The Accounting Podcast

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David Leary: [00:00:04] Literally, the Treasury Department was hacked, and nobody's talking about this. Like, this should be the biggest headline on CNN coming to you weekly from the OnPay Recording Studio.

Blake Oliver: [00:00:16] Hey, everyone, and welcome back to The Accounting Podcast, your weekly news roundup for accounting and tax professionals. And the number one podcast for accountants in the world. I'm Blake Oliver. And I'm.

David Leary: [00:00:26] David Leary. And Blake. Today's episode did you notice the number is very special and significant for 20?

Blake Oliver: [00:00:32] I have no idea. For 20 that is. Um, tell me the significance of it.

David Leary: [00:00:36] David, I tried to find a cannabis related accounting story for this week, and I couldn't find one, so too bad. And I think your suggestion was we should have brought on Scott Scarano from Accounting High to bridge the gap for this episode, but it did not happen either, so.

Blake Oliver: [00:00:49] Well, I feel like I'm high or something right now because the news has just been wild. Like I have no idea what is going on. Um, I came down for breakfast a few days ago and my son greets me and says, dad, Trump saved TikTok. He'd been watching live streams, streamers on like YouTube talking about this. This was all the news on what was it Sunday morning? Uh, and this might be the single greatest piece of propaganda that I've ever seen in my life. This is the message that greeted, uh, TikTok users after it was restored. It says here, uh. Welcome back. Thanks for your patience and support as a result of President Trump's efforts. Tiktok is back in the US. You can continue to create, share and discover all the things you love on TikTok. Uh, so what happened is that on like Sunday night, late TikTok shut itself down because of this law that bans TikTok in the United States that Congress passed a while ago. Uh, and then turned it back on midday on Sunday after Trump said that he was going to as president, you know, extend give them give them that extension.

Blake Oliver: [00:02:03] That's part of the law. But here's what's crazy about this. And we talked about this on the show. There was actually no requirement in the law that TikTok shut down the app. The only thing that TikTok was required to do, or that American companies were required to do, is to remove TikTok from the App Store. So the app could have functioned completely. It could have continued to function for those who had downloaded it. But TikTok chose to disable itself and then turn itself back on, thus making Donald Trump the hero to millions and millions and millions of TikTok users. And you know, to be fair, us as well, in a sense that we got 8 million views on TikTok in the last 365 days and 310,000 likes. It's been a great platform for us. But that was not part of the law. People should know that. So here you have this Chinese company. Basically, I don't know if they were coordinating or what, but they they gave Trump this massive PR bump.

David Leary: [00:03:04] And I think I texted you as soon as you sent me this image of that and I said, um, Trump's running for his third term already. He, he's he's courting new voters from a whole nother generation.

Blake Oliver: [00:03:15] Welcome to our live stream, viewers. Don't forget, you can join us live. Uh, follow us on YouTube. We are at The Accounting Podcast. Hit subscribe and that notification button and you will get notified when we go live. And you can chat with us and you'll get the episodes before anyone else. Also, you can earn free continuing professional education for listening to this show. Go to the earmark app. You can download it on the Apple App Store or the Google Play Store, or access it in your browser at earmark app. Sign up for free and earn a free CPE credit every week for listening to this show. It works for Certified Public accountants. Certified management accountants. The tax courses on our app work for enrolled agents. But be careful just the federal tax ones work. You got to look for that IRS banner. It's a great way to earn CPE and not have a crunch at the end of the year. So go sign up at your app. And David, let's shut it.

David Leary: [00:04:08] Down and then relaunch it. And then put a message in our app. Yes you.

Blake Oliver: [00:04:11] Do. There you go. We're not that sophisticated yet. David, let's thank our sponsors who are our sponsors for this episode.

David Leary: [00:04:18] For for sponsors for this episode. We have Relay Keeper Tax Bandits and Basil, and we'll have ads for all of them during the episode, so stay tuned.

Blake Oliver: [00:04:27] Awesome. Um, so on the Trump train this week, all this news is Trump all the time. He was inaugurated as the next president of the United States. And the thing I really want to talk about is this Trump coin, because I feel like it has not gotten the the coverage it deserves. This is truly momentous that the sitting president on his inauguration day issued his own cryptocurrency, and also one for his wife. Those coins are Trump and Melania. I want to talk about that. I also want to talk about KPMG becoming a law firm in the United States. And that's happening here in Arizona. David, what's top of mind for you this week?

David Leary: [00:05:14] Um, one of the day one initiatives Republicans asked Trump to do was to kill direct file. That looks like that's not going to happen. Now. I definitely want to talk about that. And then it looks like Sage's copilot. I may have given Business A's list of invoices to a different business. Business be, let's say, when somebody requested their list of invoices. So we have to talk about you know, I it's not leaking is a weird word to use, but it's kind of like a leak, even if it gives somebody else's data from a different company. Right.

Blake Oliver: [00:05:46] Uh. Welcome, Evan. Welcome, David. Hey, Ben. Boring accountant. Our favorite live stream viewer. Um, one of our listeners is asking in the chat, what is our broadcast schedule? Sorry, r5, HD, we don't really have a broadcast schedule. We just get on whenever we can. We're going to try to do it on Wednesday mornings this year. We're going to make every effort for it to be Wednesday mornings, which will probably reduce our live stream viewership. I think it was better when we did Fridays, but I don't know, we might go back to that. Anyway, the best thing to do is just to subscribe on YouTube and hit notify and we'll pop up for you. Hey Gator NYC. Good to see you as well. Okay, David, I really do want to talk about the Trump coin, but I know that a lot of our listeners are not that into crypto. So why don't we start with Sage Copilot and this news? Because this really concerns me. You were telling me about this before the show started, and it sounds like Sage is I gave confidential information to a user from another company.

David Leary: [00:06:48] Yeah. So to quote from the, uh, news report. A customer found when they asked Sage copilot to show a list of recent invoices. The AI pulled data from other customers accounts, including their own. Now, when they say a customer, based on the headlines of the articles, I'm thinking that the customer was actually an accounting firm. And so they made a request and they got maybe their own clients and the customers of the client they were working in at that time. It feels like based on reading, it doesn't say who the customer is, but it feels like an accounting firm discovered this. So they reported this up to Sage right away. Sage actually turned off Sage copilot temporarily for several hours on Monday to address the issue. The Sage spokesperson spokesperson described it as an AI blunder. It's a minor issue that only involved a small amount of customers. Um, and they Sage group also denied that its AI leaked sensitive customer information.

Blake Oliver: [00:07:46] Okay, so I'm trying to figure out what happened here in my head. Help me picture this, David. So I work at an accounting firm, and I've got my clients on Sage, and I have access to Sage. Copilot. And copilot is the chatbot that they've built that's connected to the.

David Leary: [00:08:02] Maybe you're using Sage for your own firm's books.

Blake Oliver: [00:08:05] Okay.

David Leary: [00:08:06] And you said you asked copilot, tell me the open invoices and it went and got your invoices, but it also got open invoices from your clients.

Blake Oliver: [00:08:15] Okay. But this is still something that I am supposed to have access to, because my big concern would be if it went and got invoices from a company that I am not associated with at all, and started telling me information about that.

David Leary: [00:08:33] And that's why it's interesting. So the the headline said, let me read the headline. Accounting firms are caught telling customers about each other's financial records. And that's why I think it was an accounting firm that discovered this, because that was the headline of the article. But the articles just say customer. But you're right. The bigger concern if I have customer Joe's Plumbing over here and I have Katherine's Kitchen's over here, and Katherine's kitchen's invoices show up in front of Joe's plumbing. That's an issue. And that's kind of what happened. But it feels like it got rolled up to the accountant who had access already.

