what they got paid for it

17:50

and how much they raised. But

17:52

like he said, it's extremely difficult,

17:54

especially since you can trade. Like

17:56

you could control another wallet that

17:59

then buys from the original wallet

18:01

and nobody knows who controls that.

18:03

So basically trying to figure out

18:05

what Trump made from this is

18:07

almost impossible. And trying to figure

18:09

out which are related entities and

18:11

which or not is almost impossible.

18:14

impossible. So like how much money

18:16

did Trump make selling this meme

18:18

coin? We don't know. We know

18:20

that it could be. Yes, we

18:22

don't know yet. I mean we

18:24

know that it could be billions

18:26

of dollars, but we don't know.

18:29

Probably not, right? Because again, you're

18:31

just taking the market price and

18:33

you're multiplying it by the circulating

18:35

supply. That doesn't mean that everybody

18:37

paid that much for it because

18:39

it started much lower than that.

18:41

you know, you're going to make

18:44

those quick easy profits on its

18:46

way up. Right. So, so, you

18:48

know, what kind of blows my

18:50

mind about this whole thing is,

18:52

here's a situation. We have a

18:54

president, a US president, who will

18:56

imagine this David, imagine that on

18:59

inauguration day, Donald Trump, buys a

19:01

plot of land next to the

19:03

US Mint in Washington DC. I

19:05

don't know if it's in Washington,

19:07

but let's just say he buys

19:09

up and he puts a building

19:11

there, right? And that, he creates

19:14

the Trump Mint and the Trump

19:16

Mint starts creating currency, coins, dollar,

19:18

you know, bills, whatever, you call

19:20

it, right? And it's called Trump,

19:22

Trump money. And he starts selling

19:24

it to people. And so people

19:26

are going into the mint and

19:29

they're exchanging their dollars. for Trump

19:31

coins. And then they're going out

19:33

into the world and they can

19:35

go and they can, you know,

19:37

exchange these coins with other people,

19:39

use them, like exchange them for

19:41

other currency, whatever. A US president

19:44

has printed his own currency. And

19:46

for me, I've always had this

19:48

thought process that would. The difference

19:50

between the United States and like

19:52

a lot of other, let's say

19:54

like Iraq and other countries where

19:56

there's been some dictatorships, etc. is

19:59

in our country, we only put

20:01

dead presidents on money and we

20:03

only put up statues of dead

20:05

presidents. We don't put live president

20:07

statues up, presidents that are live,

20:09

and we don't put live presidents

20:11

on our currency. And that's a

20:14

big difference between us and lots

20:16

of countries around the world. I

20:18

mean, even the UK, right? Whoever

20:20

the queen, the king at the

20:22

time, they get put on money.

20:24

That's crazy to me. But this

20:26

is more than just. But now

20:29

he's doing it, essentially. Well, this

20:31

is more than just propaganda. This

20:33

is more than just putting yourself

20:35

on the bill of the official

20:37

currency of the country. This is

20:39

printing your own currency. A side

20:41

currency, yeah. It's a currency, like

20:44

it can be exchanged on coin

20:46

base. You can buy and sell

20:48

Trump and Malania on coin base.

20:50

And I think this will actually

20:52

be seen as a momentous time

20:54

in US history. the idea that

20:56

an individual president issued their own

20:59

currency. And what they say, you

21:01

know, the issuer of this coin

21:03

says this is just a souvenir.

21:05

It's a collectible, right? But how

21:07

much is it really a collectible

21:09

when you actually have like a

21:11

market price and there are exchanges

21:14

where you can buy and sell

21:16

it instantaneously and convert it into

21:18

cash? To me, this is a

21:20

currency. No matter what you call

21:22

it. and call it

21:24

a collectible, but it functions like

21:26

a currency. If you would have

21:29

issued the Trump teletobie, are they

21:31

called teletobies, what are those little

21:33

things? No, beanie baby, the Trump

21:35

beanie baby. And instantly, marketplace existed

21:38

and people were buying and trading

21:40

these and they were increasing in

21:42

value. Would that be any different

21:44

than this? I mean, I guess

21:47

the difference is the immediacy and

21:49

the fact that it's not a

21:51

physical object. Right, what's the difference

21:53

between this and Bitcoin? What's the

21:56

difference between this and any other

21:58

currency? functions the same way. Yeah,

22:00

it's a temporary store of value.

22:02

Do you think about that way?

22:05

Yeah, it can be exchanged. It's

22:07

fungible. You know, all of them

22:09

are exactly the same. Like, I

22:11

mean, I think this is bending

22:13

our definitions is what I'm trying

22:16

to say here. And this could

22:18

be a real problem. I feel

22:20

like this could be a real

22:22

problem. Now Donald Trump controls 80%

22:25

in reserve of the supply of

22:27

a new currency that he has

22:29

created. I mean, and so it

22:31

has no intrinsic value whatsoever, and

22:34

yet somehow it has a market

22:36

cap of $7.8 billion. What does

22:38

that value represent? Yeah, what if

22:40

what if he decides to make

22:43

it the official crypto of the

22:45

United States? Now and it becomes

22:47

this standard if you want to

22:49

call it that right? I mean,

22:52

he'll be what a trillion to

22:54

trillions What if what if Trump?

22:56

I mean this he could do

22:58

this I'm not saying he's gonna

23:01

do this But like let's say

23:03

he he gets you know He

23:05

gives he gives a chunk of

23:07

that You know crypto and reserve

23:09

the Trump coin to every member

23:12

of Congress and then they pass

23:14

a law to make this an

23:16

official currency or something like What's

23:18

to stop that? That scares me

23:21

actually because I feel that's just

23:23

a very believable scenario with Congress

23:25

these days, actually scares me. Edgar

23:27

says it only has value if

23:30

people believe it does the same

23:32

as the dollar. I think the

23:34

difference between the dollar and any

23:36

other cryptocurrency is that the dollar

23:39

has the full faith, you know,

23:41

and credit and backing of the

23:43

United States government and the government

23:45

guarantees that you can exchange it

23:48

for, that you can use it.

23:50

you know, the power of our

23:52

military backs it and all that

23:54

stuff, right? So the fact that

23:56

the president is behind this changes.

23:59

It's different. than any other currency.

24:01

So, yeah, I just want to

24:03

bring that up. If any of

24:05

you have insights into this, you

24:08

know, please let me know. I

24:10

just find this to be fascinating,

24:12

potentially frightening. And what does this

24:14

mean for the future of cryptocurrency?

24:17

Like, one of my, go ahead,

24:19

David. And this is just like,

24:21

is this really, from him and

24:23

his organizations or is just another,

24:26

here's my brand, and I just

24:28

let people license it. Ultimately,

24:31

which is what he's done in

24:33

the past. But he doesn't run

24:35

Trump's stakes and Trump bathrobes. It's

24:37

just companies buy the word Trump

24:39

and slap it on and sell

24:41

these things. Trump university, etc. So

24:44

is this more of that? Now,

24:46

in exchange, they gave him X

24:48

percentage of this instead of maybe

24:50

him taking a licensing fee. He

24:52

just took some of the coin.

