Episode 23 - What Can A Tax Attorney Do For You?

In Episode 23 - What Can A Tax Attorney Do For You Janathan Allen discusses what a tax attorney brings to the table that many other don't.  Janathan notes that many attorneys don't like numbers and yet there is so much in the business world that focuses upon the numbers associated with measuring business success and reporting the information driving every aspect of that business.  A tax attorney can provide so much more than a CPA and some other type of lawyer.

One of the primary advantages of a tax attorney over a CPA is the protections of the attorney-client privilege.  If an IRS auditor wants to see the communications between you and your CPA or the CPA's own notes they are easily discoverable to an IRS or state tax auditor.  In Episode 23 - What Can A Tax Attorney Do For You Janathan goes on to discuss the benefits of transactional planning and how intertwined the legal, tax and accounting perspectives are. The tax attorney is able to amalgamate all of the information regarding the business or individual and the type of business they operate, the type of gains/proits and losses they experience and where, when and how those gains/losses are realized.  The next steps involve the development of a strategy including entities and fiscal year planning to better match when losses occur and gains are recognized in order to minimize tax exposures.

Janathan discusses the similarity between how the United States and California look at their own taxpayers.  In both cases, the government expects it's citizens to pay taxes on worldwide income.  Why is it always important to file a tax return, even if you aren't going to owe anything?  Janathan Allen discusses real life examples such as the worker who received stock options or simply contributed to a 401(k) or other retirement vehicle while living and working in California.  It surprises many to learn that if it was earned in California, the State of California intends to tax it.

In Episode 22 - Domestic Tax Planning Janathan Allen discusses the importance of the process of domestic tax planning.  Many people don't think to consider tax planning by assuming "I'm a W2 employee, how can domestic tax planning help me?"  The fact is there are a lot of ways to structure your financial affairs in a way that reduces the amount of tax you owe to the IRS and the State of California (or any state) each year.  In this substantive episode, Janathan discusses the concepts of tax planning and how they connect with a transactional plan.

Episode 22 - Domestic Tax Planning goes on to lay out a general outline of domestic tax planning: "The first is what I would call the marshaling of the assets and the marshaling of the assets is really learning about what it is an individual or their individual and a spouse actually hold, earn, and have. So it could be investments in real estate, it could be investments in stocks, it could be investments in fine art or maybe old cars. But it's really sitting down with the client and understanding what it is that they have. Secondarily is what it is and how it is that those assets are held. Because I can't tell you how many times when I ask a client how it is that they hold an asset that that can be an issue in terms of tax planning itself. And then third is the types or the entities that may be utilized or are not being utilized that could go back and effectively save individuals taxes."

Episode 22 - Domestic Tax Planning covers a wide range of topics from pre-tax tools such as a 401k or SEP IRA, FSA, or HSA to the creation of entities to hold specific assets in order to reduce taxation while providing additional protections for the assets themselves.  Jan discusses PIGs and PALs and how the use of real estate can be a great domestic tax planning strategy.  How long should you keep your tax returns and supporting documentation?  What are a few of the "wives' tales" about moving assets and income offshore in order to avoid taxation?  What do US expatriates need to know about the responsibility to file an IRS return?  How can you avoid the costs and delays of probate and structure your affairs to accomplish all these goals?

In ABCast Episode 21 - Due Diligence Janathan Allen discusses a crucial element of Mergers & Acquisitions or M & A: comprehensive and thorough due diligence.  Due diligence is a process and a review of financial information, tax and corporate documents in order to verify the validity of what the buyer and seller are sharing with one another as it relates to the acquisition of a company or controlling stock interest.

In ABCast Episode 21 - Due Diligence Jan shares the three components of an effective due diligence process.  The first is to verify the organizational and corporate governance component of the equation.  Is the corporate entity associated with the transaction a well run and professional corporation?  The second component focuses upon a comprehensive and thorough financial review.  This is one of the most complex and detailed aspects of an effective due diligence.  The third component focuses on the tax implications of the transaction for both the buyer and the seller.  In addition, one must consider the market and products of the target acquisition as well as primary customers and key employees.

ABCast Episode 21 - Due diligence is a thorough discussion of the checklists which drive a comprehensive review of the transaction from the perspective of the buyer or the seller.  Each party has some interests in common (a successful transaction) but there are many aspects of the merger or acquisition where their business and financial interests are somewhat or entirely opposed.  How does one verify every aspect of the transaction to ensure protections for the client of Allen Barron and Janathan L. Allen, APC?

