Tax attorney weirdness

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boglerocks
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Tax attorney weirdness

Post by boglerocks » Thu May 21, 2020 4:49 pm

I have a CPA I like but I'd also like to be able to consult a tax attorney for help with strategies for minimizing future tax liability. I was referred to two tax attorneys and both seemed to think this was a pretty strange idea. The first guy said he doesn't do tax shelters. I Googled "tax shelters" and read this page which defines them as a vehicle used to minimize or decrease taxable income:

https://www.investopedia.com/terms/t/taxshelter.asp

That sounds good so I asked the second tax attorney about tax shelters directly and he said all of those opportunities have been closed by the IRS and that it is actually something of a dirty word.

I figured this would be as straightforward as hiring a business attorney but I get the feeling I'm entering a weird world and not sure how to proceed or if I should. I started reading about the difference between a CPA and a tax attorney and found this which is just what I'm looking for:

"Another way tax lawyers are helpful is with tax planning. If you need someone to come up with a tax plan that minimizes your liability, trust an attorney to structure your assets."

https://www.toptaxdefenders.com/blog/cp ... difference

I'd also love to be able to ask an attorney tax questions when I want to double-check what my CPA tells me, but in my experience attorneys aren't excited about working on that type of basis and are only interested in larger engagements (which is perfectly understandable).

Where to from here? I could use some help with tax planning strategies and I'm also not 100% comfortable making important tax-related decisions without consulting an attorney. Is there a certain type of tax attorney I should be looking for? Should I be going about this differently?

petulant
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Re: Tax attorney weirdness

Post by petulant » Thu May 21, 2020 5:01 pm

What exactly are you trying to do? You might be going about it wrong.

If you're trying to minimize personal income taxes over a long period of time in conjunction with managing things like investment accounts, funding a child's education, thinking about your home equity, and inheritance issues, a Certified Financial Planner with competence in your situation is actually the best professional to consult with. A strong CFP will then recommend limited engagements with a CPA, estate attorney, or others to handle aspects of the situation.

A tax attorney is usually geared toward resolving disputes with the IRS or planning the tax structure of a business, not toward building your personal financial plan.

fabdog
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Re: Tax attorney weirdness

Post by fabdog » Thu May 21, 2020 5:04 pm

There was a fairly large amount of tax shelters being provided some time back... and they got cracked down on.

But that doesn't appear to be what you are asking these folks for. But sounds like that's what they hear. Part of the issue may be that most if not all of their clients are companies, and that's the client base they are used to working with. Who referred you to them?

What type of advice are you looking for that your CPA can't handle, or perhaps an hourly financial planner who specializes in tax issues?

Not clear you need a tax attorney to "structure your assets" unless you have a very large amount of money and need complicated vehicles like specialized trust, multi generation, etc.

If you can let folks here know what kinds of things you were hoping to ask, I am sure you will get some helpful advice.

Mike

skepticalobserver
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Re: Tax attorney weirdness

Post by skepticalobserver » Thu May 21, 2020 5:20 pm

Try an attorney or firm that focuses on business planning. Look, a 529 plan is a tax shelter—you are sheltering income generated from investments in the plan from taxation. A real estate investment can be a tax shelter since it may generate income sheltered from taxation for a time (or maybe forever) by deprecation write offs

No attorney or CPA is going to help evade tax, but a avoid it.

Yes, there are plenty weird attorneys, but many, many more weird prospective clients.

dbr
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Re: Tax attorney weirdness

Post by dbr » Thu May 21, 2020 5:30 pm

Did you ask your CPA how he might help you with tax planning? Granted a CPA often does not go beyond tax preparation but tax planning is done by CPA professionals as it might be done by the right financial planner. I think it might not be surprising that a tax attorney would not have much to do with planning so much as legal issues someone has already gotten themselves into.

I needed to do some tax planning at one point and was referred by the CPA who was doing my parents tax returns to another CPA in his firm who was able to work out my situation. Cost was a couple hundred an hour for a couple of hours work.

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FIREchief
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Re: Tax attorney weirdness

Post by FIREchief » Thu May 21, 2020 5:43 pm

boglerocks wrote:
Thu May 21, 2020 4:49 pm
I have a CPA I like but I'd also like to be able to consult a tax attorney for help with strategies for minimizing future tax liability.
Does this have to do with individual income taxes? Self employed? Small business? Your questions would make a lot more sense with a little more context.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

bsteiner
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Re: Tax attorney weirdness

Post by bsteiner » Thu May 21, 2020 5:49 pm

Except for Roth conversions, we're more likely to do tax planning for business transactions, tax planning for estates and trusts, and tax controversies.