24:54

But is that what's really this

24:56

is just, at the end of

24:58

the day is. Innocent's not the

25:00

right word, but it kind of

25:02

is just innocent Trump, egotistical, like

25:04

it's putting my... Okay, let's put

25:06

this in perspective. Yeah. It used

25:08

to be that presidents would, U.S.

25:10

presidents would separate themselves entirely from

25:12

all of their business interests. They

25:15

would even like divest completely. And

25:17

the most famous example is, Jimmy

25:19

Carter had like a peanut farm

25:21

in Georgia. You had to get

25:23

rid of that or something, right?

25:25

That was like apparently too much

25:27

of a conflict of interest. And

25:29

now here we have a situation

25:31

where the president creates a meme

25:33

coin that has like billions of

25:35

dollars in market cap. And like

25:37

just think about how you could

25:39

influence a president this way. There's

25:41

no transparency in who controls these

25:43

wallets, right? So let's say you

25:46

wanted to bribe a sitting president

25:48

who owns his own meme coin.

25:50

You could just like buy the

25:52

coin. from a wallet

25:54

that is controlled by the Trump

25:56

organization or the Trump family it

25:58

essentially transferring money and Nobody knows

26:00

that is happening. Yeah, it opens

26:03

the door to possible corruption. And

26:05

I'm not saying this is just

26:07

that, I'm not just like targeting

26:09

Trump with this criticism. I'm saying

26:11

that this is a serious problem

26:13

with all politicians, is that money

26:16

corrupts. So if you have a

26:18

situation where you can like bribe

26:20

politicians with cryptocurrency and nobody can

26:22

see it happening. It's going to

26:24

happen. If it's not happening already.

26:26

If it's not happening already, yeah.

26:29

Okay, David, I'm going to let

26:31

you take the next story and

26:33

you also get to choose if

26:35

you want me to read the

26:37

next ad. Yeah, I'll let you

26:40

do the next ad here while

26:42

I queue up to story. Okay.

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28:03

right, let's talk about direct file

28:05

direct file right because we were

28:07

really worried that Don Trump or

28:09

his administration might shut down direct

28:11

file and Before we get into

28:13

that briefly David summarized direct file.

28:15

Yeah, so direct file is the

28:17

IRS's is Tribotax killer if you

28:19

want to call it that where

28:21

people can go to the IRS's

28:23

website and file their taxes using

28:25

an app very similar to the

28:28

TurboTax or an H&R block online

28:30

type of experience. It was rolled

28:32

out to 12 states and now

28:34

it's going to be rolled out

28:36

to 25 states. So they've doubled

28:38

the size of the program. Customer

28:40

satisfaction's been gained. It's been a

28:42

pretty successful rollout for the IRS.

28:44

But there's a lot of arguments

28:46

about it because Republicans feel very

28:48

strongly that the IRS should not

28:50

be doing this. They don't have

28:52

the right to do this. The

28:54

Congress has to pass a law

28:56

that says yes IRS, go build

28:58

this is their point of their

29:00

point of view. So to recap

29:02

about a month ago. A group

29:04

of 29 House Republicans penned a

29:06

letter and a request to Trump

29:08

asking him to kill direct file

29:10

on day one. And if you

29:12

remember that letter, they also appealed

29:14

to the Doge. They seized the

29:16

Doge guys. Muskin. Ramaswami. Rana-Swami. Who's

29:18

already out, by the way. Oh,

29:20

he's out now. Yeah, he's out.

29:22

He's out. So, you know, I

29:25

predicted that Tech and Trump would

29:27

not get along, ultimately. because that's

29:29

the history. Every time a billionaire

29:31

in our in American history tries

29:33

to like buy the presidency, eventually

29:35

the president who wins is like,

29:37

oh yeah, no, I thank you

29:39

for your help, but I don't

29:41

need you anymore. Yeah, I made

29:43

it. Anyway, continue. And they requested

29:45

him to kill, they requested Trump

29:47

to kill direct file on day

29:49

one. So all day Monday, when

29:51

all these executive orders are flying

29:53

around, you know, when he's busy.

29:55

saving Tiktok, I was checking to

29:57

see if he killed direct file

29:59

over and over again. But it's

30:01

looking like it's not going to

30:03

happen and because on January 15th,

30:05

the Democrats, 22 centers and 113...

30:07

members of the house are now

30:09

touting direct file as a doge-friendly

30:11

program and they wanted expanded. So.

30:13

Our favorite Senator Elizabeth Warren, she

30:15

penned a letter, like always. She

30:17

penned a letter, her along with

30:19

Senator Chris Coons of Delaware. On

30:22

January 15th, they sent a letter

30:24

to Scott Besant, who's now the

30:26

Secretary of Designate of the U.S.

30:28

Department of Treasury and Billy Long,

30:30

who we've spoke about, who's the

30:32

Commissioner-designate of the IRS. And one

30:34

of the sentences they have in

30:36

there says, press reports indicate that

30:38

Mr. Mr. Musk and Mr. Ranaaswami,

30:40

the leaders of President, Donald Trump's

30:42

Department of government of government of

30:44

government of government of government of

30:46

government of government of government of

30:48

government of government of government efficiency.

30:50

have discussed trying to create a

30:52

mobile app for Americans to file

30:54

their taxes for free with the

30:56

IRS Revenue Service. Direct file fits

30:58

the bill. And not only a

31:00

letter, Senator Warren actually tweeted about

31:02

this. So she said, Elon Musk

31:04

and Doge want to create a

31:06

mobile app for you to file

31:08

your taxes free with the IRS.

31:10

I've led over 140 members of

31:12

Congress in letting Trump's nominees know

31:14

that the IRS already has an

31:16

easy program to file your taxes

31:18

for free called direct file, and

31:21

we should expand it. So she

31:23

felt very strongly about this. She

31:25

put this out there. Well, during

31:27

the nomination process for, um... Trump's

31:29

picked to lead the Treasury Department,

31:31

Scott Bissent. He assured the Senate

31:33

Finance Committee that direct file will

31:35

be an option for taxpayers in

31:37

the upcoming filing season, and then

31:39

he's going to study the program

31:41

to figure out about the long-term

31:43

future. So there is not going

31:45

to be a day-one killing of

31:47

direct file. It is not being

31:49

killed. In fact, it's going to

31:51

go live on January 27th for

31:53

a total of 25 states. So

31:55

half the country will be able

31:57

to use direct file next week.

