Tax Tips From a Seasoned Attorney

PRACTICE POINTERS

BY JOHN PEARCE JD/CPA TX, LA, GA, KY

Well Friends, its tax time again. Unless your 2021 tax return is extended, for S corporations and other pass-through entities tax returns are due March 15, 2022; for individual, trust and C corporation returns the date this year is April 18, 2022; and nonprofits returns have a due date is May 16, 2022. While we predict the usual list of suspects will appear tearfully in our offices one day before the filing date with a shoe box full of receipts, and while we will endeavor to help them, as we love our friends and have a hard time saying “No,” the following are intended not just for lawyers but for all those who love and help their clients.

There are many pointers that all through the years I feel could be followed with tremendous savings or avoidance of expenses, but these are the ones that continue to be presented to me repeatedly by clients who are well educated and smart, many lawyers and accountants:

As a seasoned practitioner, don’t you worry about all these electronic tax services that are advertising everywhere from the internet to the Superbowl?

While I try hard to never wish harm on anyone, when it comes to legal forms nonlawyers find on the internet, frankly, in time those forms prove to be a great source of business for people like me. Successful people eventually realize that one-size-fits-all forms are dangerous. It is hard for me not to say this to clients who have just realized how much more tax they paid than they needed to or some other legal mistake or missed opportunity they experienced because they turned to forms rather than seasoned advisors.

The good news is, once someone like me shows them the mistakes these forms and unlicensed advisors make, once they have an experience with a professional who is experienced, they never go back to those forms. They typically stay as clients for a lifetime. That’s the joyful result of those forms!

Not all deductions and losses are created equally. Whether a casualty-loss deduction is taken depends on many factors. This is a question that gets complicated in a hurry.

The IRS asked to look at our books. What should I do?

Never, ever, ever allow the IRS to come to your clients’ offices if you can avoid it. If the IRS or other law enforcement agents have a subpoena, they won’t call first. They will show up unannounced. There is likely nothing you can do to stop them right then even if you have many avenues later.

When your client gets a call, they need to refer the IRS agent to their attorney who should ask the following of the IRS or other agent: “What is the scope of your inquiry, time, tax number and entities?” Then arrange with your client to have the requested records sent to your offices. Make the IRS or FBI agents comfortable; then leave them alone! Don’t offer amenities or try to chat it up. Just give them whatever they described, no more, no less. No conversation.

I suffered casualty loss because of a fire, the Texas Blizzard, or for some other reason. That’s a great deduction to take, isn’t it?

This is exactly the kind of question unlicensed tax preparers answer in a way that often cause their clients to stumble and the IRS to initiate an audit. Not all deductions and losses are created equally. Whether a casualty-loss deduction is taken depends on many factors. This is a question that gets complicated in a hurry. The moment your client has anything out of the ordinary like a casualty loss occasioned by a catastrophic event for them personally or their business it is time to seek the counsel of a skilled tax.

BONUS: For all our beloved nonprofit organizations: Don’t Get the 990 Blues! Retain the most skilled accountants or tax lawyers you can find to help you with preparation of 990’s no matter what type of nonprofit organization you think you are. Music video with tax preparers dancing in the sunshine to follow! AL

John Pearce is joint-licensed as an attorney and CPA in Texas since 1989, in Louisiana, Georgia and his home state of Kentucky since 1983. Pearce practices actively in Austin in both disciplines, is active in Austin Bar Association’s Business, Corporate and Tax Sections. He gives generously of his time and talent to a remarkably diverse group of local charitable organizations that run the gamut from Angel Flight to Shadow Cats. Meow! In 2016, Pearce joined as a founding member of ‘Still Loving It Lawyers Club ® ’ the 24th practice section of the Austin Bar, to encourage and inspire lawyers of every age to rejoice in their practice and continue lifelong service to others.