New Providence
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Re: Tax attorney weirdness

Post by New Providence » Thu May 21, 2020 5:57 pm

If there was a legal way to avoid paying taxes everybody on this board would be doing it.

clemrick
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Re: Tax attorney weirdness

Post by clemrick » Thu May 21, 2020 6:02 pm

Tax planning is a legitimate goal for everyone. There are many legitimate ways to minimize paying taxes. Often people just do things, like take money out of retirement accounts, without considering how it will affect their taxes and then are blindsided by a huge tax bill.

I think the poster probably wants an Enrolled Agent rather than a tax attorney. There are EAs who specialize in financial/tax planning. You can look on the National Association of Enrolled Agents for a list of EAs near you. https://taxexperts.naea.org/

EAs have to pass a rigorous three part test to be federally licensed and have to have continuing education. However, just like any other profession, some are better/worse than others.

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FIREchief
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Re: Tax attorney weirdness

Post by FIREchief » Thu May 21, 2020 6:10 pm

New Providence wrote:
Thu May 21, 2020 5:57 pm
If there was a legal way to avoid paying taxes everybody on this board would be doing it.
There are many legal ways to avoid paying taxes and many on the board are "doing it." 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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boglerocks
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Re: Tax attorney weirdness

Post by boglerocks » Thu May 21, 2020 6:44 pm

What exactly are you trying to do? You might be going about it wrong.
I think part of the problem is I don't know except that my goal is to minimize my tax liability.

A tax attorney is usually geared toward resolving disputes with the IRS or planning the tax structure of a business, not toward building your personal financial plan.
That's what I've found too.

What type of advice are you looking for that your CPA can't handle, or perhaps an hourly financial planner who specializes in tax issues?
From a practical perspective, none. I'm just most comfortable getting advice from an attorney if I'll be making decisions based on it that have legal ramifications.

Did you ask your CPA how he might help you with tax planning? Granted a CPA often does not go beyond tax preparation but tax planning is done by CPA professionals as it might be done by the right financial planner.
My CPA seems to fall into the category of not going beyond tax preparation. Maybe I need a Certified Financial Planner and an Enrolled Agent. Or maybe just another CPA.

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galawdawg
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Re: Tax attorney weirdness

Post by galawdawg » Thu May 21, 2020 6:54 pm

It sounds like you might be looking for an Accredited Tax Advisor.
The Accredited Tax Advisor (ATA) is a leading national credential for practitioners who handle sophisticated tax planning issues, including planning for owners of closely held businesses, planning for the highly compensated, choosing qualified retirement plans and performing estate tax planning. Their expertise covers tax returns for individuals, business entities, fiduciaries, trusts and estates, as well as tax planning, tax consulting and ethics.

In order to become an ATA, you must pass the ATA examination which is offered twice a year at testing centers around the country. In addition, you must also meet a three year experience requirement.
https://www.acatcredentials.org/acatcredentials/ata

rich126
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Re: Tax attorney weirdness

Post by rich126 » Thu May 21, 2020 6:57 pm

I ran into this problem as well. I'm not looking for investing advice, or someone to manage my money but wanted to pay someone for their time to review my assets and suggest things I may be overlooking from a tax perspective, especially as I get into retirement. I'm pretty clueless with taxes.

The problem is that most people want to invest your money so they can take their 1%+ from AUM. I gave up looking for now. Will look again soon.

tphp99
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Re: Tax attorney weirdness

Post by tphp99 » Thu May 21, 2020 7:24 pm

FIREchief wrote:
Thu May 21, 2020 6:10 pm
New Providence wrote:
Thu May 21, 2020 5:57 pm
If there was a legal way to avoid paying taxes everybody on this board would be doing it.
There are many legal ways to avoid paying taxes and many on the board are "doing it." 8-)
Can't think of a legal way to "avoid" paying taxes. Can you give one example?

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FIREchief
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Re: Tax attorney weirdness

Post by FIREchief » Thu May 21, 2020 7:27 pm

tphp99 wrote:
Thu May 21, 2020 7:24 pm
FIREchief wrote:
Thu May 21, 2020 6:10 pm
New Providence wrote:
Thu May 21, 2020 5:57 pm
If there was a legal way to avoid paying taxes everybody on this board would be doing it.
There are many legal ways to avoid paying taxes and many on the board are "doing it." 8-)
Can't think of a legal way to "avoid" paying taxes. Can you give one example?
Sure. Wait to sell your appreciated after-tax equity investments in a year when you can cap your MFJ taxable income at $80K. Zero taxes! :sharebeer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Zombies
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Re: Tax attorney weirdness

Post by Zombies » Thu May 21, 2020 7:31 pm

There’s really not much to be done, and this site pretty much covers it all through various threads. You max out available retirement space (both pre- and post-tax) you do a mega-backdoor rollover if you can, you give appreciated stock to charity (for many people, a DAF makes sense here) in years of high income and itemization, and tax loss harvest if that’s your thing. Any good fee-only advisor should be able to competently walk you through this if you’re not as much of a self-learner, no shame in that. Other tax ... opportunities like opportunity zones and the like are investment possibilities with some tax advantages, and a _lot_ of complications (and sometimes fraud when preying on people who don’t know those industries).