31:59

It did not get killed. a

32:01

rare example of bipartisanship. This is

32:03

great. I'm so happy. Well, what

32:05

I'm wondering about is how bad

32:07

does Elizabeth Warren hate big tax

32:09

because she hates Elon Musk a

32:11

lot, but she obviously hates into

32:13

it and H&R blocking big tax

32:15

more than she hates Elon Musk.

32:18

Well, you know, the enemy of

32:20

my enemy is my friend. But

32:22

I still can't find anything about

32:24

it being killed. Like, I've searched

32:26

and searched and searched. Direct file

32:28

is one of the smartest things

32:30

that the IRS has done, that

32:32

the government has done in a

32:34

long time. We should make it

32:36

easy for middle class Americans to

32:38

file their taxes, the simple situations

32:40

that tax pros don't want to

32:42

deal with. Just let them do

32:44

it directly with the IRS. Makes

32:46

so much sense. next to the

32:48

future cabinet members at the inauguration,

32:50

any turbo tax representatives or H&R

32:52

block representatives up there. So, you

32:54

know, they're not in the good

32:56

fortune to get the Republicans to

32:58

kill it, right? They would want

33:00

this to happen. They would want

33:02

it to be killed. It's not

33:04

happening. All right, I have news

33:06

about KPMG, the smallest of the

33:08

big four accounting firms. although we

33:10

probably shouldn't call them accounting firms

33:12

because they're really giant consulting firms

33:15

that happen to do accounting and

33:17

they're going to do more. KPMG

33:19

is getting into legal. Thus far

33:21

in the United States it has

33:23

not been possible for the big

33:25

four to provide legal services due

33:27

to rules about attorney ownership of

33:29

law firms. Is that just all

33:31

big four or just in general

33:33

you can't have a law firm

33:35

and accounting firm be the same

33:37

firm? in the United States. It's

33:39

a matter about big form, right?

33:41

Yeah, it's different elsewhere in the

33:43

world, but in the United States,

33:45

until now, lawyers had to own

33:47

law firms and only lawyers and

33:49

law firms could provide legal services.

33:51

They have a very, very good

33:53

franchise protection for their license that

33:55

we really don't enjoy as certified

33:57

public accountants. We have a very

33:59

limited franchise over assurance and lawyers

34:01

get to have like almost total

34:03

control over the law, but that

34:05

is starting to... backfire for them

34:07

because it's gotten so expensive to

34:09

hire a lawyer. There's a shortage

34:12

of lawyers in certain places. in

34:14

this country, especially for small businesses,

34:16

and for certain types of transactions,

34:18

it's just really, really expensive. We've

34:20

experienced this ourselves, David. It's really

34:22

hard to find a good lawyer

34:24

for a small business. And there

34:26

is a new program here in

34:28

Arizona that allows non-law lawyers to

34:30

own law firms, and KPMG is

34:32

going to use this to launch

34:34

their own law practice here as

34:36

part of KPMG United States. committee

34:38

overseeing the program and final approval

34:40

from the Arizona Supreme Court, which

34:42

is expected, they're going to offer

34:44

services to their clients directly inside

34:46

a KPMG. And they're describing this

34:48

as drafting and updating contracts, reconciling

34:50

legal materials in mergers and acquisitions.

34:52

The sort of stuff that they

34:54

used to outsource to law firms,

34:56

they're now going to be able

34:58

to do internally, and they want

35:00

to use artificial intelligence tools to

35:02

automate. a lot of this type

35:04

of work with M&A and contract

35:06

review, that sort of thing. We

35:08

can certainly expect the other big

35:11

four, I think, to follow KPMG's

35:13

footsteps if they get into this.

35:15

They actually already practice law in

35:17

80 countries, including in the UK

35:19

and Australia, and the US represents

35:21

the largest legal market globally. So

35:23

basically the law, the big four

35:25

are going to become law firms,

35:27

it sounds like. In the article

35:29

about this in the Wall Street

35:31

Journal, Richard Lewis, the former president

35:33

of the New York State Bar

35:35

Association, expressed concerns that KPMG's entry

35:37

into this presents a problem for

35:39

the legal profession. But, you know,

35:41

it seems like the lawyers have

35:43

kind of gotten themselves into this

35:45

problem by not providing enough lawyers,

35:47

or at least not doing it

35:49

affordably, so the Arizona move to

35:51

make this change. Lewis said,

35:53

it's a threat to the legal profession.

35:56

They will be able to undercut and

35:58

take shortcuts. They aren't helped. to the

36:00

same standards. So I wonder if there's

36:02

any parallels here to the accounting profession.

36:04

It sounds very similar like we can't

36:06

have tech companies do tax work or

36:09

here's the thing is we already have

36:11

non accountants owning accounting firms like that's

36:13

already possible in everywhere right and that's

36:15

why we see private equity flowing into

36:17

accounting and so I don't know I

36:19

guess legal is next. Gator says using

36:21

AI for legal documents, that's a big

36:24

no for me. Well, Gator, David and

36:26

I have actually been using AI for

36:28

a lot of legal stuff for our

36:30

entities. And I have to tell you,

36:32

man, it is fantastic. There's no math.

36:34

That's why. There's no math. There's all

36:36

the stuff. AI is good at. Yeah.

36:39

When I get a contract for like

36:41

speaking engagement or a deal we want

36:43

to do with somebody, the first thing

36:45

I do is I drop that contract.

36:47

into Claude and I ask it to

36:49

create an executive summary for me in

36:52

plain English with all the key terms

36:54

and that sort of thing. And oh

36:56

my God, that is so helpful. Like

36:58

I would have had to pay a

37:00

lawyer to read through this thing and

37:02

then sit on the phone call with

37:04

me and explain this or write a

37:07

memo. And now I don't really have

37:09

to do that to get the first

37:11

pass. Now, if it's something really important,

37:13

am I going to run it by

37:15

an attorney? Yes, but we can do

37:17

a lot of the grunt work without

37:19

having to pay high hourly rates. An

37:22

example too is like David and I

37:24

had to do an operating agreement for

37:26

one of our entities. Well, we could

37:28

have sat with a lawyer for hours

37:30

on the phone going through every single

37:32

term and point and everything, but what

37:35

David and I did instead, why don't

37:37

you describe what we did? chat GPT

37:39

interview us and asked us, what do

37:41

you transfer ownership? What are the terms

37:43

of that? How would you like that

37:45

to happen? And we would just answer

37:47

these questions and it would start compiling

37:50

these and at the end it would

37:52

summarize it all. And now we have

37:54

a doc, we can go back to

37:56

a lawyer to make perfect legal ease,

37:58

but we did most of the work.

38:00

All that interview, like you said, it's

38:02

the onboarding, the interview. interviewing all these

38:05

things that you the questionnaire you have

38:07

to email seven times back and forth

38:09

with your lawyer and that's where it

38:11

gets expensive versus here's this create the

38:13

legal docs that's all you want to

38:15

do yeah all right David shall we

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who trust tax bandits, slash T-A-X-A-N-D-I-T-S.

