Archives for May 2023

Estate Planning: CPA or Attorney? How About Both?

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If you’re thinking about the future, specifically how to build long-term financial stability for your family, estate planning gives you control of how your assets are dispersed when you’re gone.

As the saying goes, you can’t take anything with you, so making a plan in advance is a vital step in ensuring that your wishes are carried out, no matter how much your assets are worth. Protecting your legacy is one of the most thoughtful things you can do for your loved ones.

Many certified public accountants (CPAs) and attorneys offer estate planning services. But choosing one (or both) comes down to your needs and goals:

CPAs. With a wealth of tax law knowledge, a CPA can offer financial expertise, especially in the areas of estate laws and gift tax laws. They can also advise on how each estate planning tool will impact taxes and fees and can strategize to help families and individuals minimize their tax liabilities. (For example, it may be possible to eliminate estate tax by simply leaving all property to a charity.)

And because a CPA also prepares their clients’ tax returns, they’re aware of personal tax information that can require changes to estate plans and can watch for administrative estate planning issues.

Estate planning attorneys. Like a CPA, attorneys can lend their vast knowledge on wills, trusts and business succession matters, while addressing other legal implications of an estate plan. They specialize in more precise areas of concentration, such as evaluating estate planning options to benefit future generations, drafting a last will and testament, appointing guardians for minors, granting living relatives a power of attorney and preparing a living will to outline end of life decisions.

Working in tandem

When considering estate planning goals, clients may leverage the insight and experience of both professionals. A CPA who works with an attorney on their clients’ behalf can save them time, money and headaches — maximizing tax breaks while efficiently managing the distribution of their assets.

And when sharing a client, a lawyer and CPA are in regular contact, communicating any changes in their planning, adding value in their areas of specialty and improving outcomes for the client and their loved ones.

Collaboration is key

At Magone & Company, we believe that open, ongoing dialogue is critical for building wealth now — and planning what to do with it in the future. We have the tools and knowledge to help create lifelong financial stability and success for your family. Contact us for a complimentary assessment at (973) 301-2300.

 

Why Your Business Should Prep for an Employment Tax Audit — Now

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In August 2022, the Inflation Reduction Act was signed into law with a provision earmarking nearly $80 billion in funding to support the IRS enforcement of federal tax laws, notably, employment tax.

The IRS typically performs employment tax audits to ensure that a business is compliant with tax filing requirements and to verify the reported amounts.  With more IRS “boots on the ground,” you may want to prepare for a potential employment tax audit sooner rather than later.

Zeroing in on employer liability

Employers are generally required to withhold federal income, Social Security and Medicare taxes (collectively known as employment taxes) from employees’ earnings and forward these funds to the U.S. Treasury on employees’ behalf.

You’re also liable for taxes imposed by the Federal Unemployment Tax Act (FUTA). The IRS examines some employment tax returns to determine if wages, tips, compensation, credits and taxes are reported accurately.

Companies are obligated to remit payroll taxes on a timely basis. These taxes are called trust fund taxes because employee money is held in a trust until the employer makes a federal tax deposit in that amount. Any unpaid trust fund taxes must be immediately available for collection from the business.

In addition, it’s critical to correctly determine whether workers are employees or independent contractors, as it impacts employment taxes. Employee misclassifications can be an expensive mistake. If an independent contractor is misclassified by a company and pays his/her own self-employment taxes, but offsets it with expenses, the government never receives the entire amount owed.

If you’re concerned you may be falling short on your obligations, now’s your chance to make sure you’re in good standing — and fix what’s broken before an employment tax audit is conducted.

Calling for audit improvements

On February 13, 2023, the Treasury Inspector General for Tax Administration (TIGTA) released a report on the need for improvements to the employment tax examination process to increase taxpayer compliance and collection potential.

Employment tax workstreams are set up to focus on probable areas of non-compliance to show cases with a high potential for audit adjustments. But with increased funding, the employment tax audit process is likely to fine-tune its processes and may involve using more technology in selecting who will be subject to an examination.

Here’s an unexpected way that artificial intelligence (AI) could impact your business. An AI algorithm, for example, could examine thousands of tax returns and isolate certain areas where there are anomalies in a matter of milliseconds.

Getting a step ahead

Businesses may use internal or external resources to prepare for an IRS employment tax audit. Internal audits may be better suited for larger employers with an in-house tax department responsible for filing tax returns and other levels of compliance.

For smaller employers, seeking the help of an independent auditor can provide deeper knowledge into the issues being probed.

Staying ahead of an employment tax audit can be a challenging task. Reach out to the CPAs at Magone & Company to ensure you’re on track for IRS compliance.

This information is provided for educational purposes and should not be construed as financial or legal advice. Please consult your accountant or attorney for advice specific to your situation.