When my income rocketed up I thought for sure I was missing something, but the only accessible “tax shield” if you will over the years has been high charitable giving to my DAF. The “rich get richer” saying, in my experience, leads to better investment opportunities and asset-backed great mortgage rates (or personal loan rates backed by assets), and not exotic tax machinations. That may have been true years ago but not any more.

fabdog
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Re: Tax attorney weirdness

Post by fabdog » Thu May 21, 2020 7:32 pm

Can't think of a legal way to "avoid" paying taxes. Can you give one example
I'm sure this will turn into a lengthy list... contribute to HSA... money not taxed... spend on qualified medical expenses... not taxed

Mike

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arcticpineapplecorp.
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Re: Tax attorney weirdness

Post by arcticpineapplecorp. » Thu May 21, 2020 7:49 pm

boglerocks wrote:
Thu May 21, 2020 6:44 pm
What exactly are you trying to do? You might be going about it wrong.
I think part of the problem is I don't know except that my goal is to minimize my tax liability.
So you want to know all the ways to minimize taxes?

When my dad was in his 20s he went to H&R Block and they did his taxes.

He read an article or heard from another teacher that he could deduct something (can't remember if it was miles, or supplies, etc). He went back to the H&R Block guy and asked, "Can I take this ______ as a deduction?"
The guy at H&R Block said, "Yeah."
My dad asked, "Why didn't you tell me that when you did my taxes last year?"
The H&R Block guy said, "Because you didn't ask!"

That was the last time my Dad went to H&R Block to do his taxes.

What did he do instead? Got motivated to find whatever legal breaks he was entitled to. He started learning about taxes. He read books.

The book he stood by and bought every year (don't know if you need to do that if the tax laws haven't changed every year) is JK Lasser's Your Income Tax. You can probably get a copy from your library.

There may be some things in there that apply, and others that don't.

There are more tax breaks for business owners than w-2 employees.
Itemizing of deductions due to homeownership is not what it used to be (before 2017 tax law changes).

There are strategies to minimize tax if you have investments in taxable accounts (don't know if that's in the Lasser book or not). These are called tax loss harvesting. You can use losses to offset gains and reduce taxable income by $3000 per year and can carry over unused losses. You can even bank a loss yet stay fully invested by selling the fund with a loss and immediately buying a similar but not identical fund: https://www.bogleheads.org/wiki/Tax_loss_harvesting

There's a saver's credit depending on your income (phases out).

Here is info on those two above along with other tax considerations for investors:
https://www.bogleheads.org/wiki/Outline ... _investors

There are opportunities to reduce taxes in lots of other ways like using a tax deferred acct (401k/IRA) if you're in a higher bracket while working than you might be in retirement (contribute at higher rate, withdraw at a lower rate).

There are ways to do Roth IRA conversions while in a low tax bracket (before getting social security).

There are QCDs for RMDs from IRAs to reduce taxable income in retirement.

You can look to donate tax deferred assets if any left at death and give Roth accounts to your kids (leaving a tax free gift to them and not giving a tax deferred acct if they'd have to pay taxes at a higher rate).

You can look to gift your taxable investments to your kids (they get a stepped up basis at your death and pay no capital gains if sell at time they inherit).

You can understand the tax rates for captial gains vs dividends and how to place assets tax efficiently: https://www.bogleheads.org/wiki/Tax-eff ... _placement

Aside from that there are trusts that can be set up. But you should be clear what you're trying to accomplish. A trust can be expensive to set up.

So you've got to start reading, doing research or at least have an understanding of what taxes are you trying to reduce? Income taxes now, taxes in retirement later? Taxes on Investments now or later?

Is this some of what you're looking for?
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

Topic Author
boglerocks
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Re: Tax attorney weirdness

Post by boglerocks » Thu May 21, 2020 8:12 pm

Some real gems in there, thank you. I'm an investor so I'll go over this carefully:

https://www.bogleheads.org/wiki/Outline ... _investors

Can I avoid becoming an expert on all of this by hiring the right person or firm? Is that a tax attorney, CPA, CFP, EA...? Maybe it could be any of them if I find the right one?