Blake Oliver: [00:09:09] Don't know this. We don't.

David Leary: [00:09:09] Know. We don't know. I'm trying to put together. That's the problem with all these things, these articles. You don't get good quality reporting of the exact issue. Yeah, but maybe.

Blake Oliver: [00:09:17] We can follow up with Sage and ask, like, do we have a contact there? Because this is very concerning is when I'm in one file, one company file and I do an I query, I should not be getting results for any other company file. That should be. There should be a firewall in between them where the data is not shared. And this is the risk of AI implementations that Implementations that are not done right. Is that if an AI LLM chatbot has access to all customer data at once, and that is what is being queried, I'm asking questions of that chatbot. And, you know, there's some sort of guardrails, like instructions in place to only give information back about a particular customer. That does not guarantee that the chatbot will follow those instructions. So unless you're walling off the data somehow, you can have leaked data. And people have proven this over and over again that you can basically hack these llms in different ways by giving them the right prompt. And that, for instance, is how The New York Times hacked ChatGPT to give them the full text of New York Times articles. Openai, when they were building ChatGPT, copied all the New York Times articles and used them to train ChatGPT, which is something the New York Times said, you said, you can't do right. They're suing OpenAI about it. And to prove it, they went into ChatGPT and they did a bunch of prompts. Now, if you try to do this, ChatGPT will refuse to give you the full text of an article because it's got instructions, but there's ways to get around that. And so The New York Times did like hundreds of prompts, thousands of prompts, and eventually they figured out how to get ChatGPT to give them the full articles. So if you are working at an app company and you are designing an AI agent, you have to make sure that the customer data is walled off or this will happen.

David Leary: [00:11:13] So going by that theory. Enterprising accounting hackers should be open. You could go into if it's Intuit's assist or Sage's copilot or any of these that exist. Oracle's. I forget what they're calling them. It's probably just called the Oracle for for NetSuite. I forget what they're calling them.

Blake Oliver: [00:11:31] They should just call it the Or. They should call it Delphi is what they should call it.

David Leary: [00:11:34] But you could go in and in theory say See. Like I would like to see the open invoices for customer, blah blah blah, even though you don't have any access to that and see if it gives it back because it has the knowledge. It just is it making the right decision at the time to give you that which really it's that it's the difference between knowledge and intelligence. Because intelligence would recognize like, wait, these are not your invoices, why would I give you them? Why would display these on a report for you? Just because I know they exist doesn't mean I'm getting their your invoices. And that's that difference of it has knowledge but not intelligence.

Blake Oliver: [00:12:06] Mhm. All right David let's thank our first sponsor. It's relay this uh this episode right.

David Leary: [00:12:14] It's relay. And if you want to hit the banner for me I'll read the ad.

Blake Oliver: [00:12:17] Great.

David Leary: [00:12:21] Get a little sip of water first.

Blake Oliver: [00:12:23] We don't want David to lose his voice again on this episode.

David Leary: [00:12:26] Yeah. So between Blake and myself, we now have three, four, five, maybe six business entities, 20 or so checking accounts, dozens and dozens of dozens of virtual cards, and it would be impossible to manage all of this if we weren't using relays or small business. Bank relay is truly a part of the tech stack we use to run our businesses. Relay allows Blake and I to each have our own logins. We can grant access to our team and even our account without sharing passwords or two factor authentication codes. Relay allows us to grow and scale our banking needs without ever going into a physical branch. I recently added an account to receive inbound merchant services with just a few clicks, and had to create a payroll checking account. Again, a few clicks and I instantly had access to my ACH info to give to my payroll provider. With relays virtual cards, we can issue debit cards to our team around the world with needed for business need for needed business expenses. I can instantly spin up a new visa debit card and set both daily and monthly spending limits. And when the team member doesn't need to use their card anymore, I can freeze it until they need to use it again. Relay also has automation features to sweep money automatically from one account to another based on dates, amount or target balances, even percentages. For example, inbound payments could be split daily for your payroll sales tax payable operating in savings accounts based on predefined rules. To learn more about using relay for your firm and clients, head over to The Accounting Podcast. Relay that is The Accounting Podcast relay.

Blake Oliver: [00:13:52] Thank you. Relay. Let's talk about the Trump meme coin and the Melania meme coin. President Donald Trump launched a cryptocurrency meme coin called Trump just days before his inauguration as the 47th president. The token was originally priced at $10 and quickly surged to a peak of $74.59 before experiencing significant volatility, and currently it is sitting at $39. It debuted during the inaugural Crypto Ball in Washington, DC, and the coin features an image of Trump with a raised fist and the phrase fight, fight, fight. First Lady Melania Trump followed by launching her own meme coin called Melania on Sunday. That one has not done nearly as well. It is sitting at $3.81. And I think the folks who bought into that one are are are not too happy about that one. There's like, uh, criticism that it was a rug pull, meaning, uh, the, the holders of the coin dumped it onto the market and pushed the price down in order to enrich themselves. But I want to talk about this because a lot of the coverage in the mainstream press has been about how Trump is now a crypto billionaire because of this. And I want to explain what that means, because it's not like real money. It's on paper at this point. So there's $1 billion supply or, sorry, a billion coin supply of this Trump coin. That is that is what is available on the Solana blockchain. Okay. Or what could be. And organizations affiliated with Donald Trump that control this coin put 200 million into circulation. And it started selling for what, $10 or something. And then, you know, it's gone up and down, right. But they sell it to people who buy it just like Bitcoin, right? Just like Ethereum, any of these coins. And so the market price of that coin is currently, what did I say.

David Leary: [00:15:57] 30 around 48 or 58.

Blake Oliver: [00:15:58] Somewhere in there it's $39.11 at this very moment as we record. Okay. So if you multiply the circulating supply of of 2 million coins by that price, you get a market cap of $7.8 billion. So if everybody were able to sell all of their coins for at that perfect price, yeah, that's what it's worth. What that means is theoretically because Trump holds It is, entities hold 80% of the supply and reserve that is worth if they were able to sell it at $39.30 1.28 billion. Okay, now that's the number that gets tossed around. But of course, if that happened, if the Trump organizations did dump 80% of their supply onto the market, it would, of course, crash the price. Um, and I was trying to figure out, like, exactly how much money did Trump make from selling these coins? And I asked a friend who's been in crypto for years and years, and he says, actually, it's impossible to figure this out. It's, it's and if anyone knows how to figure this out, I want to know. But because these wallets addresses are really hard to like. Trace. Right. You have the original wallets, I guess, that issued the the token. And we could try to figure out what they got paid for it and how much they raised. But like he said, it's extremely difficult, especially since you can, like, trade, like you could control another wallet that then buys from the original wallet and nobody knows who controls that. So basically, trying to figure out what Trump made from this is almost impossible and trying to figure out which are related entities and which are not is almost impossible. So like, how much money did Trump make selling this meme coin? We don't know. We know that it could be yet. Yes. We don't know yet. I mean, we know that it could be billions of dollars, but we don't know. Probably not. Right. Because again, you're just taking the market price and you're multiplying it by the circulating supply. That doesn't mean that everybody paid that much for it because it started much lower than that. Um, but.

David Leary: [00:18:05] If you diversify or sell a little bit here, so a little bit here, you know, you're going to make those, these quick easy profits on its way up.