39:50

Thank you, tax bandits. Gator says,

39:52

both of your examples, this is

39:54

going back to the legal stuff,

39:56

legal question, both of your examples

39:58

aren't making the actual legal doc,

40:01

just simplifying the data gathering phase.

40:03

is actually, gator, apologies if I

40:05

wasn't clear, we used it to

40:07

draft the operating agreement, the first

40:09

draft of it, so based on

40:11

a template. So it actually created

40:14

the operating agreement with the signatures,

40:16

with the opening, everything. So I'm

40:18

gonna run that, you know, we

40:20

run that by an attorney, but

40:22

it gets it like 90% of

40:25

the way there, so that the

40:27

review process is what's left. for

40:29

their expertise of the review. You

40:31

don't want to pay them for

40:33

the back and forth emails. Well,

40:36

what's Blake's address? What's your address?

40:38

Those are just expensive nonsense to

40:40

pay for it. And are just

40:42

coming up with the basic terms

40:44

that have to go into the

40:47

operating agreement. Like we can discuss

40:49

that. Yeah, all that stuff. We

40:51

can figure out. And they review

40:53

it and make sure there's no

40:55

holes in it. I'm

40:58

going to let you choose. FDIC,

41:01

external revenue service, South Carolina. I

41:03

want to do South Carolina because

41:05

I'm hoping maybe you could give

41:07

some insights or maybe our listeners

41:09

could give some insights to what's

41:11

happening there. So months and months

41:14

ago, it feels like a year

41:16

ago, we talked about South Carolina

41:18

and they discovered $1.8 billion. accounting

41:20

error, mystery. And the way it

41:22

was presented at that time was

41:25

there was $1.8 billion sitting in

41:27

a bank account and it was

41:29

presented that way for a very

41:31

long time. Now they've had an

41:33

audit, the audit did all the

41:35

research, a forensic audit, and they

41:38

figured out no wrongdoing was done,

41:40

but it turns out that the

41:42

$1.8 billion isn't in the bank

41:44

account the way it was kind

41:46

of initially presented. Well there is

41:49

no $1.8 million dollars. At 1.8

41:51

billion, that money is not sitting

41:53

on a bank account. It didn't

41:55

go missing. It never existed. It

41:57

just might be on the GL

42:00

and it was never reconciled properly.

42:02

That's in the... So the reason

42:04

sometimes you hear the story and

42:06

it's 1.6 million, because apparently there

42:08

is about $200 million that actually

42:10

exists somewhere. But it's nowhere close

42:13

to the 1.8 billion. So I

42:15

was trying to figure out how

42:17

this happened, David. I was trying

42:19

to figure out like, what are

42:21

the debits in the credits? Like,

42:24

how does 1.8 billion dollars show

42:26

up on a balance sheet that

42:28

doesn't exist? And apparently it's a

42:30

clearing account issue. So there was

42:32

a migration between accounting systems and

42:34

they created a flow through account.

42:37

as a catch-all for all unreconciled

42:39

transactions, and it was designated as

42:41

a non-reportable pass-through fund that should

42:43

have maintained a zero balance, but

42:45

debits did not match credits. So

42:48

this might blow minds of people

42:50

who use accounting systems that force

42:52

debits and credits to balance in

42:54

accounts, but there are plenty of

42:56

ancient accounting systems where that doesn't

42:59

have to happen. And so this

43:01

clearing account... got all the debits,

43:03

but it never got any credits.

43:05

And that's basically what happened, is

43:07

that it just went on for

43:09

seven years. So it's just a

43:12

pass-through account, clearing account, got all

43:14

the debits, never got the credits.

43:16

Isn't that amazing? Create all this

43:18

trouble. And it all started when

43:20

they migrated to a new accounting

43:23

system. So it was like a

43:25

failed ERP migration. And when I

43:27

say failed the ERP migration, it

43:29

doesn't necessarily mean the data failed.

43:31

Maybe the training and the support

43:33

for the individuals was not there.

43:36

And things were just getting posted

43:38

wrong. They didn't understand how to

43:40

use the ERP, the new GL.

43:42

And so, and then it never

43:44

got reconciled. Like how does this

43:47

not reconcile out eventually, some quarter

43:49

or some month, or at the

43:51

end of their job? Yeah. And

43:53

so the governor is insisting that

43:55

all the corrective actions that have

43:58

been recommended and that they had

44:00

to pay $3 million for a

44:02

forensic accounting review. They're going to

44:04

adopt all these new policies and

44:06

procedures and it's not going to

44:08

happen again. But there was no

44:11

deception or fraud. None of this

44:13

was on purpose. It was just

44:15

really incompetence, which we keep seeing

44:17

this happen over and over again.

44:19

The Macy's thing, there's a lot

44:22

of incompetence happening in accounting. And

44:24

probably, and I don't think it's

44:26

a skill set of the accountants.

44:28

I wonder if it's overwork. There's

44:30

just too much on people's plates

44:32

and some things just get done

44:35

half asked because there's too much

44:37

on accountant's plates right now. What's

44:39

the adjusting entry to correct this?

44:41

So you have a phantom account,

44:43

a debit balance on your balance

44:46

sheet, an asset. You got to

44:48

credit that. And I guess my

44:50

question is, what's the debit side

44:52

of that entry? Is it an

44:54

expense? Is it a reduction in...

44:56

I don't know because I've never

44:59

like... Because if it wasn't truly

45:01

a wash account, you would move

45:03

the cash that actually existed over

45:05

to that account. But there's no

45:07

cash. So cash is overstated. So

45:10

you credit... the cash or that

45:12

clearing account and then what do

45:14

you debit? Is it an expense

45:16

or is it just some like

45:18

reduction in like equity? But you

45:21

know it's a state government. I

45:23

don't know how that works. So

45:25

I'd be curious to know if

45:27

anyone has the idea of what

45:29

the entry would be, do let

45:31

me know. And what's interesting is

45:34

one of the articles talked about

45:36

how South Carolina has a long

45:38

history of accounting issues. So the

45:40

treasurer's office which was created with

45:42

the state's first constitution in 1776.

45:45

Back then, the General Assembly selected

45:47

the treasurer. But in the early

45:49

1800s, the state finances were in

45:51

a state of bewildering confusion and

45:53

no one could tell amounts of

45:55

debits or the credit of the

45:58

state, according to history of the

46:00

South Carolina book. The first controller

46:02

general determined that the state was

46:04

owed about $750,000 in debits would

46:06

be worth about $20 million today.

46:09

So they have a history of

46:11

like mucking up their books in

46:13

South Carolina for some reason. There's

46:15

not, not on top of it.

46:17

Let's talk about the external revenue

46:20

service since we're on. on a

46:22

political theme, Trump theme, this week.