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celia
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Re: Tax attorney weirdness

Post by celia » Thu May 21, 2020 8:52 pm

Can't think of a legal way to "avoid" paying taxes. Can you give one example
My favorite example is that you will pay the same taxes on your yearly income if you put $6,000 in a Roth or in a taxable account. Since there is no penalty for withdrawing the Roth contributions early (should they be needed), it is a no-brainer to contribute to Roths where future growth will grow tax-free (as long as the Roth is at least 5 years old and you are over 59.5 when you withdraw).

boglerocks wrote:
Thu May 21, 2020 8:12 pm
Can I avoid becoming an expert on all of this by hiring the right person or firm? Is that a tax attorney, CPA, CFP, EA...? Maybe it could be any of them if I find the right one?
How is ‘hiring the right person’ any different from ‘reading the forum’ for answers here? Can’t you tell which threads apply (or might apply) to you and which ones don’t? If you read the forum for about 2 hours a week, the ‘common knowledge’ we have will soon be known by you too!

Even if you ‘hire the right person’ or ‘read a thread that applies to you’, it won’t do you any good if you don’t follow the recommended actions. Do you also want this person to manage your assets and take the actions you can easily do yourself?
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

petulant
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Re: Tax attorney weirdness

Post by petulant » Thu May 21, 2020 9:13 pm

boglerocks wrote:
Thu May 21, 2020 8:12 pm
Some real gems in there, thank you. I'm an investor so I'll go over this carefully:

https://www.bogleheads.org/wiki/Outline ... _investors

Can I avoid becoming an expert on all of this by hiring the right person or firm? Is that a tax attorney, CPA, CFP, EA...? Maybe it could be any of them if I find the right one?
Like I said above, CFP is the right professional, and then they will recommend other professionals for limited engagements. Finding the right CFP is important, though.

manusnd1
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Re: Tax attorney weirdness

Post by manusnd1 » Thu May 21, 2020 9:25 pm

Wow, your post is all over the place. So you want to use super aggressive "tax shelters," but you don't know what they are or anything about them and your afraid to take any basic advice from regular old CPA? In my experience CPAs come in two flavors, conservative and aggressive as you want them to be. Why don't you find one of each and pay them for their time and have them do some financial planning for you? A good CPA can charge as much per hour as a lawyer.

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arcticpineapplecorp.
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Re: Tax attorney weirdness

Post by arcticpineapplecorp. » Thu May 21, 2020 9:57 pm

that site (investopedia) lists tax shelters as lots of different things, from 401ks to incorporating in Delaware and everything in between.

You have to understand a few things:
1. just because something is a tax shelter doesn't mean you can use it or benefit from it.
if you don't have a business, incorporating in Delaware is of no use to you.

2. just because a tax shelter might be available to you doesn't mean it's the right thing to do (from a tax perspective).
are municipal bonds for you just because they're exempt from federal (and possibly state/local) taxes? Maybe, maybe not. Typically munis are for people in higher tax brackets. If you're in a lower tax bracket (12% or 22%) they may not be helping you that much. They are typically higher cost than another type of bond or bond fund because of the tradeoff (tax benefit on one side of the equation equals higher cost on the other side). You have to make sure the extra cost is going to be worth the tax savings. If not, you'd be better off not in munis.

3. foreign tax credit can be useful, but it may be small. And it's only available if you invest in international funds in a taxable account.

4. take advantage of tax advantaged accounts (Roth IRA, 401k, etc)

5. Most importantly is to not let the tax tail wag the investment dog.
This means don't make the primary decision based on tax purposes. You could be choosing improperly because your focus is off.
Determination of your asset allocation (% stocks / % bonds), which sets your portfolio's level of acceptable risk, is the single most influential decision you can make on your portfolio's performance. Only consider taxes after you have configured your total portfolio.
Tax regulations can be complex and contain subtle details that may escape inexperienced investors. If this article seems overly complicated, then just remember a few key points:

Set your asset allocation first, taxes come second. If you don't have any funds which can be put in a location to reduce your tax bill, then stop here. You've done the best you can.
Tax rates and brackets change frequently. What was a logical tax location one year may turn out to be a poor choice a few years later. Consider if it's worth the effort (added complexity) to take this approach.

source: https://www.bogleheads.org/wiki/Tax-eff ... _placement
I have a co-worker who plans to retire, buy an RV and travel the country. She's on an RV message board, goes to lectures, etc. where they all buy their RV from South Dakota or Florida for the tax savings and claim residency in South Dakota (they have to purchase a p.o. box where they get their mail and pay for a service to physically get the mail, scan it and email it to them) in order to get the tax benefits.

So there are all sorts of things you can do, some may be relevant. Some not. You will not likely be able to eliminate taxes entirely if that is your goal.

Real estate (renting out/landlording) can be profitable tax wise. This is because of the depreciation in addition to the write off of expenses (mortgage, etc). But I wouldn't become a landlord just for the tax benefits.