Blake Oliver: [00:18:13] Right. So so you know what kind of blows my mind about this whole thing is. Here's the Here's the situation. We have a president. A US president who? Well, imagine this, David. Imagine that on Inauguration Day, Donald Trump buys a plot of land next to the US Mint in Washington, DC. I don't know if it's in Washington, but let's just say he buys up and he puts a building there, right? And that he creates the Trump mint. And the Trump mint starts creating currency coins, dollar bills, whatever you call it. Right. And it's called Trump Trump money. And he starts selling it to people. And so people are going into the mint and they're they're exchanging their dollars for Trump coins, and then they're going out into the world. And they can go and they can, you know, exchange these coins with other people, use them like exchange them for dollars, exchange them exchange them for other currency, whatever they like. A US president has printed his own currency.

David Leary: [00:19:28] And for me, I've always I've always had this thought process that the difference between the United States and like a lot of other, let's say, like Iraq and other countries where there's been some dictatorships, etc., is in our country, we don't we only put dead presidents on money, and we only put up statues of dead presidents. We don't put live president statues up of presidents that are alive, and we don't put live presidents on our currency. And that's a big difference between us and lots of countries around the world. I mean, even the UK, right? Whoever the queen or the king at the time, they get put on the money. That's crazy to me.

Blake Oliver: [00:20:01] Right. But but this is more than just.

David Leary: [00:20:03] But now he's doing it essentially right.

Blake Oliver: [00:20:05] Well, this is more than just propaganda. This is more than just putting yourself on the bill of the official currency of the country. This is printing your own currency.

David Leary: [00:20:14] A side currency. Yeah.

Blake Oliver: [00:20:16] Essentially it's it's it's a currency. Like it can be exchanged on Coinbase. You can buy and sell Trump and Melania on Coinbase and. I think this will actually be seen as a momentous time in US history. The idea that an individual president issued their own currency and. What they say, you know, the issuer of this coin says this is just a souvenir. It's a collectible. Right. But how how much is it really a collectible when you actually have like a market price? And there are exchanges where you can buy and sell it instantaneously and convert it into cash? To me, this is a currency, no matter what you call it. You can call it a collectible, but it functions like a currency.

David Leary: [00:21:07] If you would have issued the Trump Teletubby, are they called Teletubbies? What are those little things? No Beanie baby, the Trump beanie baby. Yeah. And instantly a marketplace existed and people were buying and trading these and they were increasing in value. Would that be any different than this?

Blake Oliver: [00:21:23] I mean, I guess the difference is the immediacy and the fact that it's not a physical object. Like, explain to me, David.

David Leary: [00:21:29] With crypto.

Blake Oliver: [00:21:30] What's the difference between. Right, what's the difference between this and Bitcoin. What's the difference between this and any other currency. It functions the same way.

David Leary: [00:21:42] Yeah. It's a temporary store of value if you think about it that way.

Blake Oliver: [00:21:46] Yeah. It can be exchanged. It's fungible. You know, every all of them are exactly the same. Um, like, I mean. I think this is bending our definitions is what I'm trying to say here. And this could be a real problem. I feel like this could be a real problem, because now Donald Trump controls 80% in reserve of the supply of a new currency that he has created. I mean, and so it has no intrinsic value whatsoever. And yet somehow it has a market cap of $7.8 billion. What does that value represent?

David Leary: [00:22:30] What if what if he decides to make it the official crypto of the United States now, and it becomes this standard, if you want to call it that.

Blake Oliver: [00:22:38] Right. I mean, he'll.

David Leary: [00:22:40] He'll be worth trillions and trillions.

Blake Oliver: [00:22:42] What if what if Trump I mean, he could do this. I'm not saying he's going to do this, but like let's say he he gets you know, he gives he gives a chunk of that, you know, crypto and reserve the Trump coin to every member of Congress. And then they pass a law to make this an official currency or something like what's to stop that?

David Leary: [00:23:04] That scares me, actually, because I feel that it's a very believable scenario with Congress these days, actually scares me.

Blake Oliver: [00:23:12] Edgar says it only has value if people believe it does the same as the dollar. I think the difference between the dollar and any other cryptocurrency is that the dollar has the full faith and credit and backing of the United States government, and the government guarantees that you can exchange it for that. You can use it. And, you know, the power of our military backs it and all that stuff, right? So the fact that the president is behind this changes. It's different than any other currency. So, um, yeah, I just want to bring that up. If any of you have insights into this, you know, please let me know. I just find this to be fascinating, potentially frightening. Uh, and what does this mean for the future of cryptocurrency? Like one of my. Go ahead. David.

David Leary: [00:24:01] And is this just, like, is this really from him and his organizations, or is this just another here's my brand and I just let people license it Ultimately, which is what he's done in the past. Like he doesn't run Trump steaks and Trump bathrobes. It's just companies by the word trump and slap it on and sell these things Trump University, etc.. So is this is this more of that now? In exchange, they gave him X percentage of this instead of maybe him taking a licensing fee. He just took some of the coin. But is that what's really this is just at the end of the day is innocence not the right word, but it kind of is just innocent Trump egotistical. Like, it's like putting my okay, let's.

Blake Oliver: [00:24:44] Put this in perspective. Yeah. It used to be that presidents would U.S. presidents would separate themselves entirely from all of their business interests. They would even like divest completely. And the most famous example is to avoid conflicts of interest. Right. The most famous example is Jimmy Carter had, like a peanut farm in Georgia. He had to get rid of that or something, right? That was like apparently too much of a conflict of interest. And now here we have a situation where the president creates a meme coin that has like billions of dollars in market cap and like, just think about how you could influence a president this way. There's no transparency in who controls these wallets, right? So let's say you wanted to bribe a sitting president who owns his own meme coin. You could just, like, buy, buy the coin from a wallet that is controlled by the Trump Organization or the Trump family, essentially transferring money, and nobody knows that it's happening.

David Leary: [00:25:45] Yeah, it opens the door to possible corruption.

Blake Oliver: [00:25:48] And I'm not saying this is just that I'm not just like targeting Trump with this criticism. I'm saying that this is a serious problem with all politicians is that money corrupts. So if you have a situation where you can like bribe politicians with cryptocurrency and nobody can see it happening. It's going to happen.

David Leary: [00:26:13] If it's not happening already.

Blake Oliver: [00:26:15] If it's not happening already? Yeah. Um, okay, David, I'm going to let you take the next story. And you also get to choose if you want me to read the next ad. Yeah, I'll.

David Leary: [00:26:24] Let you do the next ad here while I queue up the story. I'll pull up the banner.

Blake Oliver: [00:26:28] Thank you, keeper, for sponsoring this episode. By combining client communications, file review reporting and task management, keeper has everything you need to run your bookkeeping or CAS practice. Keeper is an all in one app that allows you, your team, and your clients to easily collaborate to make your monthly close as efficient as possible. Starting with a beautiful custom branded client portal optimized for bookkeeping work, your client can answer questions you have about uncategorized transactions, allowing you to categorize and automatically post them to QuickBooks online correctly, all without ever leaving keeper. Keepers month end file review feature will surface transactions that may not be posted correctly, and with keeper's customized reports, you'll be able to increase the value that your firm provides to clients by giving them reports they'll actually read. Keeper's built in task management ensures nothing falls through the cracks and includes time tracking, so you can see where you and your team spends their time. Keeper has very affordable and clear pricing model that starts at only $8 a month. To learn more about why thousands of bookkeepers and accountants trust keeper to manage their month end close and to get 20% off your first three months, head over to The Accounting Podcast. Keeper. All right. Let's talk about direct file. Direct file. Trump. Right. Because we were really worried that Donald Trump or his administration might shut down direct file. And before we get into that briefly David summarize direct file.

