The tax environment is about uncertainties which will greatly affect family offices and wealthy individuals. Notwithstanding is the recent tax increase that had generally brought a big impact. Its tax implication may bring further increase, the future of various wealth planning prospects and the growth of ultra-high net worth individuals may be limited or it will leave an impression, good or bad to the tax examination environment.
However, the Internal Revenue Service (IRS) is not keeping a close watch with family offices. The US Treasury on the other hand, had published Circular 230 providing the regulations pertinent to those professionals who perform their functions before the IRS. The circular stated rules of professional conduct and gave a list of requirements for providing tax advice. Professionals, such as tax advisers who were found to infringe Circular 230 may be sanctioned, fined or suspended from carrying out their expertise before the IRS. While the family office itself is not closely monitored by the IRS or the Treasury Department, experts involved in executing tax functions may be subject to Circular 230.
Examinations involving the family enterprise usually consist of the most vital taxpayers within the organization of related parties. It is also essential to have expert professionals who are aware of the complex degree of IRS practices and procedures in order to develop effective relations with the IRS.
Issues concerning the IRS are never a good idea. The IRS is an agency which is support in full power and resources of the U.S. government. Considering a dispute to an IRS action can be a big challenge. First, it is mainly difficult, and then it is time consuming. Lastly, it is costly. The federal estate tax laws are unstable and recent news items mentioned that wealthy individuals are the prospects for complex tax audits.
Setting up a family office is an advantage when facing issues coming from the IRS. This means that the family will have assistance from the experts in order to work out on the issues. Mainly, the family office’s goal is to resolve tax controversies in the most professional manner possible while coming up with a favorable result for the family.
Tax experts who are included for a family office must be qualified to assist in addressing the sensitive issues on tax. Mainly, the clients depend on the specialist to comprehend, forecast possible issues and provide strategic actions upon the inquiry of federal or tax authorities. The family would appreciate it if experts offer solutions that would make tax issues less difficult and more favorable to the family enterprise. It is important to come up with an individualized approach or offer tailor-fit resolutions to assist clients realize a more positive feedback in dealing with various tax controversies. This might even include complicated arguments and tax liabilities which were past due. A family office must be able to recognize the stages of the tax controversy from the beginning of the tax audit, to putting into order of the tax protests if necessary, up to succeeding negotiations with IRS.
The family office when faced with tax controversies must be able to represent the family enterprise before the authorities from federal, state and local tax. Financial experts are required to perform audits of individual, payroll, estate, corporate and partnership returns. In addition, they are tasked to identify amended or delinquent individual, payroll, estate, corporate and partnership returns. The domestic and offshore voluntary disclosures are also needed to ensure that taxpayers are treated fairly and consistently. It will also help the family, being the taxpayers that have utilized undisclosed foreign accounts and undisclosed foreign entities not to evade tax but rather comply with US tax laws.
Tax audit representation and tax controversy resolution are likewise important functions of the professionals in a family office in order to develop additional strategies in aligning tax regulations for the enterprise and to further reduce issues pertaining to tax. Additional tax concerns may consist of penalty abatement and negotiations. Penalty abatement is the taking away of penalties as assessed by the IRS and for not filing or paying taxes on time. The negotiation will comprise the altering or reducing the amount of any penalty assessed. Financial experts in the family office can be able to identify when the IRS appraise such penalties and interest. Also, they must be able to recognize if there is reasonable cause for the adjustment or elimination for the IRS to consider. It is notable that in some cases, penalties and interest charges on current tax obligations are significant. More often than not, there is reasonable cause for negotiating with the IRS to have the penalties reduced or even removed even though the figures may be large or small. Data shows that one-third of tax penalties evaluated by the IRS are mostly removed.
In most cases, family office can settle disputes involving tax controversies without arriving to litigation. This could be resolved through mediation or arbitration and finding alternative dispute resolution. In the event that litigation could not be avoided, financial experts in a family office have sufficient amount of experience to be able to defend the family in any jurisdiction by employing innovative approaches and technology to attain helpful results.