46:24

Donald Trump, before his inauguration, said

46:26

he was looking into creating an

46:28

external revenue service. External, not internal.

46:30

What does this mean, David? I

46:33

think based on his tweet, it's

46:35

instead of having the US Customs

46:37

and Border Protection responsible for collecting

46:39

tariffs, he wants to have a

46:41

version of the internal revenue service

46:44

dubbed the external that will go

46:46

after these customs in. Terror, these

46:48

tariffs that he wants to impose

46:50

on everybody. So be a new

46:52

government agency, it would collect tariffs,

46:54

duties, and all revenue from foreign

46:57

sources. And this is the sort

46:59

of thing that makes me wonder,

47:01

has anyone told Donald Trump that

47:03

tariffs are not paid by other

47:05

countries, that they are paid by

47:08

US companies that import products from

47:10

other countries? And there's already an

47:12

agency that collects, like you said

47:14

tariffs, like you said, customs and

47:16

border protection. So I was really

47:19

happy actually to hear after this

47:21

flurry of executive actions that we're

47:23

not doing tariffs yet. We're holding

47:25

off on the tariffs. And I

47:27

was super relieved about that because

47:29

I do believe that 25, 35%

47:32

tariffs on imported goods would be

47:34

really bad for the economy. I

47:36

mean, we talked about on a

47:38

previous show. Actually, no, we didn't.

47:40

I was talking about this on

47:43

Twitter. I did some research into

47:45

this. The 35% I believe it's

47:47

the 35% tariff on Chinese goods

47:49

that proposed tariff, that would increase

47:51

the average household's yearly expenses by

47:53

$2,600, which for low-income households is

47:56

like 4% of their income. So

47:58

imagine instantly you have another 4%

48:00

of inflation of inflation instantly. And

48:02

that adds up quick because if

48:04

you think about with COVID, everybody

48:07

got checks. for $2,600 and it

48:09

changed the whole economy. Right? Right?

48:11

The economy boomed. So if you

48:13

pull away $2,600 from every American

48:15

household, the economy's gonna tank. It

48:18

doesn't seem like that much money,

48:20

but it really adds up. Right.

48:22

It adds up over millions and

48:24

millions of households, right? So. Trump

48:26

is not putting any tariffs in

48:28

place immediately, but he is threatening

48:31

now to impose 25% tariffs on

48:33

Mexico and Canada by February 1st,

48:35

using that as leverage to renegotiate

48:37

the USMCA trade agreement. And, you

48:39

know, 25% tariffs on Mexico and

48:42

Canada would actually be, I think,

48:44

far more concerning than on any

48:46

tariffs on China, because who is

48:48

impacted by that? car manufacturers, appliance

48:50

manufacturers, those are big ones. I

48:52

mean, you know, imagine if like

48:55

all the cars imported from Mexico,

48:57

we're now like 25% more expensive.

48:59

That'd be not not great. And

49:01

I think he's trying, he's doing

49:03

that because he's trying to not

49:06

let China circumvent their tariffs by

49:08

like, oh, we'll put the goods

49:10

in Mexico first and assemble them

49:12

there, then bring them across the

49:14

Mexican border or the US-Canada border.

49:17

So, you know, I. I like

49:19

the idea of tariffs as threats

49:21

to get better deals, but actually

49:23

implementing them would be, I think,

49:25

terrible for the US economy. So

49:27

this is good news. I'm happy

49:30

about this. Like, well done. In

49:32

his tweet storm, or tweet storm,

49:34

I'm sorry, his true social storm

49:36

when he put this out a

49:38

few weeks ago, he declared that

49:41

on January 20, 2025 will be

49:43

the birthday to the external revenue

49:45

service. Did this happen two days

49:47

ago? Did he actually create this

49:49

external revenue service? No. Not that

49:51

I know, not that I heard

49:54

of. Okay. You got to talk

49:56

about how the Treasury Department was

49:58

breached by Chinese hackers? And

50:00

apparently Janet Yellen's computer

50:03

was hacked? Yeah, so in early December,

50:05

the Treasury Department was

50:07

hacked. The Chinese hacking group called

50:10

Silk Typhoon is believed to have

50:12

stolen a digital key from a

50:14

third-party service provider and used it

50:17

to access unclassified information. Bloomberg reported

50:19

this, you know, with people familiar

50:21

with the matter, but they didn't

50:24

want to be named, that type

50:26

of information. And the... Basically,

50:30

they stole a third-party digital key

50:32

from a company called Beyond Trust.

50:34

It's a third-party service provider and

50:36

used access unclassified information to potential

50:38

sanctions. The way Beyond Trust, I

50:40

went and googled a little bit.

50:43

The way to think about Beyond

50:45

Trust is like how a bank

50:47

might have a safe and there's a timer

50:49

on it, so only the manager with

50:51

the key that's there at a certain

50:53

time could maybe open that safe. That's

50:55

the type of thing. So you basically

50:57

give access to your network instead of

50:59

people having, they call it privilege access

51:01

management. So somebody could be on your

51:03

network, but they don't have access to

51:05

everything. They only have access to some

51:07

things at certain time. And that's this

51:09

company's sales model. That's what they sell

51:11

to the treasury and governments and people

51:14

that want security. But it got

51:16

compromised. So they were able to

51:18

use that to take over these

51:20

computers. So Janet Yellen's computer was

51:22

infiltrated some unclassified files from hers.

51:24

Also, two of her lieutenants, Deputy

51:26

Secretary Wally Atameo and acting under

51:28

Secretary Brad Smith, they were, they

51:30

got access, their computers got

51:33

access too, but overall about 400

51:35

laptops and desktop machines were accessed

51:37

using the employees' names and passwords

51:40

and they accessed about 3,000 files

51:42

on unclassified personal devices. And then

51:44

they also accessed law enforcement sensitive

51:47

data on material on investigations run

51:49

by the committee of foreign investments

51:52

in the US, which we've. These

51:54

are national security

51:56

reviews about foreign

51:58

financing. terrorism, etc. And

52:01

so that's what's interesting is now

52:03

these Chinese hackers have gotten into

52:05

they have a picture of what's

52:07

happening at the US government. Maybe

52:09

that's pending legislation against them or

52:12

actions. They have access to this

52:14

legal information. Obviously Chinese officials have

52:16

denied these claiming that the government

52:18

was not behind them and it

52:20

was unwarded and groundless these claims.

