Year-Round Tax Planning Tips for High-Income Taxpayers: How to Avoid a Tax Audit in 2023News, Offshore Account Update
Posted in on June 30, 2022
For business owners, investors and other high-income taxpayers, tax planning is a year-round process. These taxpayers must take steps to ensure that they remain current on their federal and state tax obligations, and they should implement tax strategies designed to minimize their liability to the greatest extent possible. In this article, Maryland federal tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, discusses some ways high-income taxpayers can—and should—plan to minimize their tax liability and avoid a tax audit in 2023.
5 Strategies for High-Income Taxpayers to Minimize Tax and Avoid Audits
1. Making Accurate Quarterly Estimated Tax Payments
The IRS requires taxpayers to make quarterly estimated tax payments for all forms of income that are not subject to an automatic withholding. This requirement applies to most business owners and investors. Taxpayers who have to make quarterly estimated tax payments should work with their tax counsel to accurately calculate these payments—as underpaying can lead to interest, penalties and possible IRS scrutiny.
2. Minimize Capital Gains Tax on Investments
Before the end of each quarter, investors should see what they can do to minimize the capital gains tax they owe. Realizing losses, delaying the sale of appreciated securities, and transferring investments to qualified funds for disadvantaged communities are just a few examples of ways investors can limit how much they owe.
3. Leverage the Estate and Gift Tax Exemptions
The Tax Cuts and Jobs Act increased the lifetime gift tax exemption for individuals and married couples filing jointly. Through carefully planned and scheduled gifts to family members, high-income taxpayers can preserve their family’s wealth while still meeting their obligations to the IRS.
4. Leverage Charitable Giving, Conservation Easements and Other Tax Savings Opportunities
The IRS offers tax benefits for charitable giving, conservation easements and various other gifts and forms of investment. While spreading out charitable gifts over the course of a year can be advantageous in some cases, high-income taxpayers may find it beneficial to “bunch” their gifts as well.
5. Maximize the Benefits of Offshore Holdings
Holding assets offshore can offer several benefits for high-income taxpayers. But, taxpayers with offshore holdings also need to be careful, as multiple reporting obligations may apply.
The key to all of these strategies is being proactive. Once a taxpayer misses an opportunity to reduce his or her tax liability or underpays the IRS, the damage has already been done. While there are strategies a Maryland federal tax attorney can use to help taxpayers recover from past mistakes, it is best to avoid these mistakes (and the potential for an IRS audit) whenever possible.
Schedule an Appointment with Maryland Federal Tax Attorney Kevin E. Thorn
If you have questions about minimizing your tax liability and avoiding (or resolving) issues with the IRS, we encourage you to get in touch. To schedule an appointment with Maryland federal tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 240-235-5096, email firstname.lastname@example.org or contact us confidentially online today.Share This Post