David Leary: [00:27:56] Yeah. So direct file is the IRS's TurboTax killer, if you want to call it that, where people can go to the IRS's website and file their taxes using an app very similar to a TurboTax or an H&R Block online type of experience. It was rolled out to 12 states, and now it's going to be rolled out to 25 states. So they've doubled the size of the program. Customer satisfaction has been good. It's been a pretty successful rollout for the IRS, but there's a lot of arguments about it, because Republicans feel very strongly that the IRS should not be doing this. They don't have the right to do this. The Congress has to pass a law that says, yes, IRS, go build this. It's their point of view. So to recap, about a month ago, a group of 29 House Republicans penned a letter in a request to Trump asking him to kill direct file on day one. And if you remember that letter, they also appealed to the Doge. They secede. The Doge guys, Musk and uh, Ramaswamy. Ramaswamy who's already.

Blake Oliver: [00:28:54] Out, by the way?

David Leary: [00:28:55] Oh, he's out now. Yeah, yeah.

Blake Oliver: [00:28:56] He's he's he's out. So he's out. You know, I predicted that Tech and Trump would not get along ultimately, because that's the history. Every time a billionaire in our in American history tries to, like, buy the presidency. Eventually the president who wins is like, oh yeah, no, I thank you for your help, but I don't need you anymore.

David Leary: [00:29:15] Yeah, I made it anyway.

Blake Oliver: [00:29:17] Continue.

David Leary: [00:29:18] And they requested him to kill. They requested Trump to kill direct file on day one. So all day Monday, when all these executive orders are flying around, you know, when he's busy, uh, saving TikTok. I was checking to see if he killed direct file over and over again, but it's looking like it's not going to happen. And because on January 15th, the Democrats, 22 senators and 113 members of the House are now touting direct file as a Doge friendly program. And they wanted it expanded. So our favorite senator, Elizabeth Warren, she penned a letter. Like always. She penned a letter her along with Senator Chris Coons of Delaware. On January 15th, they sent a letter to Scott Bessent, who is now the secretary designate of the of the US Department of Treasury, and Billy Long, who we've spoken about, who's the commissioner designate of the IRS and one of the sentences they have in there says press reports indicate that Mr. Musk, Mr. Musk and Mr. Ramaswamy, the leaders of president elect Donald Trump's Department of Government Efficiency, have discussed trying to create a mobile app for Americans to file their taxes for free with IRS Revenue Service.

David Leary: [00:30:22] Direct file fits the bill. And not only a letter. Senator Warren actually tweeted about this. So she said Elon Musk and Doge want to create a mobile app for you to file your taxes for you with the IRS. I've led over 140 members of Congress in letting Trump's nominees know that the IRS already has an easy program to file your taxes for free, called Direct File. And we should expand it. So she felt very strongly about this. She put this out there. Well, during the nomination process for Trump's pick to lead the Treasury Department, Scott Bissonette, he assured the Senate Finance Committee that direct file would be an option for taxpayers in the upcoming filing season. And then he's going to study the program to figure out about the long term future. So there is not going to be a day one killing of direct file. It is not being killed. In fact, it's going to go scheduled to go live on January 27th for a total of 25 states. So half the country will be able to use direct file next week. It did not get killed.

Blake Oliver: [00:31:18] It's a rare example of bipartisanship. This is great. I'm so happy.

David Leary: [00:31:24] What I'm wondering about is how bad does Elizabeth Warren hate Big Tax? Because she hates Elon Musk a lot, but she obviously hates Intuit and H&R block and Big Tax more than she hates Elon Musk.

Blake Oliver: [00:31:38] Well, you know, the enemy of my enemy is my friend.

David Leary: [00:31:41] Yeah, but I still can't find anything about it being killed. Like, I just I've searched and searched.

Blake Oliver: [00:31:47] It would make no sense. Direct file is one of the smartest things that the IRS has done, that the government has done in a long time. We should make it easy For middle class Americans to file their taxes. The simple situations that tax pros don't want to deal with, just let them do it directly with the IRS. I didn't so.

David Leary: [00:32:06] Much sign up on the stage there next to the future cabinet members at the inauguration. Any TurboTax representatives or H&R block representatives up there so you know they're not in the the the good fortune to get the Republicans to kill it, right? They would want this to happen. They would want it to be killed. It's not.

Blake Oliver: [00:32:24] Happening. All right. I have news about KPMG, the smallest of the big four accounting firms. Although we probably shouldn't call them accounting firms because they're really giant consulting firms that happen to do accounting and tax. And they're going to do more. Kpmg is getting into legal thus far in the United States, it has not been possible for the Big Four to provide legal services due to rules about Out attorney ownership of law firms.

David Leary: [00:32:56] Just is that just all Big Four or just in general? You can't have a law firm and accounting firm be the same firm. Like it doesn't matter if it's a big form, right?

Blake Oliver: [00:33:05] Yeah, it's different elsewhere in the world. But in the United States, until now, lawyers had to own law firms, and only lawyers and law firms could provide legal services. They have a very, very good franchise protection for their license that we really don't enjoy as certified public accountants. We have a very limited franchise over assurance, and lawyers get to have like almost total control over the law. But that is starting to backfire for them because it's gotten so expensive to hire a lawyer. There's a shortage of lawyers in certain places in this country, especially for small businesses and for certain types of transactions. It's just really, really expensive. We've experienced this ourselves, David. It's really hard to find a good lawyer for a small business. And there is a new program here in Arizona that allows non-lawyers to own law firms, and KPMG is going to use this to launch their own law practice here as part of KPMG United States. Um, they plan well if they get through the committee overseeing the program and final approval from the Arizona Supreme Court, which is expected, they're going to offer services to their clients directly inside of KPMG. And they're describing this as drafting and updating contracts, reconciling legal materials in mergers and acquisitions. Um, the sort of stuff that they used to outsource to law firms they're now going to be able to do internally, and they want to use artificial intelligence tools to automate a lot of this type of work with M&A and contract review, that sort of thing.

Blake Oliver: [00:34:41] Uh, we can certainly expect the other big four, I think, to follow KPMG's footsteps if they get into this. They actually already practice law in 80 countries, including in the UK and Australia, and the US, represents the largest legal market globally. So basically the law, the big four are going to become law firms. It sounds like, uh, in the article about this in the Wall Street Journal, Richard Lewis, the former president of the New York State Bar Association, expressed concerns that KPMG's entry into this presents a problem for the legal profession. Um, but, you know, it seems like the lawyers have kind of gotten themselves into this problem by not providing not creating enough, uh, lawyers or at least not doing it affordably. So the Arizona moved to make this change. Um, Lewis said it's a threat to the legal profession. They will be able to undercut and take shortcuts. They aren't held to the same standards. So I wonder if there's any parallels here. You know, to the accounting profession.

David Leary: [00:35:45] Sounds very similar. Like we can't have tech companies do tax work or.

Blake Oliver: [00:35:50] But here's the thing is we already have non accountants owning accounting firms. Like that's already possible in everywhere. Right. And that's why we see private equity flowing into accounting. Um and so I don't know I guess legal is next. Um Gator says using AI for legal documents. That's a big no for me. Well, Gator, uh, David and I have actually been using AI for a lot of legal stuff for our entities. And I have to tell you, man, it is fantastic.

David Leary: [00:36:20] There's no AI. That's why.

Blake Oliver: [00:36:22] There's no math.

David Leary: [00:36:23] Right? It's all the stuff it's good at.

Blake Oliver: [00:36:25] Yeah. When I get a contract for, like, uh, speaking engagement or a deal we want to do with somebody, the first thing I do is I drop that contract into Claude, and I ask it to create an executive summary for me in plain English, with all the key terms and that sort of thing. Um, and. Oh, my God, that is so helpful. Like, I would have had to pay a lawyer to read through this thing and then sit on a phone call with me and explain this, or write a memo. And now I don't really have to do that to get the first pass. Now, if it's something really important, am I going to run it by an attorney? Yes. But we can do a lot of the grunt work without having to pay high hourly rates. An example, too, is like, David and I had to do an operating agreement for one of our entities. Well, we could have sat with a lawyer for hours on the phone, going through every single term and point and everything. But what David and I did instead. David, why don't you describe what we did?