52:23

But this is in general. China's

52:25

behind government state back a lot

52:27

of these tax are state backed

52:29

Yeah, it's really concerning I wonder

52:31

what they got access to I

52:33

feel like nobody's talking about this

52:36

story I mean literally the Treasury

52:38

Department was hacked and nobody's talking

52:40

about this like this should be

52:42

the biggest headline on CNN and

52:44

well it's because we don't know

52:47

what they got access to right

52:49

yes if we knew that they

52:51

had stolen secrets or something I

52:53

guess it would be more concerning

52:55

but there was a hearing and

52:58

also Last week, Biden did create

53:00

an executive order like a draft

53:02

executive order that instructs the government

53:04

to develop guidelines to better secure

53:06

cryptographic keys using cloud software contractors,

53:09

including storing them in hardware security

53:11

modules, physical devices that stores digital

53:13

keys to keep them safe. Under

53:15

the executive order, federal contractors would

53:17

also be required to manage access

53:19

better. So something definitely happened, but

53:22

it's not, nobody's talking about it

53:24

properly or as much as they

53:26

should be. All

53:29

right, David, let's go ahead and

53:31

do our last sponsor message and

53:34

then I'll take us out with

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a few small stories. Okay, grab.

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55:03

of the new AI apps that

55:05

is getting a lot of buzz

55:07

right now, actually it's not an

55:10

AI app, it's just a model,

55:12

is Google's Gemini Advanced, which I

55:14

have purchased access to, and you

55:16

can now do what's called deep

55:18

research. So I wanted to actually

55:20

like test this out and see

55:23

if we can do a little

55:25

bit of deep research. So this

55:27

is the 1.5 pro with deep

55:29

research. To get access to this

55:31

you have to have a personal

55:33

Google account. So you can't use

55:36

an enterprise account. It's got to

55:38

be like a Gmail account. And

55:40

you go to Gemini.gov.com and you

55:42

sign up. You can get a

55:44

month for free. And then it's

55:47

20 bucks a month after that.

55:49

And if you click the little

55:51

drop down here in the upper

55:53

left, you can select 1.5 pro

55:55

with deep research. And so. You

55:57

know, the way this works is

56:00

it does deep research. It goes

56:02

out and will search for First

56:04

of all, it takes a query

56:06

and then break that into like

56:08

multiple questions and then go out

56:11

and reach research, potentially hundreds of

56:13

websites to get an answer. And

56:15

it can take a little while.

56:17

So I want to launch this,

56:19

come up with a question, and

56:21

then I want to come back

56:24

to it after it's had a

56:26

bit of time to think. So

56:28

we'll do another story and come

56:30

back. So here's what I need

56:32

from our live stream viewers. I

56:35

need a question. that we can

56:37

use to test Gemini advanced and

56:39

see just how sophisticated it is.

56:41

So this is my call to

56:43

you, live stream viewers. Give me

56:45

a question and I'm going to

56:48

wait here and hopefully you have

56:50

not all fallen asleep. We're going

56:52

to get a question from somebody.

56:54

And in the meantime, David, let's

56:56

go ahead and talk about the

56:59

FDIC suing bank executives. So the

57:01

FDIC, this was a complaint filed

57:03

in San Francisco Federal Court this

57:05

week, suing 17 former Silicon Valley

57:07

Bank executives over the collapse. The

57:09

FDIC sued 17 former executives and

57:12

directors of Silicon Valley Bank on

57:14

Thursday seeking to recover billions of

57:16

dollars for alleged gross negligence and

57:18

breaches of fiduciary duty that caused

57:20

the bank's March 2023 collapse. They

57:23

faulted the bank's over-reliance on unhedged

57:25

interest rate sensitive long-term government bonds,

57:27

such as US Treasuries and mortgage-backed

57:29

securities. And the big objection to

57:31

the payment of a, they call

57:33

it grossly imprudent, $294 million dividend

57:36

to the parent company and it

57:38

drain needed capital. So in December

57:40

of 22, less than three months

57:42

before they paid a dividend out

57:44

of $200. almost $300 million and

57:47

they probably could have used some

57:49

of that capital when everything went

57:51

the hell there. They're calling the

57:53

SVP represents a case of egregious

57:55

mismanagement of interest rate and liquid.

57:57

risk by the bank's former officers

58:00

and directors. What's interesting to me

58:02

is like, where does the auditor

58:04

come into this, like when there's

58:06

lawsuits like this? Should auditors be

58:08

part of these lawsuits too? Sorry,

58:11

I wasn't really listening. So for,

58:13

no, that's okay. I mean, we

58:15

covered the Silicon Valley bank thing

58:17

and you brought it up and

58:19

it was what you showed a

58:21

footnote from the auditor in there

58:24

about their exposure to these government

58:26

treasury bonds. So now

58:28

there's this lawsuit. But my question

58:30

to you is, how come the

58:32

auditors aren't named in this? They're

58:35

the ones that kind of failed

58:37

to ring the bell that somebody

58:39

was wrong. I don't know. Maybe

58:42

you're separated out and you can't

58:44

be named in these if you're

58:46

all, all you're doing is auditing

58:49

their boats. Sorry David I wasn't

58:51

paying attention because I'm trying to

58:53

try and over getting all these

58:56

chats I see the chats coming

58:58

through it's okay. So thank you

59:00

Matthew I'm selecting Matthew's question here

59:03

Matthew says okay can you please

59:05

provide a tax efficiency analysis of

59:07

a single member LLC SSTB deciding

59:10

to either remain a sole proprietor

59:12

or electing to be taxed as

59:14

an S election. Assume net income

59:17

of at least 500K. All right,

59:19

let's let it work. So the

59:21

first thing that's going to do

59:24

is look at my prompt and

59:26

then expand on it and give

59:28

me the opportunity to edit it.

59:31

Here we go. Here's a research

59:33

plan for that tax topic. If

59:35

you need to update it, And

59:38

we've got a research plan here

59:40

with five questions. It's going to

59:42

first find the tax implications for

59:45

a single member LLC remaining a

59:47

sole proprietor with a net income

59:49

of at least $500,000. And then

59:52

it's going to do that for

59:54

if it has an ex- selection

59:56

then it will compare and contrast

59:59

Options 1 and 2. It will

1:00:01

find any relevant law changes or

1:00:03

updates that may impact the decision

1:00:06

and then find any articles or

1:00:08

resources discussing the pros and cons.

1:00:10

So let's start the research and

1:00:13

now it's going to go back

1:00:15

and it's going to start doing

1:00:17

the research and it's going to

1:00:20

take a few minutes so we

1:00:22

will come back to this and

1:00:24

let's see what happens. And Matthew

1:00:27

said, it should have said S

1:00:29

Corp is an S election. I

1:00:31

think it'll figure it out. I

1:00:34

hope it should be able to

1:00:36

figure it out, right? Great. Oh,

1:00:38

here we go. We got 19

1:00:41

websites so far, and we can

1:00:43

see which ones it's going to.

1:00:45

All right, while it does that,

1:00:48

David, go ahead and. Well, another,

1:00:50

you know, Soft Bank, who's famously

1:00:52

invested in lots of companies, it's.

