What to do when you receive a tax notice
Wood LLP

Wood LLP is one of the nation's premier boutique tax firms concentrating in areas of specific interest to trial lawyers, insurance companies and others concerned with tax issues related to settlements and litigation

Robert Wood Podcast Feed

Add to Google
ATG Trust Company
The Legal Broadcast Network
Search
Login
Tax Law Resources
Friday
Aug222014

You Won Millions in the Lottery—What Now?

You Won Millions in the Lottery--What Now? from Sequence Media on Vimeo.

A 24-year-old Michigan woman has turned in a lottery ticket worth $66 million. What should she do next, or what should you do if it happens to you? Tax attorney Rob Wood discusses the happy situation, also the subject of his Forbes article “Savvy 24 Year Old's $66 Million Mega Lottery Win--On Friday The 13th.”

 

One unusual feature of this story is the winner’s young age. Wood notes that the young woman has been doing planning and getting tax advice so that she doesn’t get into the dilemmas that await someone who gets a windfall.

One question every winner confronts at the outset is whether to take the lump sum payment or to go for the annuity. The winner in this case took the lump sum. Wood suggests that he, too, would probably take the lump sum. Right now, interest rates are historically low, so locking in an annuity that is based on those low rates is less attractive.

The stories of winners who end up broke within a few years make the idea of an annuity more attractive. “This is a difficult conversation to have with people,” says Wood. The winner has to make this decision almost immediately, and it is difficult choice to make for people who aren’t already rich (which is likely everyone who has ever won a lottery). Getting protection from people who want to take advantage of the windfall is another factor in favor of taking the annuity.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Thursday
Aug212014

Lionel Messi Tax Case—Does Secrecy Equal Evasion?

Lionel Messi Tax Case—Does Secrecy Equal Evasion? from Sequence Media on Vimeo.

Argentinian soccer star Lionel Messi facing a Spanish tax evasion case, and willfulness and secrecy are key elements. Tax attorney Rob Wood comments on the case, discussed in his Forbes article “For Lionel Messi Or 'Hot Lips' Kramer, Secrecy Can Spell Tax Evasion.”

 

Wood notes that, while this is a Spanish case, it is being watched by tax experts in the U.S., the U.K., and elsewhere. Increasingly, he suggests, secrecy is being viewed as “a badge of willfulness that can mean more penalties, even jail.”

For all kinds of taxpayers, celebrities or not, there are legitimate reasons for not wanting their names attached to things. Privacy concerns are running headfirst into the government’s view that it is not enough to know the name of an entity; it is necessary to know the name of the ultimate beneficial owner. As Wood points out in his Forbes article, setting up trusts or corporations can be a red flag to the I.R.S.

Wood mentions a proposal in the U.K. to require any entity, regardless of how closely held it is, to display beneficial ownership. This is probably a trend, Wood suggests, such that it will become increasingly difficult for any taxpayer to hide beneficial ownership of assets.

In the Forbes article, Wood also discusses the tax cases of Bernard Kramer and Ty Warner. The article is definitely worth a close look for anyone who has money or assets that might be considered hidden.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Friday
Aug082014

Paying In Cash? Careful, It Can Mean Jail Time

Paying for things in cash can be desirable, but it can also cause tax problems. Tax attorney Rob Wood discusses the difficulties in this report, based on his Forbes article “Paying In Cash? Careful, It Can Mean Jail.”

 

Paying in cash can be tempting to small businesses, especially. One kind of business that comes to mind, says Wood, is medical marijuana companies. These small businesses often have difficulties with banking relationships and credit card companies. These are largely cash businesses. But they still have to pay taxes.

If you pay your employees in cash, you need to remember withholding taxes. Wood points out in his article that the IRS takes employee withholding taxes very seriously. Much of the money withheld will end up in the hands of the IRS, so the agency is very sensitive on this issue.

Cash transactions make recordkeeping more difficult for the company bookkeeper. And for employees in service industries, much of their compensation comes in the form of cash tips, which need to be reported. Wood notes that people who receive cash and spend cash may be able to “live off the grid,” but it can be dangerous, and the IRS will be looking at the possibility that income is being under-reported.

Wood also points out that there are special cash reporting forms that taxpayers need to be aware of.

Cash can lead to problems where people try to engage in transactions in cash that are either under-reported or not reported at all. Wood mentions a sting operation some years back that involved car dealerships. The IRS ran the sting and succeeded in catching several dealerships.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Friday
Aug082014

“Willful” Tax Missteps—What the IRS Looks For

Offshore bank accounts and mishandling them—or failing to do anything—can get taxpayers in trouble. The key concept is “willful” conduct. Tax attorney Rob Wood comments on the subject in this report, which is based on his Forbes article “10 Signs Your Tax Missteps Are 'Willful' Triggering IRS Penalties Or Jail.”

 

Wood notes at the outset that “It’s hard for all of us to evaluate our own facts.” This can be especially true with foreign bank accounts, especially when Swiss banks are involved. There was often some mystery involved in using foreign banks.

Wood also suggests that it is hard for taxpayers to determine the willfulness—or not—of their conduct if they were following directives from parents or bank officials. “A lot of people today were led down the primrose path” by following the advice of others.

One thing the IRS looks at as a badge of willfulness is setting up trusts or corporations to hold accounts. Filing some forms but not others is another sign. So is reporting one account but not another. Using a non-American passport will raise red flags, whether you have a good reason or not.

Moving money around frequently and dealing in cash are things that will also attract the attention of the IRS. “Anything that looks secretive” will attract attention. Asking that bank account statements not be sent is not something a taxpayer would typically do as to a regular account, Wood says.

All of these things have become more important since June 2014 when the IRS came out with its Streamlined program for people in the U.S. to clean up their compliance as to foreign accounts. The IRS and tax practitioners are aware that the Streamlined program is a good deal for taxpayers with foreign accounts, but one requirement for participation is non-willful conduct. Mr. Wood’s article provides the complete list of warning signs.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Wednesday
Aug062014

Philip Seymour Hoffman’s Estate—Tips for Estate Planning

The untimely death of actor Philip Seymour Hoffman and subsequent publicity about his $35 million estate caused tax attorney Rob Wood to think about what people can learn from Mr. Hoffman’s estate plan. He comments here on his Forbes article “New Clues In Philip Seymour Hoffman's Costly Estate Plan.”

 

Hoffman’s estate situation, like those of James Gandolfini, Heath Ledger, and Amy Winehouse, shines a light on what sometimes happens when someone dies much earlier than might have been expected. One of the most interesting aspects of Hoffman’s situation is that he was not married to the mother of his three children.

Hoffman apparently did not believe in marriage, Wood notes, and that belief, however principled, will be costly. Because Hoffman was single, his estate will pay about $15 million more than would have been the case had he been married. But notwithstanding the tax consequence, Wood opines that “you have assets going to the people you want them to go to.”

In Hoffman’s case, he left the money to Marianne O’Donnell, the mother of his children, and counted on her to take care of the children. Hoffman did not want his children to be “trust fund kids.” Wood points out that it can be difficult to plan for the passing of assets to children. “Any time you put major assets in the hands of a twenty-one-year-old, it’s probably a mistake.”

Spousal tax treatment is probably the most interesting part of this situation. Spouses are treated differently under the income tax law and estate tax law than others. The gay marriage discussions sometimes focus on this point.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.