David Leary: [00:37:14] So we basically had ChatGPT interview us and asked us, how would you, uh, transfer ownership? What are the terms of that? How would you like that to happen? And we would just answer these questions and it would start compiling these. And at the end it would summarize it all. And now we have a doc. We can go back to a lawyer to make perfect legalese. But we did most of the work. All that interview like you said, it's the onboarding, the interviewing, all these things that you the question you have to email seven times back and forth with your lawyer, and that's where it gets expensive versus here's this create the legal docs. That's all you want to do.

Blake Oliver: [00:37:51] Yep. Um. All right. David, shall we thank our third sponsor? Tax bandits. Yeah. Tax bandits. Up the banner.

David Leary: [00:38:00] All right. And I'll read it. If you're feeling the pressure of juggling 1099, w-2s and 1099 forms, listen up. Tax bandits is the solution you've been waiting for. They've got over a decade of experience and support 100 plus tax forms, including everything from your 940 X series to those tricky state filings. Tax bandits handles both federal and state e-filing seamlessly, so you're set. No matter how many states your clients operating in operate in. Tax bandits is IRS certified, meaning that they offer instant processing of your forms and provide real time status updates, ensuring accuracy and eliminating the risk of B notices. For additional peace of mind, Tax Bandits also offers you tin matching and USPS validations to ensure your filings are precise and your IRS requirement is met. Plus, delivering recipient copies is a breeze. Go with traditional postal mail or give clients online access to their forms. It's all about flexibility. As an accounting professional, you'll love Tax Bandit's pro features like a secure client portal, team management tools, and full branding customization. Everything you need to streamline your workflow and provide top tier service. And when it's late, you're tired and you just need a helping hand. Tax Bandit Support Team is actually there via phone, email or live chat whenever you need them. If you're ready to take control of tax season and join thousands of tax professionals who trust tax bandits, head over to The Accounting Podcast. Tax bandits. That's The Accounting Podcast promo tax bandits. Thank you. Tax bandits.

Blake Oliver: [00:39:30] Gator says both of your examples. This is going back to the legal stuff. Legal question. Both of your examples aren't making the actual legal doc, just simplifying the data gathering Phase. Actually, Gator. Apologies if I wasn't clear. We used it to draft the operating agreement. The first draft of it. So based on a template. So it actually created the operating agreement with the signatures with the opening everything. So I'm going to run that you know we run that by an attorney. But it gets it like 90% of the way there. So that the review process is what's left.

David Leary: [00:40:06] That's that's what you want to pay for, is you want to pay your attorney for their expertise of the review. You don't want to pay them for the back and forth emails. Well, what's Blake's address? What's your address? Those are just expensive nonsense to pay.

Blake Oliver: [00:40:19] Yeah. And or just coming up with the basic terms that have to go into the operating agreement. Like we can discuss that. Yeah, yeah, all that stuff we can figure out, and they review it and make sure there's no holes in it. Um, okay. David. I'm going to let you choose FDIC. External revenue service. South Carolina.

David Leary: [00:40:45] I want to do South Carolina because I'm hoping maybe either you could give some insights, or maybe our listeners could give some insights to what's happening there. So months and months ago, it feels like a year ago, we talked about South Carolina and they discovered $1.8 billion accounting error, mystery. And and the way it was presented at that time was there was $1.8 billion sitting in a bank account. And it was presented that way for a very long time. Now they've had an audit. The audit did all the research, a forensic audit, and they figured out no wrongdoing was done. But it turns out that the 1.8 billion is actually isn't in the bank account the way it was kind of initially presented.

Blake Oliver: [00:41:23] Well, there is no $1.8 million like it's just 1.8 billion. There is that money is not sitting in a bank account. It didn't go missing. It never existed.

David Leary: [00:41:33] It just might be on the go. And it was never reconciled properly that that's and the reason sometimes you hear the story and it's 1.6 million because apparently there is about $200 million that actually exist somewhere, but it's nowhere close to the 1.8 billion.

Blake Oliver: [00:41:48] So and I was trying to figure out how this happened, David, I was trying to figure out like, what are the debits and credits? Like, how does $1.8 billion show up on a balance sheet that doesn't exist? And apparently it's a clearing account issue. So there was a migration between accounting systems and they created a flow through account as a catch all for all unreconciled transactions. And it was designated as a non reportable pass through fund that should have maintained a zero balance. But debits did not match credits. So this might blow minds of people who use accounting systems that force debits and credits to balance in accounts. But there are plenty of ancient accounting systems where that doesn't have to happen. And so this clearing account got all the debits but it never got any credits. And that's basically what happened is that it just went on for seven years. So it's just a pass through account. Clearing account got all the debits. Never got the credits. Isn't that amazing? Created all this trouble.

David Leary: [00:42:56] And it all started when they migrated to a new accounting system. So like a failed ERP migration. And when I say failed, the ERP migration doesn't necessarily mean the data failed. Maybe the training and the support for the individuals was not there and things were just getting posted wrong. They didn't understand how to use the ERP, the GL. And so and then it never got reconciled. Like how does this not reconcile out eventually some quarter or some month or at the end of some year? It's just on and on and on.

Blake Oliver: [00:43:22] They didn't do their job. Yeah.

David Leary: [00:43:25] And so they the, the governor is insisting that, um, all the corrective actions that have been recommended in the. They had to pay $3 million for a forensic accounting review. They're going to adopt all these new policies and procedures and it's not going to happen again. But there was no, um, deception or fraud. None of this was on purpose. It was just really incompetence, which we keep seeing this happen over and over again. Um, the Macy's thing. There's a lot of incompetence happening in accountant accounting and probably and I don't think it's a skill set of the accountants. I wonder if it's overworked. There's just too much on people's plates, and some things just get done half assed, because there's just too much on accountants plates right now.

Blake Oliver: [00:44:06] What I'm curious about is what's the adjusting entry to correct this? So you have a phantom account, a debit balance on your balance sheet, an asset. You got to credit that. And I guess my question is what's the debit side of that entry. Is it an expense. Is it a reduction in I don't know because I've never like if it.

David Leary: [00:44:28] Was truly a wash account you would move the cash that actually existed over that account.

Blake Oliver: [00:44:32] But but there's no cash. So. So cash is overstated. So you you credit the cash or that clearing account and then what do you debit. Is it an expense or is it just some like reduction in like equity. But you know it's a state government I don't know how that works. So I'd be curious to know if anyone has the idea has an idea of what the entry would be. Do let me know.

David Leary: [00:44:56] And what's interesting is one of the articles talked about how South Carolina has a long history of accounting issues. So the treasurer's office, which was created with the state's first constitution in 1776. Back then, the General Assembly selected the treasurer. But in the early 1800s, the state finances were in a state of bewildering confusion, and no one could tell amounts of debits or the credit of the state. According to history of the South Carolina Book, the first Comptroller General determined that the state was owed about 750,000 in debits would be worth about $20 million today. So they they have a history of like mucking up their books in South Carolina for some reason. There's not not on top of it.

Blake Oliver: [00:45:36] Let's talk about the External Revenue Service since we're on a political theme. Trump theme this week. Donald Trump, before his inauguration, said he was looking into creating an external revenue service. External, not internal. What does this mean, David?

David Leary: [00:45:55] I think based on his tweet, it's instead of having the US Customs and Border Protection responsible for collecting tariffs, he wants to have a version of the Internal Revenue Service, dubbed the external, that will go after these customs and these tariffs that he wants to impose on everybody.