There are more important things in life than just trying to reduce/eliminate your taxes. And don't think that just because some presidents think themselves "smart" by not paying taxes (insinuating those that do are stupid), you will likely be a recipient of benefits that were funded with tax dollars (social security, medicare, possibly even medicaid if you need skilled care and are required to spend down assets). If you like freedom that comes from our national defense, that was paid for by tax dollars. Lots of other things too. Libraries, public parks, legislation for clean air, water. Those things are important, right? Someone's got to pay for them. If you don't think you should, why should anyone else? Then where would we all be?
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

bsteiner
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Re: Tax attorney weirdness

Post by bsteiner » Thu May 21, 2020 10:06 pm

galawdawg wrote:
Thu May 21, 2020 6:54 pm
It sounds like you might be looking for an Accredited Tax Advisor.
The Accredited Tax Advisor (ATA) is a leading national credential for practitioners who handle sophisticated tax planning issues, .....
...
??? Who are they? Why do they think they're "leading"?

JBTX
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Re: Tax attorney weirdness

Post by JBTX » Thu May 21, 2020 10:36 pm

boglerocks wrote:
Thu May 21, 2020 8:12 pm
Some real gems in there, thank you. I'm an investor so I'll go over this carefully:

https://www.bogleheads.org/wiki/Outline ... _investors

Can I avoid becoming an expert on all of this by hiring the right person or firm? Is that a tax attorney, CPA, CFP, EA...? Maybe it could be any of them if I find the right one?
The "right" cpa or the "right" cfp should be able to handle all of those, except for estate planning issues where you should engage an estate planning attorney. But as indicated some cpas may not really be interested in much outside of preparation, and there are many CFPs I'd steer clear of who are glorified commissioned sales people.

You don't have to learn this stuff yourself, but the result is people who don't have at least a basic understanding of it exaggerate it's importance. For a vast majority of people's taxes are reasonably straight forward. If you have a business then it becomes somewhat more complicated. Gone are the days (approx 33 years ago) when people invested in commercial real estate solely for the "tax sheltering" aspects of it.

It also depends on how much money you have. Maybe if you have 8 figure wealth there might be strategies,like family limited partnerships or other such nonsense, but otherwise while there are certainly tax minimization strategies I can't think of a "tax shelter".

For very large estates- 8 figures and above, a good estate planning attorney can make a material difference.

Katietsu
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Re: Tax attorney weirdness

Post by Katietsu » Thu May 21, 2020 10:50 pm

boglerocks wrote:
Thu May 21, 2020 8:12 pm
Some real gems in there, thank you. I'm an investor so I'll go over this carefully:

https://www.bogleheads.org/wiki/Outline ... _investors

Can I avoid becoming an expert on all of this by hiring the right person or firm? Is that a tax attorney, CPA, CFP, EA...? Maybe it could be any of them if I find the right one?
This. There are definitely professionals with the CPA designation that have limited experience with personal income tax and even less with tax planning, the CFP that will not even give specific tax advice and there are EAs that only want to look at you taxes retrospectively not prospectively. On the other hand, the right person for you could have any of those designations.

BuckyBadger
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Re: Tax attorney weirdness

Post by BuckyBadger » Thu May 21, 2020 11:49 pm

Is your situation particularly complex? If not, none of these professionals may be necessary.

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Eric
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Re: Tax attorney weirdness

Post by Eric » Fri May 22, 2020 12:03 am

I'm a tax lawyer, though I mostly deal with estate and gift taxes.

As another poster mentioned, in most cases there's very little an individual can do to reduce his or her income tax liability, beyond contributing to retirement plans, tax-efficient investing, and other fairly straightforward techniques you'll see discussed regularly on this site (and which an experienced CPA can likely cover). If you're charitably inclined, there are a few more options a tax attorney (or upper-level estate-planning attorney, but they/we are tax attorneys) may be able to help you with. But even there it is important to have realistic expectations. It's rare for anyone to come out ahead by making a charitable gift.

If you have a business, a tax lawyer can help you choose an appropriate entity classification (C corporation, S corporation, partnership, disregarded entity) for your circumstances. But that's more of a one-time selection (with perhaps occasional review) rather than ongoing planning.

Old-style "tax shelters" don't work anymore (for individuals) because of what are known as the passive loss rules, enacted in 1986. To oversimplify a bit, if you want to get tax-writeoffs from a business venture, you must "materially participate" in the business under a somewhat complex set of rules. You can't take those losses as just a passive investor. These rules pretty much killed the doctors-investing-in-orange-groves-for-tax-writeoffs industry.