1:00:55

Lots of massive failures, but also

1:00:57

some big successes. Some big successes,

1:00:59

but they were big and we

1:01:02

work. Yeah. We work, right. Well,

1:01:04

another one of their portfolio companies

1:01:06

have been accused of faking most

1:01:09

of its sales. So they invested,

1:01:11

there's a company called E. Fisheries,

1:01:13

one of Indonesia's most prominent startups,

1:01:16

may have inflated revenue and profit

1:01:18

for several years, according to an

1:01:20

internal investigation that was triggered by

1:01:23

a whistleblower, to the board. So

1:01:25

E-Fissary deploys feeders deficient shrimp farmers

1:01:27

in Indonesia and was a darling

1:01:30

of the startup scene scored a

1:01:32

valuation of $1.4 billion. And essentially

1:01:34

what management's accused of, they've inflated

1:01:37

revenue by almost $600 million in

1:01:39

nine months through September of last

1:01:41

year, according to this 52-page report

1:01:44

that Bloomberg News has access to.

1:01:46

Basically, it's saying about 75% of

1:01:48

the reported figures were faked. It

1:01:51

presented a $16 million profit for

1:01:54

the first nine months of 2024,

1:01:56

but it actually generated a $35

1:01:58

million loss during that time. The

1:02:00

revenue for the period was estimated

1:02:03

$157 million rather than the $752

1:02:05

they told investors. Management also inflated

1:02:07

revenue and profit numbers for previous

1:02:09

years as well. Now, what's interesting

1:02:12

about this is they previously hired

1:02:14

PWC and Grant Thornton to audit

1:02:16

financial results in the past, but

1:02:18

neither accounting firms declined to comment,

1:02:21

you know, via email. But I

1:02:23

just questioned, A, doesn't soft bank

1:02:25

vet their investments better, they just

1:02:27

take founders for the word. And

1:02:30

the other question I have is,

1:02:32

how do auditors miss revenue that's

1:02:34

misstated by 4X? Like, how does,

1:02:36

how does that happen? Like, nobody

1:02:39

steps back and seems, that seems

1:02:41

like a lot of fish feeders

1:02:43

to sell in a half a

1:02:45

year or a year. Like, they

1:02:48

can steps back and does the

1:02:50

math. Like, that's just a lot

1:02:52

of fish feeding. You got me.

1:02:54

I have no idea how some

1:02:57

of these massive frauds happen, if

1:02:59

true. But they do. And a

1:03:01

lot of times it seems like

1:03:03

auditors just blindly accepting what management

1:03:06

provided. And really there's no incentive

1:03:08

to go and look for reasons

1:03:10

to not accept it. It just

1:03:12

makes the job take longer. And

1:03:15

then you're in nasty little fish

1:03:17

farms poking around. You don't want

1:03:19

to be doing that if you're

1:03:21

the auditor. You just want to

1:03:24

make send an email, get an

1:03:26

answer, and work from that. Okay.

1:03:28

You've got an answer from Google

1:03:30

yet? Google Gemini is still tugging

1:03:33

away. It's now analyzing the results.

1:03:35

It researched 30 websites. So hopefully

1:03:37

it'll be done shortly here. So

1:03:39

in the meantime. Did you go

1:03:42

back to that if you would?

1:03:44

Yeah, sure. So what went out,

1:03:46

took your request, searched for websites

1:03:48

that might talk about that. It's

1:03:51

essentially, I'm seeing the logos that

1:03:53

are on here. I see it's

1:03:55

at the turbotage website, the bench

1:03:57

website. You know, it's got some

1:04:00

law firms here. Shopifies website. So

1:04:02

a lot of these are just

1:04:04

SEO blog posts. They might not

1:04:06

have good. It's got the IRS

1:04:09

here. It has the IRS there,

1:04:11

yeah. You know, hopefully it'll sort

1:04:13

the wheat from the chaff. It's

1:04:15

got instructions for 1120 in here.

1:04:18

I mean, we're going to see

1:04:20

how it does. Yeah, it's actually

1:04:22

using the IRS websites. Because I

1:04:24

think that's the after problem when

1:04:27

you try to do research. Those

1:04:29

Google searches you search and there's

1:04:31

just like so many websites that

1:04:33

are just in the way to

1:04:36

actually get to the real answer

1:04:38

on many things. So that's the

1:04:40

hope of this. If that's all

1:04:42

this does, it's all this does.

1:04:45

It's cut off that. It's cut

1:04:47

off that. It's cut off that.

1:04:49

It's cut off that. It's cut

1:04:51

off that. Yeah, we'll see. Okay,

1:04:54

so it's still going, so we're

1:04:56

going to we're going to keep

1:04:58

moving on here and we'll come

1:05:00

back to that. I have a

1:05:03

follow-up story here about American Express.

1:05:05

American Express got in trouble for

1:05:07

giving bad tax advice to its

1:05:09

customers. Years and years ago. I

1:05:11

remember talking about this on the

1:05:14

show, and they have now settled

1:05:16

with the Department of Justice over.

1:05:18

the allegations of fraud and deceptive

1:05:20

marketing practices. They are going to

1:05:23

pay $230 million to settle this

1:05:25

case. And there's a few different

1:05:27

things they were doing here, but

1:05:29

the big one, the one that

1:05:32

is the most interesting, is what

1:05:34

they were doing with wire fees.

1:05:36

In 2018 and 2019, American Express

1:05:38

launched wire products called payroll rewards

1:05:41

and premium wire. and they marketed

1:05:43

these wire services to small and

1:05:45

mid-sized businesses. These products had really

1:05:47

high fees for the wires, way

1:05:50

higher than you would normally pay.

1:05:52

And companies who bought these products

1:05:54

were told, yeah, the fees are

1:05:56

high, but they're fully tax deductible,

1:05:59

so your business is going to

1:06:01

pay for these wire fees, and

1:06:03

every time you do a wire...

1:06:05

with American Express, we're going to

1:06:08

give you credit cards, reward points.

1:06:10

And those are tax-free. So your

1:06:12

business is going to pay a

1:06:14

little more for wires, but you're

1:06:17

going to get massive rewards on...

1:06:19

your American Express card. And it

1:06:21

really added up. If you think

1:06:23

about it, every time you make

1:06:26

a credit card payment on an

1:06:28

American Express card, you know, you

1:06:30

might be earning anywhere from like

1:06:32

1 to 2 percent of that

1:06:35

transaction back in credit card rewards.

1:06:37

So basically by running what would

1:06:39

be wire transfers, very large payments

1:06:41

through the American Express network, you're

1:06:44

getting that like 1 to 2

1:06:46

percent back in terms of credit

1:06:48

card rewards personally. And they, the

1:06:50

sales people were going out and

1:06:53

telling. the business owners, this is

1:06:55

tax free. Now, credit card rewards

1:06:57

are generally tax free. The IRS

1:06:59

says, don't worry about it, you

1:07:02

don't have to report this as

1:07:04

income. But when you do something

1:07:06

like this, that doesn't apply. And

1:07:08

they're not busting the business owners,

1:07:11

they're busting American Express for giving

1:07:13

improper tax advice. I don't know

1:07:15

anything, I don't know what happened.