We invite you listen to an interesting and thorough discussion of the due diligence process in an M & A transaction.

In ABCast Episode 20 - Preparing a Company for Sale our founder, Janathan Allen, discusses all of the steps required to get ready to sell your business and the concepts and goals you should evaluate before you begin the process.  What do you, the seller, want out of the transaction?  What are your cash needs going forward?  Are you willing to remain in place to help with the transition or do you need to move on?  What are the tax ramifications of the transaction?  What are the specific steps and how long will this process take?

It may surprise most business owners to learn it can take more than a year to prepare their company for sale.  In Episode 20 - Preparing a Company for Sale Jan begins with the question of "why do you want to sell?" and moves through each step of the process.  Usually this begins with organizing the corporate entity, the books and other aspects of the business which will maximize the value of the entity and ease the process of selling it. The decision of an asset sale or a stock purchase transaction is crucial.  The buyer and the seller have opposing interests in each of these types of transactions and the structure of the transaction itself will have a substantial yet differing tax impact on the buyer and seller.

Episode 20 - Preparing a Company for Sale discusses the process to update and/or audit the financials and the books.  How will key employees and key customers be managed?  Are there any contingent liabilities or crucial creditors which must be addressed?  Once the organization is prepared for sale and a Letter of Intent is in place, the extensive process of due diligence will begin.  This can also take several months and helps the buyer to validate the information provided by the seller.  

The first step is to find a partner who can help with all of the legal, tax, accounting, estate planning and business issues associated with the transaction and provide sound insight, advice and counsel based upon decades of experience

Episode 19 - Business Succession Planning focuses on one of the most important part of protecting an owner, member, partner, shareholder or investor in any company, and yet less than one in four businesses have a succession plan.   In this insightful episode Jan establishes the purpose of a business plan: "how it is that you wish to transfer the operations of whatever you're doing in the event of death or disability so that the company can continue and customers can be served, or you close the company and it ceases to exist.

In Episode 19 - Business Succession Planning Jan discusses the "reasons" business owners and stakeholders have for putting off this important process, while providing real life examples of what has happened to two example clients who failed to establish succession planning prior to the passing of the primary owner or key executive.

Episode 18 - International Tax Strategies and Forms provides insights for any US taxpayer with offshore interests, and any international person or expat with US interests.  Jan begins the conversation with an interesting observation: "I think the perception is that Americans don't realize that once they leave our shores and they move to another country or they obtain residency in another country, that they have foreign reporting issues (to the IRS). I think sometimes the term foreign reporting is interpreted to mean it's not me because I'm an American citizen, when in fact if you are an American citizen outside of the states or you have foreign holdings, real estate, bank accounts, et cetera, outside of the United States, (filing an IRS tax return) does apply to you. And most people are quite surprised by that."

The episode goes on to discuss various foreign investments, entities and real estate ownership as well as oft used IRS tax forms such as the 5471, 8858, FBAR (Form 114) and 8938.  Jan goes on to explain the importance of transactional planning as it relates to international and US tax exposure with two simple goals: minimize tax exposure while protecting and preserving the associated assets.

In our conversation regarding real life scenarios to avoid and to attain, Part 2 begins with a comprehensive conversation regarding cryptocurrency and Non-Fungible Tokens or NFTs.  Janathan Allen discusses the quagmire cryptocurrency has become for many US taxpayers and the complexity of tracking, recording and reporting qualifying "events" for crypto and NFTs under US Tax laws.  Jan discusses the question at the top of the IRS form 1040 as well as the taxpayers' signature "under penalty of perjury."  The discussion converges upon how the IRS will find individual US taxpayers with unreported crypto assets and transactions and the risks they face by failing to report activity to the IRS.  "It's not a matter of if...It's a matter of when."  In the next segment, the discussion turns to real life challenges and how these decisions are made.  Jan uses the example of the challenge of whether a business should pay the quarterly sales tax deposit to the CDTFA or pay suppliers.  If the company in the example fails to pay suppliers they will literally go out of business. Jan explains the challenge and how the CDTFA would much prefer to help the company to stay in business and grwo stronger by establishing a payment plan or some other deferred strategy.  Jan discusses how the IRS views taxpayers who try to work with the agency through challenges as opposed to those who hide and hope not to be noticed.  Jan also gives the real life example of a business who took a PPP loan during COVID, but the bookkeeper mis-recorded the transaction as "income" when in fact it should have been to debit cash and credit a liability. The importance of accounting from a business and personal perspective cannot be overstated.  Accounting not only helps to reduce tax exposure and increase retained earnings, but helps in all aspects of transactional planning - the strategy of structuring transactions to reduce taxation exposures.  The lively conversation turns to PIGs and PALs and how these offsetting tools help US taxpayers to reduce tax exposure and increase the amount retained in "hip pocket national bank."

