When searching for a tax professional to handle your tax project, it is crucial to hire someone with a deep understanding of tax law and the necessary education and credentials to provide high-quality tax services. To ensure that the tax professional you choose has the appropriate level of tax sophistication, you should carefully review their education and professional credentials.
One key credential to look for in a tax professional is the Certified Public Accountant (CPA) designation. CPAs are licensed by state boards of accountancy to provide accounting services, including tax preparation, planning, and advice. To obtain this designation, CPAs must meet rigorous education and experience requirements, pass a comprehensive exam, and maintain ongoing continuing education requirements to stay up-to-date with changes in tax law.
In addition to the CPA designation, it is also beneficial to look for a tax professional with a Master's in Taxation (MTax) degree. An MTax degree is a specialized degree that provides advanced training in tax law and allows tax professionals to gain in-depth knowledge of complex tax regulations and codes. This advanced education helps tax professionals to provide more comprehensive and sophisticated tax planning, advice, and preparation services to their clients.
Therefore, it is recommended to choose a tax professional who holds both the CPA designation and an MTax degree to ensure that they have a high level of tax expertise and can provide you with the best possible tax solutions for your tax project.
Types of Tax Planning Transactions
Open-Fact Tax Transactions
An open-fact transaction refers to a transaction that is not yet complete, as the relevant facts have not yet been fully established. These types of transactions are typically in the early stages of development or are projected to occur in the future. This presents an opportunity for taxpayers to plan and structure anticipated facts in a way that can result in a more favorable tax treatment.
For instance, if an agreement for the sale of a property has not yet been signed, the taxpayer can still modify the facts and structure the agreement in a way that minimizes the tax consequences of the transaction. By taking advantage of this type of transaction, taxpayers can make modifications before the transaction is finalized and obtain a more advantageous tax outcome.
In summary, open-fact transactions provide an opportunity for taxpayers to plan and structure transactions in a way that can result in a more favorable tax treatment. These transactions allow taxpayers to modify the relevant facts before the transaction is closed, thereby maximizing tax benefits and minimizing tax liabilities.
Closed-Fact Tax Transactions
In a closed transaction, all the relevant facts have been established and the transaction has already taken place. This can limit the opportunities for tax planning, as the focus shifts to presenting the facts in a legally acceptable and taxpayer-positive manner to the IRS. However, there is a common misconception that no additional planning is possible after a transaction has been completed. In reality, additional research and analysis can uncover opportunities to lower a taxpayer's tax liability through a legislative, administrative, or judicial tax law position.
At Client Tax Services, we understand the importance of conducting thorough research before presenting any information to the IRS. We carefully examine all aspects of a closed transaction to identify any potential opportunities for reducing tax liability. Our team of experienced tax professionals uses our extensive knowledge of tax law to analyze the facts of each transaction and develop a comprehensive strategy for presenting the information to the IRS in a legally acceptable and taxpayer-positive manner.
In conclusion, while closed transactions may limit the opportunities for tax planning, additional research and analysis can still uncover opportunities to lower a taxpayer's tax liability. At Client Tax Services, we take a thorough and comprehensive approach to every transaction, ensuring that we identify and pursue all available options for minimizing our clients' tax liabilities.
Tax Research Skills
Navigating the complexities of tax law requires a high level of expertise and experience. When seeking a tax professional for tax analysis or preparation, it's essential to ensure they possess a mastery of tax law.
At Client Tax Services, we prioritize the highest level of professionalism and qualifications for our tax professionals. We recommend hiring a tax professional with a CPA license and a Master's degree in Taxation, ensuring that they have the technical knowledge and experience necessary to provide accurate and effective tax services.
A CPA license indicates that the tax professional has passed rigorous exams and has fulfilled requirements for continuing education and ethical standards. A Master's degree in Taxation provides additional specialized education in tax law, allowing tax professionals to analyze complex tax situations and provide effective solutions.
At Client Tax Services, our team of tax professionals possesses the necessary qualifications and experience to provide our clients with top-tier tax services. We prioritize staying up-to-date with changes in tax laws and regulations to provide our clients with the most accurate and effective tax planning and preparation.
Tax Planning Techniques
At Client Tax Services, our primary objective is to help you maximize your after-tax cash flow, rather than focusing solely on minimizing your tax liability. We believe that reducing your net revenue from a transaction could ultimately undermine the purpose of any tax reduction strategy. As part of our comprehensive tax preparation process, we carefully gather and analyze all of the relevant facts, recognizing that many IRS disputes arise from questions of fact as well as interpretations of tax law.
