Suzanne DeWitt is the founder and managing partner of DEWITT PLLC. With over 21 years of experience in international tax and private wealth planning, she is an expert in the areas of global tax minimization and crossborder wealth planning. Her work includes global tax and trust planning for very high net worth clients, as well as the structuring, formation, and operation, on a cross-border basis, of a variety of alternative investment products, including U.S. and non-U.S. private equity funds. Additionally, Ms. DeWitt represents a number of significant global companies in their global tax planning projects. Here, Suzanne DeWitt demystifies the role of a “Tax Lawyer” and describes what tax planning actually means.
A Tax Lawyer is not an accountant. Tax planning is not tax preparation. Tax planning is a Tax Lawyerʼs analysis and arrangement of a
clientʼs financial situation in order to develop tax strategies to maximize tax breaks and minimize tax liabilities in a legal and efficient manner. For Tax Lawyers, tax planning involves the research and analysis of applicable law and taking financial and business positions in support of any recommended tax plan. Accountants, on the other hand, are like historians. Accountants analyze a taxpayerʼs financials, receipts, checkbook, and other reports from that prior year to develop a governmental financial statement (i.e., a tax return) for the IRS that discloses what happened during that period, after the year is over. Accountants are an integral cog in any Tax Lawyerʼs tax planning wheel.
Comprehensive tax planning does not stop at legal jargon and technical analysis; it should be ‘translatableʼ into an easy-to-understand
framework. An effective tax lawyer should not simply recite complex statutes and case law to their client and expect the client to just
accept that the recommendation will reduce their taxes. Sound tax planning includes the ability to fully explain sophisticated recommendations to clients in a manner that can be easily understood by anyone.
Tax planning benefits are maximized when tax planning is proactive. Business owners conduct transactions every day. For example, they negotiate prices and terms prior to engaging in a transaction. This principle also applies to tax planning. Unfortunately, business owners put off organizing their taxes until the year is nearly over, or sometimes, forget about their taxes altogether until after the year is closed. Once the year is complete, there are far-fewer means of reducing taxes, meaning an increased risk for the overpayment of taxes. Tax planning is financial planning in preparation for tax efficiency. It aims to reduce oneʼs tax liabilities and optimally utilize tax exemptions, rebates, and benefits, as much as possible. The bottom line is that tax planning is most effective when it commences at the beginning of the year, as the available number of tax reduction strategies expands dramatically.
It is synergistic. Tax planning considers both the financial consequences and benefits across multiple perspectives. These varied perspectives include personal benefits, business benefits, ownershipʼs succession wishes, current and desired retirement planning, ownershipʼs estate planning wishes, and asset protection. Tax planning also considers the impact of several laws including federal income tax, federal employment/payroll tax, state taxes, creditor laws, and state legal structure. In the same fashion that a general contractor must consider various components when planning to build a house, a strategic tax planning team must simultaneously contemplate diverse elements. Giving any single aspect more attention than the other can result in optimization of one element while tax may be substantially increased in another area. Therefore, because all aspects of a business ownerʼs tax situation are viewed in concert, the result is overall tax minimization and asset protection.
It is collaborative. Because strategic tax planning examines several components concurrently, tax attorneys rarely work alone when examining a business ownerʼs position. Due to the interrelation between the business owner and the business, as well as the dynamic between different taxes, legal structure, industry, and ownership, some tax planning recommendations may overlap with other areas and thus a good tax lawyer understands that any decision made with the benefit of the business owner in mind, is made jointly with a team of advisors. This collaborative effort results in a coordinated plan which has considered all aspects of the business owner, including the business retirement, estate planning wishes, succession wishes, and asset protection.