In this episode of ABCast Janathan Allen discusses some real life scenarios of how Allen Barron has been able to provide valuable services to solve our client's problems and fix integrated legal, tax and accounting issues both domestically and internationally.  The conversation begins with issues relating to a trust (or lack of one).  What happens when you pass away without a trust or will?  What is funding a trust and why is this so important?  When might it not be a good idea to put something into a trust?  Jan reviews the high cost of probate and how an effective trust strategy saves substantial time, money and hassle.  The conversation turns to domestic tax planning, international tax planning and transactional planning.  We discuss a few examples of how international tax planning has helped to restructure our client's strategy to reduce taxation and increase profits.  Jan discusses the substantial difference between how investments and income are taxed abroad versus here in the United States and how Europe's method of reporting investment income actually results in almost doubling an American investor's taxation due to PFIC calculations.  The conversation turns to FBAR reporting, Crypto investments and other associated vehicles.  Jan discusses the concepts of "willful" versus "non-willful" behavior on the part of a US taxpayer and how to come into compliance easily and efficiently if you have failed to report offshore accounts or activity.  The conversation includes a discussion on the protections of the attorney-client privilege and why it is almost never in the interests of a US taxpayer to speak directly to the IRS. 

This episode of ABCast focuses on trusts - what is a trust and why would one need to consider a trust.  The episode begins with a review of the key terms associated with a trust and an overview of the legal importance and structure of a trust itself.  A trust is a separate legal entity which provides additional protections for the assets placed within the trust.  These protections extend to shielding the assets from creditors while ensuring that they are well managed and ultimately passed on directly to the beneficiaries intended by the creator(s) of the trust.  There are several forms of trust vehicles, including but not limited to a revocable trust, an irrevocable trust, a special needs trust and a charitable trust.  Each form of trust carries protections and limitations associated with the purpose of the trust and the intentions of those who create it.  The conversation includes an overview of the time and expense associated with the process of probate, and why it is in the best interests of most people, including simply those who own their own home in San Diego and Southern California, to avoid having their assets taken through probate. In essence, a trust allows you to pass assets on to the people or entities you care about in a fairly immediate time frame after passing while saving your beneficiaries a substantial amount of time and money.  A trust ensures your wishes are accomplished while allowing one to ensure the beneficiaries have access to the assets contained within the trust in a manner which best suits the asset(s) as well as each beneficiary.  Controls within the trust can help protect a beneficiary from wasting the assets or to deliver them at a specific point in time (age, completion of rehab, etc.) or to simply ensure they pass to the beneficiaries in an efficient manner.

In this episode Janathan Allen discusses the value of, basis for and steps to accomplish tax planning for individuals and corporate entities.  Jan explains the primary goal of tax planning: to review sources of income and structure personal and business transactions in a manner which ultimately reduces tax liability within the code and regulations of federal and state tax laws.  The best time of year to begin tax planning is at the end of a fiscal or calendar year as you approach planning for the coming year.  Tax planning generally involves a review of the previous year(s) tax returns as well as income streams and liabilities in order to evaluate opportunities for tax optimization.  The discussion begins with evaluation of active and passive income and the types of taxation which applies to each bucket.  An effective tax plan is based upon getting perspective on where things stand and developing a strategy which provides actual steps the client can implement to accomplish their goals while minimizing associated taxation.  How can you best accelerate or decelerate income and associated expenses or losses in order to accomplish the best outcome from a tax perspective?  How does underlying accounting throughout the year affect the ease and cost of effective tax planning?  What should a US expat know about continuing tax exposures and how an effective tax plan will reduce their tax burden?  Join us for another substantive episode of ABCast.