Blake Oliver: [00:46:12] So it could be a new government agency. It would collect tariffs, duties and all revenue from foreign sources. And this is the sort of thing that makes me wonder, has anyone told Donald Trump that The tariffs are not paid by other countries, that they are paid by US companies that import products from other countries. Yes. And there's already an agency that collects tariffs, like you said. Right. Customs and Border Protection. Yeah. So I was really happy actually, um, to hear after this flurry of executive actions, uh, that we're not doing tariffs yet. We're holding off on the tariffs. And I was super relieved about that because I do believe that 25, 35% tariffs on imported goods would be really bad for the economy. I mean, we talked about it in a previous show. Actually, no we didn't. I was talking about this on Twitter. Um, I did some research into this. The 35%, I believe it's the 35% tariff on Chinese goods that proposed tariff that would increase, uh, the average households yearly expenses by $2,600, which for low income housing households is like 4% of their income. So imagine instantly you have another 4% of inflation instantly.

David Leary: [00:47:35] And that adds up quick. Because if you think about with Covid, everybody got checks for $2,600 and it changed the whole economy, right? Right. The economy boomed because. So if you if you pull away $2,600 from every American household, the economy is going to tank. It doesn't seem like that much money, but it really adds up, right?

Blake Oliver: [00:47:54] It adds up over millions and millions of households. Right? Um, so Trump is not putting any tariffs in place immediately, but he is threatening now to impose 25% tariffs on Mexico and Canada by February 1st, using that as leverage to renegotiate the Usmca trade agreement. Um, and, you know, 25% tariffs on Mexico and Canada would actually be, I think, far more concerning than on any tariffs on China, because who is impacted by that? Car manufacturers? Appliance manufacturers. Those are big ones. I mean, you know, imagine if, like all the cars imported from Mexico were now like 25% more expensive. That'd be not not great.

David Leary: [00:48:43] And I think he's trying. He's doing that because he's trying to not let China circumvent their tariffs by like, oh, we'll put the goods in Mexico first and assemble them there, then bring them across the Mexican border or the US-Canada border.

Blake Oliver: [00:48:56] So, you know, I like the idea of tariffs as threats to get better deals, but actually implementing them would be, I think, terrible for the US economy. So this is good news. I'm happy about this. Like well done.

David Leary: [00:49:13] On his tweet storm or tweet storm I'm sorry. His truth social storm. When he put this out a few weeks ago, he declared that on January 20th, 20, 2025 will be the birth date of the External Revenue Service. Did this happen two days ago? Did he actually create this external revenue service?

Blake Oliver: [00:49:27] No. No, not that I know. Not that I heard of.

David Leary: [00:49:29] Okay.

Blake Oliver: [00:49:30] Like, um. Okay.

David Leary: [00:49:35] You want to talk about, uh, how the Treasury Department was breached by Chinese hackers? Believe it or not.

Blake Oliver: [00:49:42] And apparently, Janet Yellen's computer was hacked.

David Leary: [00:49:46] Yeah. So in early December, the Treasury Department was hacked. The Chinese hacking group called Silk Typhoon is believed to have stolen a digital key from a third party service provider and used it to access unclassified information. Bloomberg reported this, you know, with people familiar with the matter, but they didn't want to be named that type of information. And the basically, they stole a third party digital key from a company called Beyondtrust. It's a third party service provider and used it to access unclassified information to potential potentials and to potential sanctions. Um, the way beyond dressed, I went and googled a little bit. The way to think about Beyond trust is like how a bank might have a safe and there's a timer on it. So only only the manager with the key that's there at a certain time could maybe open that safe. That's the type of thing. So so you basically give access to your network instead of people having they call it privileged access management. So somebody could be on your network, but they don't have access to everything. They only have access to some things at certain time. And that's this company's sales model. That's what they sell to the Treasury and governments and people that want security.

David Leary: [00:50:53] But it got compromised. So they were able to use that to take over these computers. So Janet Yellen's computer was infiltrated and they stole some unclassified files from hers. Also, two of her lieutenants, Deputy Secretary Wally Adeyemo and acting Undersecretary Brad Smith, they were um, they got access their computers got access to. But overall, about 400 laptops and Laptops and desktop machines were accessed using the employees names and passwords, and they accessed about 3000 files on unclassified personal devices. And then they also accessed law enforcement sensitive data on material on investigations run by the Committee of Foreign Investments in the US, which these are national security and, uh, reviews about foreign financing, terrorism, etc.. And so that's what's interesting is now these Chinese hackers have gotten into they have a picture of what's happening at the US government. Maybe that's pending legislation against them or actions. They have access to this legal information. Obviously, Chinese officials have denied these, claiming that the the government was not behind them and it was unwarranted and groundless. These claims. But this is in general, China's government is state backed. A lot of these attacks are state backed. Yeah, it's really concerning.

Blake Oliver: [00:52:14] I wonder what they got access to.

Speaker3: [00:52:17] What did they.

David Leary: [00:52:17] I feel like nobody's talking about this story. I mean, literally, the Treasury Department was hacked, and nobody's talking about this. Like, this should be the biggest headline on CNN, and nobody's talking about it.

Blake Oliver: [00:52:26] It's because we don't know what they got access to, right?

Speaker3: [00:52:29] Yes.

Blake Oliver: [00:52:29] If we knew that they had stolen secrets or something, I guess it would be more concerning.

David Leary: [00:52:34] But there was a hearing. And also, um, last week, Biden did create an executive order, like a draft executive order that instructs the government to develop guidelines to better secure cryptographic keys using cloud software contractors, including storing them in hardware security modules, a physical device that stores digital keys to keep them safe. Under the executive order, federal contractors would also be required for better to manage access better. So something definitely happened. But, uh, it's not. Nobody's talking about it properly or as much as they should be.

Blake Oliver: [00:53:09] All right, David, let's go ahead and do our last sponsor message, and then I'll take us out with. Maybe we'll go out with a few small stories.

Speaker3: [00:53:18] Okay.

David Leary: [00:53:19] We'll grab.

Blake Oliver: [00:53:20] So our sponsor is Basil.

David Leary: [00:53:26] I'm going.

Blake Oliver: [00:53:27] It's up. Yeah.

Speaker3: [00:53:27] You go.

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Speaker3: [00:54:39] All right.

Blake Oliver: [00:54:40] Um, so one of the new AI apps that is getting a lot of buzz right now. Actually, it's not an AI app, it's just a model. Is Google's Gemini Advanced, which I have purchased access to. And, uh, you can now do what's called deep research. So I wanted to actually test this out and see if we can, um, if we can do a little bit of deep research. Um, so this is the 1.5 Pro with deep research. To get access to this you have to have a personal Google account. So you can't use an enterprise account. It's got to be like a Gmail account. And you go to Gemini google.com and you sign up, you can get a month for free, and then it's 20 bucks a month after that. And if you click the little drop down here in the upper left, you can you can select 1.5 Pro with deep research. Um, and so, you know, the way this works is um, it does deep research. It goes out and will search. Uh, first of all, it'll take a query and then break that into like multiple questions and then go out and research potentially hundreds of websites to get an answer. And it can take a little while. So I want to launch this, come up with a question, and then I want to come back to it after it's had a bit of time to think. So we'll do another story and come back. So here's what I need from our live stream viewers. This I need I need a question. So I want you to give me a difficult, relatively difficult question. Accounting or tax that we can use to test. Gemini advanced and see just how sophisticated it is. So this is my call to you live stream. Viewers, give me a question and I'm going to wait here. And hopefully you have not all fallen asleep. We're going to get a question from somebody. And in the meantime, David, let's go ahead and talk about the FDIC suing bank executives.