We employ a range of sophisticated techniques designed to legally minimize your tax liability, including deferring the receipt of income, characterizing capital outlays as ordinary, utilizing different business entity forms to maximize legal benefits, conducting cost segregation analyses, maximizing allowable individual and business deductions, structuring corporate acquisitions, avoiding corporate dividend distribution through stock redemption, and implementing international tax planning strategies.
Where possible, we assist you in increasing your allowable retirement plan contributions, accelerating your charitable contributions, maximizing your allowable debt financing versus equity financing, and more. We work to convert ordinary income into capital gains, convert active income to passive income for the purposes of maximizing your passive loss deduction, convert passive expenses into active expenses, and help you make lifetime gifts to family members. We also help you maximize savings vehicles like life insurance and single-premium annuities, and create, increase, or accelerate your tax deductions through legally allowed means.
However, it's important to note that transactions executed to achieve efficient tax planning must withstand anti-abuse challenges, such as economic substance, sham transaction, and business purpose. To avoid these tax traps, we carefully review and analyze each strategy and avoid any problematic tax planning practices, such as reasonable compensation challenges, below-market loan issues, step transactions, and related party problems. Our goal is to provide you with a legally compliant and efficient tax plan that optimizes your after-tax cash flow while minimizing any potential tax liability.
Deferring the Receipt of Income
Deferring income can be a tax planning strategy that can be used in certain instances where the income is deferred until a subsequent transaction occurs. This can be achieved through the concept of “substituted basis”. There are two general types of non-recognition planning techniques.
The first type involves the transfer of property from one person to another with full or partial non-recognition of the gain realized from the transfer by the transferee. The property is treated as a “transferred basis property” in the transferee’s hands, and the transferee determines the basis in whole or in part in reference to the transferor’s basis. This type of non-recognition provision includes transactions such as transfers between spouses, gifts, transfers of property to controlled corporations, partnerships, etc.
The second type involves a taxpayer’s acquisition of one property in exchange for another with full or partial non-recognition of the gain realized from the transfer. The property is treated as an “exchanged basis property” in the hands of the taxpayer, and its basis is determined in whole or in part in reference to the taxpayer’s basis in the property formerly held. This type of non-recognition provision includes transactions such as the receipt of stock for property contributed to a controlled corporation, the receipt of a partnership interest for property contributed to a partnership, the exchange of property for property of a like-kind, the reacquisition of certain real property by a seller, involuntary conversions, etc. At Client Tax Services, we carefully analyze your unique situation and determine if deferring income is an appropriate strategy for you. We take into consideration any potential risks and ensure that the strategy is legally sound and compliant with tax laws.
Characterizing Capital Outlays As Ordinary Expenses
At Client Tax Services, we understand the importance of correctly characterizing capital outlays as ordinary expenses to reduce tax liability. To achieve this, we conduct a thorough analysis of tax principles and doctrines that determine whether an expenditure can be currently deducted as an ordinary and necessary business expense or capitalized and recovered through another tax accounting mechanism, such as depreciation. We consider the clear reflection of income and matching requirements, as well as theoretical underpinnings to address the tax treatment of a wide range of business expenditures, including direct and indirect costs incurred to acquire, create, repair, and maintain tangible property.
In addition, we evaluate a variety of other expenditures incurred by business taxpayers, such as software and website design expenditures, advertising, business reengineering costs, etc. Our comprehensive analysis enables us to identify otherwise capitalized costs that may be deducted currently, thereby reducing your tax liability.
We ensure that all deductions claimed are in compliance with tax regulations and guidelines to avoid any potential audit issues. Our team of experienced tax professionals is equipped to provide you with expert advice and guidance on how to reduce your tax liability while staying in compliance with tax laws. Trust us to help you maximize your tax savings and optimize your business profits.
