All Articles - Think Outside the Tax Box

CURRENT EDITION

By Garret Wasny, MA, CMC, CITP/FITP

10 Ways Certified Tax Planners Can Prepare for Increased IRS Focus on Documentation During Audits

The IRS is ramping up scrutiny of high-net-worth individuals and businesses, increasing audit rates by over 50% for those earning above $10 million. Recent IRS initiatives backed by Inflation Reduction Act funding have intensified enforcement on wealthy taxpayers, large partnerships, real estate investors, and tech businesses. IRS agents are digging deeper during audits and expecting taxpayers to produce more documentation to support every position on their returns. To help clients navigate this environment, certified tax planners must take proactive steps to bolster documentation and audit readiness. Below are ten authoritative strategies, complete with industry examples, IRS policy references, and best practices, to prepare for the increased IRS focus on documentation.

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How to Help Your Clients Lower Their Student Loan Payments

There are roughly 42.7 million federal student loan borrowers as of Q4 2024, creating an opportunity to provide additional insight to your clients beyond tax preparation. By leveraging certain tax and repayment strategies, you can help your clients reduce their tax liability and lower their student loan payments in one strategic swoop. Here’s how.

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Trust Issues: Don’t Try to Save Your Way to the Trust Fund Recovery Penalty

When people reach out to me about reducing their tax bill, there are two things that they bring up. The first is starting an LLC, and the second is converting their business to an S-Corp. When I ask why they think an S-Corp will help, the common knee jerk reaction response is to eliminate self-employment tax. It is true that their net income will no longer be subject to self- employment tax and neither will their distributions. However, what they fail to learn in their S-Corp online class from YouTube university is that they need to be on payroll if they are working in the business. Not only that, but they also need to receive reasonable compensation while on payroll. So, what happens if they go a year or two without being on payroll before they find this out? The TFRP is the biggest ouch a business owner can face and threatens to close businesses each year. It's the penalty that business owners pay for stealing from their employees and the IRS. To better understand it, let's look at what the trust fund is, how the IRS calculates the penalty, and who is responsible.

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Client Alert

TAX COURT ROUNDUP – December 2024

Just a few new developments out of United States Tax Court in November. Technical issues predominate in this short working month.

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Tax Scams: What You Need to Know About “Sovereign Tribal Tax Credits”

Tax scams come in many shapes and sizes. Some schemes aim to steal money or identities, while others present as legitimate-looking investment opportunities with promises of reducing tax bills. These offers often come from law firms, investment groups, financial advisors, and even sophisticated organizations. They tempt taxpayers with strategies like inflated art donation deductions, film investments, and even Native American Tax Credits. The IRS advises taxpayers to consult independent tax or legal professionals to avoid falling prey to aggressive promoters. But as tax planners, how do we determine if a strategy is legitimate? Who do we consult so we can understand the difference between a scam and a scheme? Think Outside the Tax Box of course! One popular scheme being whispered about in tax conferences this year is the so-called "Tribal Tax Credits." It’s been a hot topic, with many professionals asking about its legitimacy. Let's dive into the details to better understand this intriguing yet questionable opportunity.

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IRC Section 121 Exclusion: Nuances That Make a Big Difference

With the sale of a client’s primary residence, many tax professionals are familiar with the Section 121 exclusion, which allows taxpayers to exclude up to $500,000 ($250,000 for single - $500,000 for married filing jointly) on capital gains for the sale. Often, the only criteria mentioned is that the taxpayer must have owned and occupied the home for two of the most recent five years. However, this barely scratches the surface of Section 121; there’s much more money-saving potential in this portion of the tax code.

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Exploring the Final 1099-DA (Digital Asset) Regulations

One of the IRS’ favorite ways to entertain itself is to release new and important guidance at 5 pm on a Friday. They self-award bonus points if it is the Friday before a holiday. They hit “publish” and immediately shut down the office before anyone can react. When it comes to digital asset guidance, I speculate they also have access to my vacation calendar to release it at the most inconvenient time possible. Last summer, they released the temporary regulations on 1099 crypto reporting while I was on vacation in South Africa. This year, at 4:45 pm on the Friday before the 4th of July, they released the final regulations. I then had to spend the rest of the summer dodging my editors at TOTTB because this article was really harshing on my vacation plans.

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Advising Clients About Prenups

To have and to hold and happily ever after is a nice dream, but into every married life a little reality about money must fall. Enter the prenuptial agreement, aka the prenup. This contract between prospective spouses clarifies the rights and obligations of the parties during their marriage – and during the sometimes-ugly aftermath should they separate, divorce, annul the marriage, or die. Prenups can help couples set financial expectations for the marriage, including whether they’ll have a joint bank account and file taxes together, among many other matters. Given the sensitive nature of these conversations, it’s important to know how to advise on such an important document. What do your clients need to know?

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Instagram Marketing for CPAs: Showcasing Expertise and Behind-the-Scenes Insights

We've been expanding our conversation on how a solid online presence is crucial for professionals in every field, including Certified Public Accountants (CPAs). So far, we covered Linkedin and X (previously Twitter). In this article, we will delve into Instagram, a platform traditionally dominated by lifestyle, fashion, and food influencers; it now offers a unique opportunity for accountants and CPAs to connect with potential clients, showcase their expertise, and provide an insider's view into their work processes. We will explore creative ways you can leverage Instagram to enhance your professional brand and connect with your audience through engaging visual content and storytelling. Unlike LinkedIn and X, you can post on Instagram (IG for short) in three main ways.

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