David Leary: [00:56:36] So the FDIC is this was a complaint filed in San Francisco federal court this week, suing for suing 17 former Silicon Valley bank executives over the collapse. The FDIC sued 17 former executives and directors of Silicon Valley Bank on Thursday, seeking to recover billions of dollars for alleged gross negligence and breaches of fiduciary duty that caused the bank's March 2023 collapse. They faulted the bank's overreliance on Unhedged interest rate sensitive long term government bonds such as US treasuries and mortgage backed securities, and the. The big objection to the payment of A they call it grossly imprudent 294 million dividend to the to the parent company and it drained needed capital. So in December of 22, less than three months before they paid a dividend out of 200, 200, almost $300 million. And they probably could use some of that capital when everything went to hell up there. Um, they're calling the SVB represents a case of egregious mismanagement of interest rate and liquidity risks by the bank's former officers and directors. Um, what's interesting to me is like, what about the where does the auditor come into this? Like when there's lawsuits like this, should auditors be part of these lawsuits, too?

Blake Oliver: [00:57:53] Sorry, I wasn't really listening.

Speaker3: [00:57:54] So for.

David Leary: [00:57:55] No. That's okay. I mean, we covered the Silicon Valley bank thing, and you brought it up, and it was what? You showed a footnote. There was a footnote from the auditor in there about their exposure to these government treasury bonds. So now there's this lawsuit. But my question to you is how come the auditors aren't named in this? They're the ones that kind of failed to ring the bell, that something was wrong. I don't know, maybe. Maybe you're separated out and you can't be named in these if all you're doing is auditing their books.

Blake Oliver: [00:58:27] Sorry, David, I wasn't paying attention because I'm.

Speaker3: [00:58:29] Trying to navigate all these chats.

David Leary: [00:58:30] I see the chats coming through. It's okay. Okay.

Blake Oliver: [00:58:32] So thank you. Matthew. I'm selecting Matthew's question here. Matthew says, okay. Can you please provide a tax efficiency analysis of a single member LLC, STB, deciding to either remain a sole proprietor. Or electing to be taxed as an s election. Assume net income of at least 500 K. All right. Let's let it work. So the first thing it's going to do is look at my prompt and then expand on it and give me the opportunity to edit it. Here we go. Here's a research plan for that tax topic. If you need to update it let me know. And we've got a research plan here with five questions. It's going to first find the tax implications for a single member LLC remaining a sole proprietor with a net income of at least 500,000. And then it's going to do that for if it has an S election, then it will compare and contrast options one and two. It will find any relevant law changes or updates that may impact the decision. And then find any articles or resources discussing the pros and cons. So let's start the research. And now it's going to go back and it's going to start doing the research. Um, and it's going to take a few minutes. So we will come back to this. And, uh, let's see what happens.

Speaker3: [01:00:06] Well, that's working along.

David Leary: [01:00:07] Do you want to talk about.

Speaker3: [01:00:08] And, uh, Matthew.

Blake Oliver: [01:00:10] Said it should have said S Corp and said s election. I think it'll figure it out. I hope it should be able to figure it out. Right. If it's smart enough. So, um. Great. Oh, here we go. It's. We got 19 websites so far, and we can see which ones it's going to. All right, while it does that David, go ahead and, uh.

David Leary: [01:00:31] Well another you know SoftBank who's famously invested in lots of companies. It's it's representing lots of massive.

Blake Oliver: [01:00:38] Failures but also some big.

Speaker3: [01:00:39] Successes, some big.

David Leary: [01:00:40] Successes.

Speaker3: [01:00:41] But they were they were big in WeWork. Yeah.

David Leary: [01:00:43] Right. Well another one of their portfolio companies have been accused of faking most of its sales. So they invested. There's a company called E fishery, one of Indonesia's most prominent startups, may have inflated revenue and profit for several years, according to an internal investigation that was triggered by a whistleblower to the board. So if fishery deploys feeders to fish in shrimp farmers in Indonesia and was a darling of the start up scene, scored a valuation of $1.4 billion. And essentially what management is accused of, they've inflated revenue by over 600 by almost $600 million in nine months through September of last year, according to this 52 page report that Bloomberg News has had access to. Um, and basically it's saying about 75% of the reported figures were faked. It presented a $16 million profit for the first nine months of 2024, but it actually generated a $35 million loss during that time. The revenue for the period was estimated at 157 million, rather than the 752, they told investors. Management also inflated revenue and profit numbers for previous years as well. Now, what's interesting about this is they previously hired PwC and Grant Thornton to audit financial results in the past, but neither accounting. Both firms declined to comment via email. But I just questioned a doesn't SoftBank vet their investments better? They just take founders for their word. And the other question I have is how do auditors miss revenue that's misstated by forex. Like how how does how does that happen. Like nobody steps back and says that seems like a lot of fish feeders to sell in a half a year or a year, like they steps back and does the math. Like that's just a lot of fish feeding.

Blake Oliver: [01:02:31] You got me. I have I have no idea how some of these massive frauds happen if if true. But they do. And a lot of times it seems like auditors just blindly accepting what management provided. And really there's there's no incentive to go and look for reasons to not accept it. It just makes the job take longer.

David Leary: [01:02:52] And then you're a nasty little fish farms poking around. You don't want to be doing that if you're the auditor.

Speaker3: [01:02:56] No, you just want.

David Leary: [01:02:58] To send an email and get an answer and work from that. Okay, get an answer from Google.

Blake Oliver: [01:03:02] Yet Google Gemini is still chugging away. It's now analyzing the results. It researched 30 websites, so hopefully it'll be done shortly here. Um, so in the in the.

Speaker3: [01:03:13] Meantime back to that.

David Leary: [01:03:14] If you would.

Speaker3: [01:03:15] Yeah, sure.

David Leary: [01:03:16] So it went out, took your request, searched for websites that might talk about that. Now it's interesting. I'm seeing the logos that are on here. I see it's at the TurboTax website, the bench website.

Speaker3: [01:03:26] Wolters Kluwer collective.

Blake Oliver: [01:03:30] Into it. You know, it's got some law firms, Shopify's website.

David Leary: [01:03:34] So a lot of these are just SEO blog posts they might not have. Good.

Blake Oliver: [01:03:38] Uh, it's got the IRS here.

David Leary: [01:03:39] It has the IRS there. Yeah.

Blake Oliver: [01:03:41] You know, hopefully it'll sort the wheat from the chaff. It's got instructions for a 1120 in here. I mean we're going to see how it does.

Speaker3: [01:03:49] Yeah.

David Leary: [01:03:50] It's actually using the IRS websites, because I think that's half the problem when you try to do research. Those Google searches, you search. And there's just like so many websites that are just in the way to actually get to the real answer on many things.

Speaker3: [01:04:01] So that's the hope. That's all this.

David Leary: [01:04:03] Does is cut off. That noise would be amazing.

Speaker3: [01:04:07] Yeah we'll see.

Blake Oliver: [01:04:07] Okay. So it's still going. So we're going to we're going to keep moving on here and we'll come back to that. I have a follow up story here about um, American Express. American Express got in trouble for giving bad, uh, tax advice.

Speaker3: [01:04:26] To its customers years ago.

David Leary: [01:04:27] Years and years ago.

