Tax law can be a complex practice area, even for experienced attorneys. As there are special rules for dealing with IRS and tax court, you should make sure you find an attorney experienced in handling tax law cases. A San Diego tax attorney can help your company create a tax plan that complies with state and federal law. A tax attorney can also represent you in your personal tax return audit, or appeal an IRS finding in tax court. Before you hire an attorney to handle your tax issue, make sure they understand state and federal tax regulations and are experienced in obtaining successful outcomes for their clients.
Tax law practice is generally divided into transactional or planning practice and litigation. Transactional tax law often involves extensive research, advising, and negotiating on behalf of their clients on tax issues. Tax litigation often involves representing clients involved in a lawsuit or potential lawsuit, including representation before the tax court, or fighting the IRS and Franchise Tax Board (FTB).
Tax planning is crucial first step that often goes ignored until a problem arises. Tax planning and tax compliance generally involves deciding how to treat certain properties and assets, and how to calculate taxes based on those decisions before taxes are filed. Tax planning may vary greatly depending on the overall value of the assets involved, where transactions occur, where money is held, and whether the tax planning involves corporate or personal tax filings.
Most individuals earning an income are required to file a federal tax return and a state tax return. If the individual has property or income based in another state, they may have to file a tax return for multiple states. Similarly, a company only doing business in California may have to file a federal and state tax return. However, if the business receives income or sales in other states, multiple returns may have to be filed.
Additionally, when a company or individual has assets or income from outside the country, they are generally required to declare those assets in their federal tax return and may also have to file or report taxes in the foreign country.
Tax planning and compliance requires consideration of the tax implications in each jurisdiction where the individual or corporation may be subjected to tax laws. Shifting assets from one location to another may allow the filer to take advantage of certain tax laws and reduce tax liability while staying in compliance with tax law and regulations.
Business and Corporate Tax Planning
Proper corporate tax planning can save a company and its shareholders a significant amount of money and increase the company's profitability. Some of the primary areas where corporate tax planning can make a large impact on a company include employee compensation, employee benefits, tax planning for mergers and acquisitions, accounting methods, deduction methods, computation of income tax, depreciation allowances, expensing, and the use of available tax credits.
Personal Income Tax Planning
When individuals or families have significant financial assets, have a home-based business, have assets overseas, or have personal and business interests, they may be able to benefit from individual tax planning, preparation, and compliance. Tax planning for individuals typically includes consideration of estate taxes, gift tax, home or property sales, and multi-state or foreign income or assets.
Litigation involves a legal dispute between two parties. However, with tax litigation, one of those parties is inevitably the Internal Revenue Service (IRS). Generally, following an audit, the IRS disputes the amount of tax a filer owes, or how the tax filer treated certain assets or income. While the IRS may recalculate an individual's tax liability in favor of the taxpayer, tax litigation involves tax assessments or penalties against the taxpayer.
Tax disputes generally begin with an audit. The IRS may review the taxpayer's filing and have questions or find errors in how the taxpayer filed their taxes. Tax audits are relatively rare for individuals; however, they may be common or even routine for some corporations.
An audit may begin with a request for more information or a request for documents. Rather than respond directly to the IRS when informed of an audit or request for documents, many companies and individuals engage an experienced tax attorney to deal directly with the IRS.
After reviewing the additional information and documents, the IRS may issue a “no-change” letter, which results in no adjustments to the taxpayer's return. The agent may also propose adjusting the return, and if the taxpayer agrees, the audit may provide a recalculation of tax liability. However, if the taxpayer and IRS disagree on adjustments to the return, the taxpayer may be forced to engage in litigation with the IRS.
The taxpayer may file a petition in the tax court if they dispute the outcome of the audit. In most cases, the taxpayer only has 90 days to file a petition in tax court after the IRS issues a Notice of Deficiency. Litigation may eventually lead to settlement, or could result in a hearing before the tax court. If you lose your case in tax court, you may be able to file an appeal.
Tax Fraud and Criminal Charges
Tax fraud is a criminal charge. Any individual who attempts to evade or defeat any tax imposed by the U.S. tax code may be guilty of a felony, with penalties including expensive fines, payment of taxes owed, and imprisonment for up to 5 years. Tax fraud often involves unreported or illegal sources of income. Even if income is earned through unlawful means, taxpayers are required to report those unlawful gains, whatever the source. Failure to report any income can result in tax fraud charges.
There are also penalties for failure to report certain accounts, such as off-shore interests. When any U.S. filer has a financial interest in accounts in foreign countries over a certain amount, they may be required to file a Report of Foreign Bank and Financial Accounts (FBAR). Failure to report foreign accounts may result in tax penalties and possible criminal charges.
Tax Debt Fresh Starts
The IRS introduced a Fresh Start Program that makes it easier for taxpayers who owe back taxes to pay the taxes and avoid a tax lien. Depending on the circumstances, individuals and some small businesses may benefit from this program. As part of the Fresh Start Program, taxpayers who meet certain requirements can request the IRS withdraw a federal tax lien. The program also allows taxpayers to enter into a payment installment agreement with the IRS to pay any outstanding amount due over a period of time. Once an installment agreement agreed upon, the taxpayer will begin making monthly payments to the IRS via check or through direct deposit withdrawals. Lastly, it is possible for a taxpayer to settle their tax debt for less than the full amount through an Offer in Compromise. Your experienced tax attorney can help you get approved for an IRS fresh start to avoid a tax lien and settle any tax debt.
San Diego Tax Law Attorneys
At Butterfield Schechter LLP, we assist our clients with all forms of tax law representation. From tax planning and compliance to tax court appeals, our attorneys will help you create a tax plan that meets state and federal tax code requirements, reduces your tax liability, and will represent you in tax litigation cases. Contact our office today with any questions on how we can help you and your company succeed.
Tax Law Resources
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