Bottom line, the tax attorneys you contacted probably assumed from the way you phrased your inquiry that you were interested in the kind of planning that doesn't work anymore, and they didn't want to spend probably nonchargeable time explaining why you can't do what you want to do. And on the off chance (they may have reasoned) you wanted something doable, it could probably be handled by a CPA and they'd end up referring it out, again with little or no chargeable time. So they blew you off. They probably could have handled it better but honestly, I don't always spend a lot of time either on cold calls from people who want things I know I can't provide.

My suggestion would be to find a knowledgeable CPA, let them provide the Boglehead-type advice on routine income tax planning options, and let them point you to a tax lawyer if one is actually needed for your situation. Finding a good CPA can also be a challenge (tip: don't evaluate them on things like who promises you the biggest refund!) but it's a better starting point for what you seem to want.

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FIREchief
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Re: Tax attorney weirdness

Post by FIREchief » Fri May 22, 2020 12:48 am

Eric wrote:
Fri May 22, 2020 12:03 am
As another poster mentioned, in most cases there's very little an individual can do to reduce his or her income tax liability, beyond contributing to retirement plans, tax-efficient investing, and other fairly straightforward techniques you'll see discussed regularly on this site (and which an experienced CPA can likely cover).
Your comments seem to be based upon the near term (i.e. this year) instead of a person's expected remaining lifetime. Certainly, by running the numbers, a person can generate long term comparisons for different strategies. Aggressive Roth conversions? Zero Roth conversions? Early SS filing? Delayed SS filing? Some years capped at top of zero percent capital gains rates? IRMAA impacts? Inheritance planning options? These are all tax issues, and a skilled tax planner can help a person chart a reasonable course (or avoid a stupid course). Why do you think that "there's very little an individual can do?" :confused
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Eric
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Re: Tax attorney weirdness

Post by Eric » Fri May 22, 2020 12:56 am

FIREchief wrote:
Fri May 22, 2020 12:48 am
Why do you think that "there's very little an individual can do?" :confused
The rest of my statement was, there's very little an individual can do beyond what's regularly discussed on Bogleheads (and should be familiar to a good CPA or maybe, as another poster suggested, financial planner). The types of planning you listed generally aren't what a tax attorney does. And there aren't other major strategies out there, unknown to most Bogleheads, that you could tap if only you had the right tax lawyer.

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celia
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Re: Tax attorney weirdness

Post by celia » Fri May 22, 2020 4:18 am

boglerocks wrote:
Thu May 21, 2020 4:49 pm
I have a CPA I like but I'd also like to be able to consult a tax attorney for help with strategies for minimizing future tax liability.
If reducing taxes is your end goal, maybe you need to re-think your goals. Yes, you could quit your job (which would lower your taxes a lot) and just live off $10 million invested in tax-free munis. Sure, you won’t have any taxes, but your principal won’t grow very much. In fact, over the long term, it could lose out to inflation.

Compare that situation to someone who invests their $10 million in a 50/50 stocks/bonds portfolio. They might have $500,000 to $1,000,000 of annual income and be in the highest tax bracket. Even after paying the taxes due, this person would come out ahead of the one who paid no taxes.

The goal for the first person might be to avoid having to pay taxes. The goal for the second person might be to maximize their available (spendable) income.

hoffse
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Re: Tax attorney weirdness

Post by hoffse » Fri May 22, 2020 5:50 am

Eric wrote:
Fri May 22, 2020 12:03 am

Old-style "tax shelters" don't work anymore (for individuals) because of what are known as the passive loss rules, enacted in 1986. To oversimplify a bit, if you want to get tax-writeoffs from a business venture, you must "materially participate" in the business under a somewhat complex set of rules. You can't take those losses as just a passive investor. These rules pretty much killed the doctors-investing-in-orange-groves-for-tax-writeoffs industry.
This made me chuckle. My grandfather actually was a doctor who invested in one of these back in the 80’s; though I think he had a share of an apricot grove instead of an orange grove. The IRS shut that down eventually. Let’s just say that his “tax problems” were not exactly the financial highlight of his career.

In any event, OP I am also a tax attorney, though I don’t do estate planning. Like Eric and the others said there isn’t a lot you can do to reduce your personal taxes beyond the strategies you read about here. If you have a lot of assets or run a business it is certainly worth engaging an attorney for an estate plan and possibly a full-blown tax plan if such a thing is warranted (usually upon exit). But if you are a W2 employee without any type of nonqualified deferred compensation plan, I suggest saving yourself the time and money and just study the recommendations on this board.

