Our tax team provides advise and services on a wide range of issues, including capital raising and financing, mergers, business formation and re-organization, investment products, employee compensation packages, transfer pricing, customs and excise, tax investigations and disputes.

We are knowledgeable about the many dispute resolution procedures, such as pre-litigation tax disputes and courtroom litigation.

Tax Law Notes for Harmony Legal Counsel

1. Introduction to Tax Law

• Definition: Tax law involves regulations, policies, and procedures governing the taxation process.
• Purpose: Ensures legal compliance in tax payment and collection, impacting individuals, businesses, and government entities.

2. Types of Taxes

• Income Tax: Levied on individual and corporate earnings.
• Corporate Tax: Imposed on company profits.
• Sales Tax: Applied to the sale of goods and services.
• Property Tax: Based on property ownership and value.
• Estate and Gift Tax: Imposed on transfers of wealth either at death or as gifts.
• Excise Tax: Applied to specific goods, like alcohol and tobacco.

3. Tax Authorities

• Internal Revenue Service (IRS): Main federal tax collection agency in the U.S.
• State and Local Tax Agencies: Each state and municipality may have its own tax authorities and regulations.

4. Key Tax Law Concepts

• Taxable Income: Gross income minus allowable deductions and exemptions.
• Deductions: Specific expenses that can reduce taxable income (e.g., mortgage interest, medical expenses).
• Credits: Direct reductions in tax liability (e.g., earned income tax credit).
• Withholding: The process by which employers take out a portion of an employee’s wages for taxes.
• Tax Brackets: Income ranges taxed at specific rates.

5. Business Tax Considerations

• Entity Type and Taxation:
  • Sole Proprietorships: Profits taxed as personal income.
  • Partnerships: Pass-through taxation; partners report income on personal tax returns.
  • Corporations: Separate taxable entity; subject to corporate tax rates.
  • S Corporations: Pass-through entity; income taxed at individual rates.
  • LLCs: Flexibility in taxation (can be taxed as sole proprietorship, partnership, or corporation).
• Depreciation: Deduction for the wear and tear on business assets.
• Payroll Taxes: Taxes withheld from employee wages, including Social Security and Medicare.

6. International Taxation

• Double Taxation: Occurs when income is taxed in two countries.
• Tax Treaties: Agreements between countries to avoid double taxation and tax evasion.
• Transfer Pricing: Rules to prevent profit shifting through pricing of intercompany transactions.

7. Tax Compliance and Reporting

• Filing Requirements: Annual tax returns must be filed by individuals and businesses.
• Record Keeping: Important for substantiating income, deductions, and credits.
• Audit Process: IRS examination of tax returns to ensure accuracy and compliance.

8. Tax Controversy and Dispute Resolution

• Tax Audits: Can result in additional tax assessments or refunds.
• Appeals Process: Taxpayers can challenge IRS findings through administrative appeals.
• Tax Court: Judicial forum for resolving tax disputes.

9. Tax Planning Strategies

• Deferral of Income: Postponing income recognition to future years.
• Accelerating Deductions: Taking deductions in the current year to reduce taxable income.
• Tax-Advantaged Accounts: Using accounts like IRAs and 401(k)s for tax-deferred growth.
• Estate Planning: Strategies to minimize estate and gift taxes.

10. Recent Tax Law Changes

• Tax Cuts and Jobs Act (TCJA) of 2017: Significant overhaul impacting corporate tax rates, individual tax brackets, and deductions.
• Current Developments: Stay updated on recent legislation, IRS rulings, and court cases affecting tax law.

11. Ethical Considerations

• Tax Evasion vs. Tax Avoidance: Evasion is illegal; avoidance uses legal methods to minimize tax liability.
• Professional Responsibility: Adhering to ethical guidelines in advising clients on tax matters.