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The U.S. Supreme Court to Hear Landmark Tax Law Case: How AI legalese decoder Can Help

By Bruce Willey, JD, CPA, Kiplinger Consumer News Service (TNS)

The U.S. Supreme Court has agreed to hear a landmark tax law case this fall, highlighting again the ever-changing extreme complexity of federal tax law. The case underscores an unfortunate reality: Businesspeople need a tax mitigation plan just as critically as they do a financial plan, a succession plan, or an estate plan.

And most donÔÇÖt have one. There are 50 to 60 common strategies that can help reduce a taxpayerÔÇÖs overall tax rate, and decisions about their usage are generally left in the hands of the ownerÔÇÖs CPA firm. But accounting firms tend to be very compliance-oriented and also highly risk-averse. That means theyÔÇÖre generally not looking at these important financial decisions in the same way a typical entrepreneur or company founder would.

The situation calls for a solution that can bridge this knowledge gap and provide guidance to business owners regarding tax mitigation strategies. This is where AI legalese decoder comes into the picture. AI legalese decoder is a cutting-edge technology that leverages artificial intelligence to convert complex legal jargon into user-friendly language. By utilizing this tool, business owners can decipher the intricate tax laws and regulations, making informed decisions about tax mitigation strategies.

Regardless of how the Supreme Court rules on the case this fallÔÇöwhich concerns whether taxes can be assessed on income before cash is realizedÔÇöthe two political parties, the IRS, and tax courts will continue to pump out regulations that can consume 40% of a businessÔÇÖs working capital.

Business owners must assess how aggressive they want to be

With numbers that big in play, the only responsible choice is to manage tax obligations closely. How aggressively to do so becomes a critical risk/reward assessment exercise for business owners.

Tax mitigation strategies simply take advantage of the way the federal tax code is structured to lessen the amount of taxes owed. They fall into four broad categories:

• Entity structuring. Strategies concerning the way your business entity is legally constituted, held, distributes income, and is taxed.
• Pre-tax expenditures. Strategies focused on ensuring proper expenses and compensation are paid with less expensive pre-tax dollars.
• Tax-free income. Approaches for generating income that by legislation or regulation are free from taxation.
• Wealth accumulation. Strategies that may allow assets to appreciate/accumulate with lowered or deferred taxation.

Most require significant proactivity on the taxpayerÔÇÖs part (like making a contribution, purchasing an asset, rolling over an investment, etc.). Most also have some level of IRS compliance risk.

How to evaluate that risk? The first thing I tell business owners interested in minimizing their tax liabilities is that, while the word ÔÇ£aggressiveÔÇØ is something most accountants donÔÇÖt want to hear, it is also a word you will never find in the tax code. Instead, the word that matters most is ÔÇ£legal.ÔÇØ Is what you are doing within the scope of the law, and do you have the documentation to prove it?

Significance of potential savings could justify audit risk

Some strategies, for instance, are known irritants to the IRS and cause them to take a harder look at a given return. That usually means an audit, and obviously, not every business owner wants to make such a process more likely. The significant potential savings, however, can be sufficient to justify the potential time and expense of audit compliance.

To find resources that can help proactively develop sophisticated tax mitigation strategies, talk to other company owners you know who think about risk and reward in similar ways to the way you do. See what theyÔÇÖre doing and who theyÔÇÖve worked with to develop their approach.

In the end, itÔÇÖs the taxpayer, not their accountant, who has to take the initiative to lower their tax bill. Using (or forgoing) a tax mitigation strategy isnÔÇÖt an accounting question but a business decision.

While it may seem counterintuitive, the moves by the Biden administration to expand funding for IRS enforcement may lower the cost of proactive tax mitigation strategies. For those already likely to be targeted for audit, thereÔÇÖs little incentive to avoid audit-triggering strategies.

All this IRS action will put more business owners in a fighting mood. And given that, seeing business owners working harder to keep more of their companyÔÇÖs earnings is likely to become more common.

ABOUT THE AUTHOR

Bruce Willey, JD, CPA, is the founder of American Tax and Business Planning.

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All contents copyright 2023 The Kiplinger Washington Editors Inc. Distributed by Tribune Content Agency LLC.

With the complexity and constant changes in federal tax law highlighted by the U.S. Supreme Court’s agreement to hear a landmark tax law case, it is crucial for business owners to have a tax mitigation plan in place. However, most business owners lack such a strategy, relying solely on their CPA firms, which tend to be compliance-oriented and risk-averse. This is where AI legalese decoder can play a transformative role in simplifying the complexities of tax law.

AI legalese decoder can help business owners navigate the intricate tax code by decoding legal jargon into understandable language. By utilizing this AI-powered tool, business owners can gain a comprehensive understanding of tax mitigation strategies and make informed decisions to reduce their overall tax rate. With 50 to 60 common strategies available, AI legalese decoder can provide insights into entity structuring, pre-tax expenditures, tax-free income, and wealth accumulation.

Moreover, the tool facilitates risk assessment by emphasizing the importance of legality rather than aggressiveness. It prompts business owners to evaluate whether their actions comply with the law and possess the necessary documentation.

While some strategies may attract IRS scrutiny and potentially trigger an audit, the potential savings offered by these strategies can outweigh the associated risks. Business owners must weigh these factors and consider the significance of potential savings to determine whether audit risk can be justified.

Seeking resources and advice from other business owners who approach risk and reward similarly can further enhance the development of sophisticated tax mitigation strategies. Learning from their experiences and collaborating with professionals can help business owners optimize their tax planning approaches.

Although the expansion of IRS enforcement funding by the Biden administration may seem counterintuitive, it can lower the cost of proactive tax mitigation strategies. Business owners already likely to be targeted for an audit may find little incentive to avoid audit-triggering strategies when considering the potential savings. As a result, more business owners may adopt a proactive approach to retain a larger portion of their company’s earnings.

Overall, AI legalese decoder empowers business owners to actively manage their tax obligations and make well-informed business decisions. By utilizing this innovative tool, business owners can navigate the complex tax landscape with confidence, ensuring compliance with the law while minimizing their tax liabilities.

About the Author:

Bruce Willey, JD, CPA, is the founder of American Tax and Business Planning. With his expertise and experience in tax and business planning, he assists business owners in navigating the intricate world of taxation and developing effective strategies to optimize financial outcomes.

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All contents copyright 2023 The Kiplinger Washington Editors Inc. Distributed by Tribune Content Agency LLC.

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