Strategically Navigating Your Audit and Hiring a Tax Attorney

It is crucial for California taxpayers to be aware that auditors are trained to gather all applicable information to use against you to increase your tax liability if you unexpectedly receive an audit notice from the Employment Development Department (EDD), Franchise Tax Board (FTB), or Internal Revenue Service (IRS). As they go on a fact-finding journey to extend or perhaps refer you or business’s tax matter for criminal tax prosecution, auditors with the IRS, FTB, and EDD are focused on representing federal, state, and local governing authorities in this situations.

This is why consulting with and working under the guidance of a trusted licensed financial advisor, CPA and a local tax attorney could minimize your vulnerability for incompliance, civil penalties, and/or interest. Additionally, it would be an advantage and low-risk approach to have expert protection against any possible disputable items on your tax returns that may perhaps otherwise be clarified with legal basis and evidence. This is when you might consider hiring a licensed tax attorney as your biggest form of defense due to their understanding of IRS, FTB or EDD legal interpretations, procedural errors, settlement negotiations or offers in compromise with legal strategy, to assist in more complex situations. Some complex tax matters could lead to court proceedings or hearings, where a licensed financial advisor or CPA alone, cannot represent you or your business, and a licensed tax attorney could.

The largest difference between working with a licensed financial advisor, enrolled agent, and CPA versus a tax attorney, is the reliability of Attorney-Client, Work Product and Kovel protections which also provide a larger net of confidentiality while navigating through your tax matter. The IRS, FTB, or EDD cannot force disclosure of such information and your risk is manageable under such a strategic shield and for the primary purpose of working towards civil resolution. The benefit of working with a well-equipped team like Wilson Tax Law Group, APLC is that we have a diverse team comprised of former IRS trial attorneys, California FTB Attorneys, Assistant U.S. Attorneys, Federal Tax Prosecutors, a Forensic Accountant and dedicated staff, who seek to help protect you and your business when your finances, freedom and future are on the line.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

 

Qualified Opportunity Zone and Deferred Capital Gains

Congress created the Tax Cuts and Jobs Act (P.L. 115-97) in 2017 to give investors who made investments in economically challenged areas federal income tax benefits. Among other things, this act restricted state and local tax ("SALT") deductions at $10,000 and reduced corporate taxation, pass-through business taxation, and individual tax rates. It also made significant modifications to the federal tax structure. One of the tax benefits includes, the Qualified Opportunity Zone (QOZ) program, created by Congress, to provide investors with capital gains tax deferrals if they meet specific requirements until December 31, 2026, or until the investment is sold. As the conclusion of this program draws near, now is the time to work closely with your financial advisor, CPA and/or local tax attorney on building up your capital losses to help reduce impending tax impacts and prevent potential liquidity issues when this program ends.

Reinvesting capital gains in a Quality Opportunity Fund does not permanently defer them; instead, they retain their original tax nature and will be liable to the capital gains tax rates in effect during the corresponding year. Additionally, investors should consider budgeting for tax liability payments for any capital gains that do not receive income in specific inclusion years so that cash-flow is not impacted and tax payments are timely. You might consider harvesting capital losses to offset capital gains. Keep in mind, long-term losses are first applied to long-term gains and short-term losses to short-term gains, with the excess of either category applied to each type. This strategy cannot be used in managing retirement accounts (401(k) or IRA) because these are tax-deferred.

Legislation could extend the deferral period, but there is nothing on the horizon now. In the meantime, consult with your financial advisor, CPA and/or local tax attorney on what you can do to be proactive and prepared ahead of the closure of the QOZ program.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

Non-U.S. Directors and Possible Tax Implications for Businesses

When non-U.S. resident directors attend board meetings in the U.S., they can find that their limited attendance may have unanticipated tax ramifications for the business and themselves. The Internal Revenue Service considers any directors’ fees paid to non-U.S. citizens who routinely serve on boards for U.S. based businesses as subject to a 30% withholding, and may require tax reporting on annual federal returns. The Internal Revenue Code (IRC) provides limited alternatives for non-U.S. citizens to have U.S.-sourced compensation exempt from U.S. income tax. For non-U.S. directors, one clause—the de minimis exception of Sec. 861(a)(3)—could be applicable. These directors will frequently have to rely on an income tax treaties between the U.S. and their home country for possible relief, however, given the history and restrictions of this exception.

The de minimis exception of Sec. 861(a)(3) of the U.S. Internal Revenue Code is designed to address specific situations where non-U.S. citizens’ compensation could be treated as foreign-sourced income, which would exempt that income from U.S. federal income tax withholding and possibly reduce U.S. tax liability. Restrictions apply as the following conditions must be met to qualify for such this exception: the non-U.S. resident cannot be in the U.S. for more than 90-days during the tax year, the total compensation for services cannot exceed $3,000 in aggregate and the compensation must be paid by a foreign employer or office maintained in a foreign country or U.S. possession.

The biggest takeaway regarding the de minimis exception of Sec. 861(a)(3) is to note that any compensation that exceeds $3,000, the entire amount could be considered U.S. income and subject to tax withholding. This is the main reason why most non-U.S. citizens rely on income tax treaties with their home country to find tax relief. Additionally, if a U.S. state does not adhere to the federal treatment of a specific foreign income tax treaty, the applicability of the treaty may be limited based on which U.S. state the non-U.S. resident director provides services in.

For a modern non-U.S. resident board member whose meeting fees and retainers frequently surpass $50,000 in a tax year, the de minimis exception is of limited utility due to the natural rate of inflation from the beginning of the twentieth century to the new century. Contact a reliable financial advisor, CPA and/or local tax attorney for more guidance on this exception.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

 

Summer Activities and Next Year’s Tax Return

As we head into the summer season, it is critical to consider which activities may qualify for a deduction and which may affect your personal or business tax return for the next year. Ahead of tax season, the Internal Revenue Service encourages taxpayers to consider a few common summer-based activities that could have an impact on your return and how much you will or will not owe before tax season begins.

If you or a loved one are planning a wedding, there are a few things to keep in mind which include reporting any name changes to the Social Security Administration and Employer, as your social security number must match your name used when filing your tax return. Secondarily, you must notify the Internal Revenue Service when your home address has changed. Additionally, your tax withholding and filing status may change the tax bracket which can be updated by revising your Federal W-4 form and State Tax Withholding Form (if you are subject to income tax) and submitting to your employer before the end of the tax year.

If you or a loved one is planning to send a child or children to summer day camp, the costs associated may qualify for a tax deduction on your next tax return. Overnight summer camps do not qualify). However, summer day camp can include babysitter or daycare fees, preschool fees, etc. Read more about what qualifies as a Child and Dependent Care Credit as parents or guardians may elect for this tax credit if they have earned income during the tax year and the child or children are under thirteen years of age.

If you or a loved one has a side job, work part-time, or have a seasonal position, there might be tax implications regardless of how much income was earned or if no federal income tax is owed. It is critical to file a tax return anyway and early to avoid any potential, unforeseen tax penalties. This will also ensure that any possible and qualifying tax refunds are processed timely.

If you or a loved one has filed a tax extension, it is crucial that you submit your tax return as soon as you can, while you can continue to recall every detail of that particular tax year. Extensions generally run from April to October, depending on your circumstances, so stay the course and cross this task off your list before the final quarter of the year.

Lastly, don’t forget to have fun this summer without worrying too much about your taxes. Leave the worries to your local  tax attorney. We're here to help.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s) or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.