Blake Oliver: [01:04:28] I remember talking about this on the show, and they have now settled with the Department of Justice over the allegations of fraud and deceptive marketing practices. They are going to pay $230 million to settle this case. Um, and there's a few different things they were doing here. But the big one, the one that is the most interesting, is what they were doing with wire fees in 2018 and 2019. American Express launched wire products called Payroll Rewards and Premium Wire, and they marketed these wire services to small and mid-sized businesses. These products had really high fees for the wires, way higher than you would normally pay, and companies who bought these products were told, yeah, the fees are high, but they're fully tax deductible. So your business is going to pay for these wire fees. And every time you do a wire with American Express we're going to give you credit cards reward points your points. And those are tax free. So your business is going to pay a little more for wires. But you're going to get massive rewards on your American Express card. And it really added up. If you think about it every time you make a credit card payment On an American Express card. You know, you might be earning anywhere from like 1 to 2% of that transaction back in credit card rewards. So basically, by running what would be wire transfers, very large payments through the American Express network, you're getting that like 1 to 2% back in terms of credit card rewards personally. And they the salespeople were going out and telling the business owners this is tax free. Now credit card rewards are generally tax free. The IRS says don't worry about it. You don't have to report this as income. But when you do something like this, that doesn't apply.

David Leary: [01:06:24] And and they're not busting the business owners. They're busting. American Express for giving improper tax advice.

Blake Oliver: [01:06:30] And I don't know anything. I don't know what happened.

David Leary: [01:06:34] Right.

Speaker3: [01:06:34] It's but it's it is.

Blake Oliver: [01:06:35] Deceiving because it's it's illegal. You know, you have to. So credit card rewards. I don't know exactly what the rules are right with the IRS, but like credit card rewards earned in just like the normal credit card situation, those you don't have to report. But if you juice them up this way, then like, no, that's that's income.

Speaker3: [01:06:59] Right?

Blake Oliver: [01:07:00] The juice you're siphoning off, like you're basically transferring, you're creating an expense in the business and you're creating rewards on the on the personal side. Right? Yeah. So it's basically like, yeah, it's a it's a trick, it's fraud. Um, and so about 200 employees were let go in 2021, which is when we originally talked about this. And the products were discontinued in November of that year. Yeah. The DOJ alleged that this advice was incorrect since incurring expense, excessive fees for personal benefits does not qualify as an ordinary and necessary business expense, so it's incurring excessive fees for personal benefits. Um, and the customers were told that the wire payment fees were fully tax deductible business expenses, and that the reward points earned were tax free, making the benefits outweigh the costs. Uh, so. Yeah, that's that's what happens sometimes.

Speaker3: [01:08:01] So I have a.

David Leary: [01:08:02] Quick story we could possibly go out on here.

Blake Oliver: [01:08:05] Well, wait, we got to go check Gemini.

Speaker3: [01:08:06] Oh, Gemini.

Blake Oliver: [01:08:08] Okay, so I got something. All right, so tax efficiency analysis of a single member, LLC, STB sole proprietorships versus S Corp election. Um, and what I have here is like a big document here. So we've got an introduction. We've got a section called qualified business Income deduction. We've got tax implications of remaining a sole proprietorship. Um, we've got I mean it's a big long analysis here. Let's see if we can get to a conclusion. Is there a conclusion here? Wow. It just keeps going. Let's see. I'm going to be interested to see if it if it gives us a conclusion. So. The pros and cons of each option sole proprietorship. And remember that we gave it the specific case of $500,000. Right. Net income of at least that. So it says the pros are simplicity and ease of setup and lower administrative burden. The cons higher self-employment tax burden, unlimited personal liability higher audit risk. And for the S Corp it said potential for lower overall. Okay here's the conclusion. It says there's no one size fits all answer. You know, the problem is on this show I don't really have a chance to look at this. So here's what I'm going to do. I'm going to open this in Google Docs, and I'm going to paste this link into the chat. And then I would love to get your take on this So I'm going to make this public. I'm going to share this with anyone with the link, and I'll make it so that you can comment on it. And I'm just going to paste this here in the chat. So Gemini analysis of S Corp versus. Sm LLC. So take a look and then we'll give the we'll give the uh we'll give the feedback on the next episode.

Speaker3: [01:10:16] So did you just.

David Leary: [01:10:17] Blow up that startup Blue Jay at this point? Have you seen Blue Jay? I've heard essentially what you just did. It's a whole standalone tax app that would go and create. It'll do the research and give you these answers for tax things. And they're really hot. They've taken a bunch of money. They've uh they're doing partnerships. I think I just saw the latest. It might have been carbon. It's possibly working with them. They're in a bunch of firms. But essentially, this new Google product means you don't have to buy the niche app. Is that where I guess maybe that's where they are heading that way, where you don't have to have these niche apps that are built on top of the AI? The AI is getting to the point where it can just do it itself.

Blake Oliver: [01:10:57] I think for research, we're going to get to that point where, I mean, the problem right now with using general purpose chatbots for research like tax is that it goes out and it doesn't know what's an authoritative source or not. So, um, but like you can you can do this already with perplexity is you can tell perplexity. I only use these sources and when it comes back, you can actually disable certain sources and have it rerun the rerun your prompt only using, say, IRS sources or Thomson Reuters sources or whatever.

Speaker3: [01:11:27] You want it to.

Blake Oliver: [01:11:28] Be. Yeah, you can choose. So, um, yeah, I don't I mean, I'm sure there will be a market for very specialized services because not everything is available on the internet. So if you have a library of really good tax research that's private and you give AI access to that, that creates a ton of value for the researcher. So that's where the that's where the value is. It's in the proprietary data. Okay. Um don't forget you can earn free continuing professional education credits. Nasba approved CPE for listening to this show. You made it all the way through. You should get your CPE go to earmark app in your web browser and, uh, sign up for.

Speaker3: [01:12:16] Free before it gets.

David Leary: [01:12:17] Pulled down. Do it.

Speaker3: [01:12:19] Fast.

Blake Oliver: [01:12:20] Why would earmark be pulled down? What do we do, David?

Speaker3: [01:12:24] Publicity is just publicity. We want to start that. Yeah, well. It's free. I mean.

Blake Oliver: [01:12:27] We might just start charging everybody because it's so popular. We issued.

Speaker3: [01:12:30] 55.

Blake Oliver: [01:12:32] We issued 55,000 CPE credits last year to CPAs, CMAs and IAS in the United States and around the world. And you should earn some free CPP too. And if you want to support us, you can join for as a premium subscriber for $150 a year. What a deal. And get unlimited register for unlimited courses. Listen to unlimited episodes. And it really is simple. You just listen to the episode. You can listen to it in the earmark app, or you can listen to it on your favorite podcast player. And then you come back to the earmark app. When you've listened, you take a quick five question quiz. You can skip the review questions because those are optional, so you only have to answer five multiple choice questions for an hour of CPE. And if you get four out of five correct, you get your CPP certificate and you can retake the quiz if you didn't pass the first time. It takes just minutes. So listen to podcasts. Not just hours, but many great podcasts such as Oh My Fraud Uh, and, uh, federal tax updates and tax. Uh, what's what's the other tax podcast we got since we're.

Speaker3: [01:13:37] Talking about tax.

Blake Oliver: [01:13:38] Brackets, tax.

Speaker3: [01:13:39] Chats.

Blake Oliver: [01:13:40] That's a great one. Um, and, you know, listen to those while you're commuting to work or while you're doing chores or, you know, out working out, uh, take the quiz and get your CPE credit. And if you're an enrolled agent, look for those courses with the purple IRS banner. Those courses qualify for IRS continuing education. And that's all I've got for this week. David, thanks everyone who joined us live. Subscribe on YouTube at The Accounting Podcast. Join us for our next live stream. We're going to try to do these on Wednesday mornings this year, and we'll do our best to stick to it. Uh, thanks, Joseph for joining us. Joseph says great content today once again. And, uh, we'll see you here next week. Bye, everyone.