Legal Benefits of Using Different Business Entity Forms
At Client Tax Services, we recognize the importance of selecting the right business entity structure to optimize your tax savings and meet your business goals. We provide a comprehensive review of various legal entity structures, including sole proprietorships, general partnerships, limited partnerships, regular corporations, S corporations, limited liability companies, and trusts. Our team analyzes the legal and business structure of each entity, along with the applicable federal income tax rules throughout its entire life cycle. This includes a thorough review of the income tax law applicable in different scenarios, such as organizing the entity, operating and receiving profits or incurring losses, making distributions of profits in cash, property, or entity ownership units, terminating your ownership interest, when the entire entity terminates, and when the entity undergoes a tax-free restructuring. Through this analysis, we identify the most tax-efficient entity structure for your business needs.
Cost segregation studies are a tax planning tool that review property depreciated over long recovery periods, such as the 27.5 or 39 years applicable to real property. The aim of these studies is to identify portions of the property that should be reclassified as tangible personal property subject to shorter depreciable recovery periods. As a result, the study provides an analysis and supporting documentation to depreciate these assets over a more favorable recovery period. In addition to depreciating personal property over as few as five years, carving out the personal property from the real property allows for faster 200% or 150% declining balance methods of depreciation, rather than the slower straight-line method of depreciation applicable to real property. A favorable cost segregation study can then allow a taxpayer to take additional tax depreciation, thereby lowering their tax liability. Our team of experts can perform a comprehensive cost segregation study and provide detailed documentation to support the findings, ensuring that you maximize your tax savings while remaining fully compliant with all applicable tax laws and regulations.
Maximizing Individual and Business Deductions
As part of our comprehensive tax preparation services, we go above and beyond to maximize your tax deductions. We analyze in detail the character, theory, extent, and application of deductions, including imputed tax deductions. We take a careful approach to reviewing each particular deduction, such as interest, taxes, charitable contributions, casualty losses, bad debts, and more. This includes special deductions that are limited to individuals, such as moving expenses, medical expenses, alimony, contributions to retirement savings plans, cooperative housing corporation tenant-shareholder items, and personal and dependency exemptions. We also take into account special deductions that are limited to corporations, such as dividends received or paid, insurance companies, financial institutions, and more, as well as deductions allowed to estates and trusts.
Furthermore, we work to increase your allowable deductions whenever possible. We do this by maximizing your retirement plan contributions, accelerating your charitable contributions, and optimizing your debt financing versus equity financing, among other strategies. We strive to ensure that you are taking full advantage of all available tax deductions and credits, ultimately helping to lower your overall tax liability.
Structuring Corporate Acquisitions
We will work closely with you to design a transactional planning structure for your corporate acquisition that takes into account both legal and tax considerations. Our service includes a comprehensive review of the appropriateness of a stock or asset acquisition and a detailed discussion of the implications for all parties involved in the transaction. We will provide guidance on the factors that should be considered when selecting a specific acquisition structure, including more complex options. Additionally, we will discuss critical financing techniques, including the tax implications of different financial instruments that may be used to finance the acquisition.
We will also cover the unique rules of Section 351 in the context of corporate acquisitions, as well as the preservation and utilization of any loss carryovers and other tax attributes. We will analyze the tax treatment of transaction costs, acquisition-related compensation issues, and methods for disposing of unwanted assets. Furthermore, we will address the allocation of tax risks between the buyer and seller of a corporate business, as well as other non-tax issues that may impact the transaction. Our goal is to create a customized acquisition structure that is aligned with your business goals while minimizing your tax liability.
Avoiding Distribution of Corporate Dividend Through Distributions in the Redemption of Stock
We provide a comprehensive review of the practical planning techniques involved in a stock redemption for both the corporation and the shareholder being redeemed, as governed by Section 302 of the Internal Revenue Code. A redemption, unlike a taxable dividend, allows for a tax-free transfer to the shareholder being redeemed. It involves the transfer of some or all of a shareholder's stock to the issuing corporation in exchange for cash or other property. We carefully evaluate the basic tax rules that authorize and govern redemptions of stock by shareholders, and ensure that any redemption satisfies the criteria for "exchange" treatment under Section 302. These criteria include verifying that the redemption is not essentially equivalent to a dividend, that the exchange is "substantially disproportionate," that the shareholder's interest in the corporation is fully terminated, or that it is a distribution in redemption of the stock of a non-corporate shareholder in a partial liquidation. If the redemption fails to satisfy any of these tests, the distribution is treated as a taxable dividend. We also examine the provisions of Section 311, which determine the effect on the issuing corporation of a distribution of property (other than cash or obligations of the corporation), and analyze Section 312, which establishes the effects on the issuing corporation's earnings and profits.