And please don’t ever tell a tax attorney you want to engage them to help with “tax shelters.” It doesn’t sound like you were aware of this, but there are all sorts of negative connotations with that phrase. In fact, the IRS likes to use the phrase “abusive tax shelters” when describing them. I am certain that phrase scared your second tax attorney away. Be aware that even though the most common ones were shut down years ago, you still have some insurance salespeople who call themselves financial planners trying to sell scams that amount to shelters. There are also certain “investment opportunities” that have the flavor of shelters and are being closely monitored by the IRS. For example, I think certain conservation easement arrangements are headed that way.

Anyway, the phrase you want to use is “tax planning.” That implies you are seeking tried and true methods of managing your tax burden in life and at death. “Tax shelter” would make me think you have a buddy trying to sell you a share in a syndicated conservation easement scheme, and I would want to stay far away.

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Re: Tax attorney weirdness

Post by petulant » Fri May 22, 2020 6:05 am

FIREchief wrote:
Fri May 22, 2020 12:48 am
Eric wrote:
Fri May 22, 2020 12:03 am
As another poster mentioned, in most cases there's very little an individual can do to reduce his or her income tax liability, beyond contributing to retirement plans, tax-efficient investing, and other fairly straightforward techniques you'll see discussed regularly on this site (and which an experienced CPA can likely cover).
Your comments seem to be based upon the near term (i.e. this year) instead of a person's expected remaining lifetime. Certainly, by running the numbers, a person can generate long term comparisons for different strategies. Aggressive Roth conversions? Zero Roth conversions? Early SS filing? Delayed SS filing? Some years capped at top of zero percent capital gains rates? IRMAA impacts? Inheritance planning options? These are all tax issues, and a skilled tax planner can help a person chart a reasonable course (or avoid a stupid course). Why do you think that "there's very little an individual can do?" :confused
This is exactly what a good CFP does for people, not a tax attorney or CPA.

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Re: Tax attorney weirdness

Post by Jack FFR1846 » Fri May 22, 2020 7:15 am

There are 2 parts to the answer to your question.

1: Income tax minimization.

Staying away from AMT, donating, maximizing tax reduction (401k, flexible savings accounts and the like, 529 contributions in your state, etc).
Asking your employer to reduce your salary. :shock:
Moving to a state with a lower total tax burden.

2: Asset tax minimization.

Use investments that don't spill out dividends. An easy example is to invest in BRK instead of VTI. You pay no tax because there's no dividend. Of course, when you do sell, you pay tax on the gain. So you wait until you're in a zero percent LTCG bracket.
Bogle: Smart Beta is stupid

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FIREchief
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Re: Tax attorney weirdness

Post by FIREchief » Fri May 22, 2020 10:25 am

petulant wrote:
Fri May 22, 2020 6:05 am
FIREchief wrote:
Fri May 22, 2020 12:48 am
Eric wrote:
Fri May 22, 2020 12:03 am
As another poster mentioned, in most cases there's very little an individual can do to reduce his or her income tax liability, beyond contributing to retirement plans, tax-efficient investing, and other fairly straightforward techniques you'll see discussed regularly on this site (and which an experienced CPA can likely cover).
Your comments seem to be based upon the near term (i.e. this year) instead of a person's expected remaining lifetime. Certainly, by running the numbers, a person can generate long term comparisons for different strategies. Aggressive Roth conversions? Zero Roth conversions? Early SS filing? Delayed SS filing? Some years capped at top of zero percent capital gains rates? IRMAA impacts? Inheritance planning options? These are all tax issues, and a skilled tax planner can help a person chart a reasonable course (or avoid a stupid course). Why do you think that "there's very little an individual can do?" :confused
This is exactly what a good CFP does for people, not a tax attorney or CPA.
I never suggested that a tax attorney or CPA would be the right person to help. I said "tax planner," and by that I mean somebody who fully understands the opportunities that exist within our current laws to optimize payment of taxes. I don't care if that's a CPA, CFP, or XYZ. Most of those folks will make general recommendations, but it is rare that I've heard of one who will really invest the time to run the numbers and get to any meaningful results. I think most here on the forum with robust long term tax plans have developed and maintained them themselves. I don't believe the OP has even told us if he/she is asking for help with individual income taxes, small business, etc.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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FIREchief
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Re: Tax attorney weirdness

Post by FIREchief » Fri May 22, 2020 10:30 am

Eric wrote:
Fri May 22, 2020 12:56 am
FIREchief wrote:
Fri May 22, 2020 12:48 am
Why do you think that "there's very little an individual can do?" :confused
The rest of my statement was, there's very little an individual can do beyond what's regularly discussed on Bogleheads (and should be familiar to a good CPA or maybe, as another poster suggested, financial planner). The types of planning you listed generally aren't what a tax attorney does. And there aren't other major strategies out there, unknown to most Bogleheads, that you could tap if only you had the right tax lawyer.
My bad. That makes sense. I guess I misunderstood your earlier posting. :beer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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TomatoTomahto
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Re: Tax attorney weirdness

Post by TomatoTomahto » Fri May 22, 2020 10:32 am

In our case, and I trust most others, tax planning comes down to guesses: guess how your portfolio will grow/shrink, guess how long you’ll live, guess what will happen to tax structure and rates and when, guess what your health care expenses will be and how the government will or won’t be involved in the healthcare industry, etc.