1:07:17

It's not deceiving, right? It's, but

1:07:20

it is deceiving, because it's, it's,

1:07:22

it's. illegal. You know, you have

1:07:24

to. So credit card rewards, I

1:07:26

don't know exactly what the rules

1:07:29

are, right, with the IRS, but

1:07:31

like credit card rewards earned in

1:07:33

just like the normal credit card

1:07:35

situation, those you don't have to

1:07:38

report. But if you juice them

1:07:40

up this way, then like no,

1:07:42

that's that's income, right? You're siphoning

1:07:44

off. Like you're basically transferring, you're

1:07:47

creating expense in the business and

1:07:49

you're creating rewards on the on

1:07:51

the personal side, right? Yeah. So

1:07:53

it's basically like, yeah, it's a

1:07:56

trick. It's fraud. And so about

1:07:58

200 employees were let go in

1:08:00

2021, which is when we originally

1:08:02

talked about this. And the products

1:08:05

were discontinued in November of that

1:08:07

year. Yeah, the DOJ alleged that

1:08:09

this advice was incorrect since incurring

1:08:11

expense excessive fees for personal benefits

1:08:14

does not qualify as an ordinary

1:08:16

and necessary business expense. So it's

1:08:18

incurring excessive fees for personal benefits.

1:08:20

And the customers were told that

1:08:23

the wire payment fees were fully

1:08:25

tax deductible business expenses and that

1:08:27

the reward points earned were tax

1:08:29

free, making the benefits outweigh the

1:08:32

costs. So yeah, that's what happens

1:08:34

sometimes. Okay, so I got something.

1:08:36

All right, so tax efficiency analysis

1:08:38

of a single member LLC SSTB,

1:08:40

sole proprietorships versus S Corp election.

1:08:43

And what I have here is

1:08:45

like a big document here. So

1:08:47

we've got an introduction, we've got

1:08:49

a section called qualified business income

1:08:52

deduction, we've got tax implications of

1:08:54

remaining a sole proprietorship, we've got.

1:08:57

I mean, it's a big long

1:08:59

analysis here. Let's see if we

1:09:01

can get to a conclusion. Is

1:09:03

there a conclusion here? Wow, just

1:09:05

keeps going. Let's see. I'm going

1:09:07

to be interested to see if

1:09:10

it gives us a conclusion. So,

1:09:12

the pros and cons of each

1:09:14

option, sole proprietorship, and remember that

1:09:16

we gave it the specific case

1:09:18

of $500,000, right? and that income

1:09:20

of at least that. So it

1:09:22

says the pros are simplicity and

1:09:25

ease of setup and lower administrative

1:09:27

burden. The cons, higher self-employment tax

1:09:29

burden, unlimited personal liability, higher audit

1:09:31

risk. And for the S Corp,

1:09:33

it said, potential for lower overall.

1:09:35

Okay, here's a conclusion. It says

1:09:37

there's no one-size-fits-all answer. You know,

1:09:39

the problem is on this show,

1:09:42

I don't really have a chance

1:09:44

to look at this. So here's

1:09:46

what I'm going to do. I'm

1:09:48

going to open this and Google

1:09:50

Docs. and I'm going to paste

1:09:52

this link into the chat and

1:09:54

then I would love to get

1:09:57

your take on this method. So

1:10:00

I'm going to make this public,

1:10:02

I'm going to share this with

1:10:04

anyone with the link, and I'll

1:10:07

make it so that you can

1:10:09

comment on it. And I'm just

1:10:11

going to paste this here in

1:10:14

the chat. So Gemini analysis of

1:10:16

S-corp versus SMLC. Take a look

1:10:18

and then we'll give the feedback

1:10:20

on the next episode. So did

1:10:23

you just blow up that startup

1:10:25

BlueJ at this point? Have you

1:10:27

seen BlueJ? Yeah, I've heard about

1:10:29

it. It's essentially what you just

1:10:32

did. It's a whole standalone tax

1:10:34

app that we'll go and create.

1:10:36

It'll do the research and give

1:10:39

you these answers for tax things.

1:10:41

And they're really hot. They've taken

1:10:43

a bunch of money. They've, they're

1:10:45

doing partnerships. I think I just

1:10:48

saw the latest. It might have

1:10:50

been carbon. It's possibly working with

1:10:52

them. They're in a bunch of

1:10:55

firms. But essentially, this new Google

1:10:57

product means you don't have to

1:10:59

buy the niche app. Is that,

1:11:01

is that where, is AI heading

1:11:04

that way, where you don't have

1:11:06

to have these niche apps that

1:11:08

are built on top of the

1:11:10

AI? The AI is getting to

1:11:13

the point where it's getting to

1:11:15

the point where it. I mean,

1:11:17

the problem right now with using

1:11:20

general purpose chat bots for research,

1:11:22

like tax, is that it goes

1:11:24

out and it doesn't know what's

1:11:26

an authoritative source or not. So,

1:11:29

but like you can, you can

1:11:31

do this already with perplexity, is

1:11:33

you can tell perplexity, a, dot

1:11:36

AI, only use these sources. And

1:11:38

when it comes back, you can

1:11:40

actually disable certain sources and have

1:11:42

it rerun the, rerun your prompt,

1:11:45

only using say IRS sources. or

1:11:47

Thompson Reuters sources or whatever you

1:11:49

want it to be. Yeah, you

1:11:51

can choose. So yeah, I don't,

1:11:54

I mean, I'm sure there will

1:11:56

be a market for like very

1:11:58

specialized services because not everything is

1:12:01

available on the internet. So if

1:12:03

you have a library of really

1:12:05

good tax research, that's private, and

1:12:07

you give AI access to that,

1:12:10

that creates a ton of value

1:12:12

for the researcher. So that's where

1:12:14

the value is. It's in the

1:12:17

proprietary data. Okay. Don't forget. You

1:12:19

can earn free continuing professional education

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credits. NASA approved CPE for listening

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This is publicity. It's just publicity.

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We want to start charging everybody,

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since we're talking about tax checks

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tax tax That's a great one.

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And listen to those while you're

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take the quiz and get your

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1:14:29

for this week, David. Thanks everyone

1:14:31

who joined us live, subscribe, on

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We're going to try to do

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and we'll do our best to

1:14:45

stick to it. Thanks Joseph for

1:14:47

joining us. Joseph says great content

1:14:49

today once again, and we'll see

1:14:51

you here next week. Bye everyone.

1:14:56

Once you get the word out about your

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