A lawyer can’t guess much better than the other clowns in the VW. My sister, a lawyer, concurs with that assessment.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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FIREchief
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Re: Tax attorney weirdness

Post by FIREchief » Fri May 22, 2020 10:43 am

TomatoTomahto wrote:
Fri May 22, 2020 10:32 am
In our case, and I trust most others, tax planning comes down to guesses: guess how your portfolio will grow/shrink, guess how long you’ll live, guess what will happen to tax structure and rates and when, guess what your health care expenses will be and how the government will or won’t be involved in the healthcare industry, etc.

A lawyer can’t guess much better than the other clowns in the VW. My sister, a lawyer, concurs with that assessment.
That's funny. An experienced estate attorney once told me the same basic thing "you don't know what Washington is going to do, you don't know what the market is going to do, and you don't know how long you're going to live." All very true. That said, I think we can make useful estimates regarding all of them. I personally assume 2026 tax laws (as they stand now), 6% real per year and 100 years old. Since we're talking tax planning, the market return estimate argues for a different approach than other types of financial planning. If somebody is looking to develop a SWR, they might find 6% real to be too liberal considering the risks of over estimating it. OTOH, for tax planning, there is just as much risk in under-estimating market return, as a person can inadvertently wind up with future tax bombs that they weren't expecting (granted, a "good" problem).
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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TomatoTomahto
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Re: Tax attorney weirdness

Post by TomatoTomahto » Fri May 22, 2020 10:59 am

FIREchief wrote:
Fri May 22, 2020 10:43 am
...OTOH, for tax planning, there is just as much risk in under-estimating market return, as a person can inadvertently wind up with future tax bombs that they weren't expecting (granted, a "good" problem).
Or, over-estimating future tax rates. I might be an idiot for doing Roth conversions at 40%+ marginal rates, or I could turn out to be prescient. I split the difference and do moderate conversions. My widow will thank me 😁
Okay, I get it; I won't be political or controversial. The Earth is flat.

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KingRiggs
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Re: Tax attorney weirdness

Post by KingRiggs » Fri May 22, 2020 11:09 am

Get a copy of “The Over-Taxed Investor” by Phil DeMuth. Very easy read, great information.
Advice = noun | Advise = verb | | Roth, not ROTH

petulant
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Re: Tax attorney weirdness

Post by petulant » Fri May 22, 2020 11:11 am

FIREchief wrote:
Fri May 22, 2020 10:25 am
petulant wrote:
Fri May 22, 2020 6:05 am
FIREchief wrote:
Fri May 22, 2020 12:48 am
Eric wrote:
Fri May 22, 2020 12:03 am
As another poster mentioned, in most cases there's very little an individual can do to reduce his or her income tax liability, beyond contributing to retirement plans, tax-efficient investing, and other fairly straightforward techniques you'll see discussed regularly on this site (and which an experienced CPA can likely cover).
Your comments seem to be based upon the near term (i.e. this year) instead of a person's expected remaining lifetime. Certainly, by running the numbers, a person can generate long term comparisons for different strategies. Aggressive Roth conversions? Zero Roth conversions? Early SS filing? Delayed SS filing? Some years capped at top of zero percent capital gains rates? IRMAA impacts? Inheritance planning options? These are all tax issues, and a skilled tax planner can help a person chart a reasonable course (or avoid a stupid course). Why do you think that "there's very little an individual can do?" :confused
This is exactly what a good CFP does for people, not a tax attorney or CPA.
I never suggested that a tax attorney or CPA would be the right person to help. I said "tax planner," and by that I mean somebody who fully understands the opportunities that exist within our current laws to optimize payment of taxes. I don't care if that's a CPA, CFP, or XYZ. Most of those folks will make general recommendations, but it is rare that I've heard of one who will really invest the time to run the numbers and get to any meaningful results. I think most here on the forum with robust long term tax plans have developed and maintained them themselves. I don't believe the OP has even told us if he/she is asking for help with individual income taxes, small business, etc.
You're exactly right, and I agree with your earlier post. What I'm trying to do is beat it into OP's head that this is exactly what a CFP is supposed to be able to do. All the things you are talking about are referenced in CFP education materials and financial planning software. While many professionals may be able to take these steps, as you point out, the CFP is the key professional that is specifically trained to do them to earn the CFP designation.

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