What is a $2.7 million tax bill to a power couple that has a combined net worth of 1.4 billion according to Forbes? It's a bill worth a fight in tax court. Many times the initial response to a notice from the IRS is to “just pay it, make it go away.” As always, Beyoncé has the right moves by hiring a team of tax attorneys who specialize in tax dispute resolution, IRS defense, and tax planning.
A major issue appears to be millions of contributions made to a charitable organization. By removing the charitable donations from her itemized deductions, this changes her taxable income significantly. This highlights the importance of consulting with charitable giving attorneys and tax planning attorneys when making large donations to tax-exempt organizations.
Charitable contributions have a very complex set of rules that govern their deductibility. Not all charitable contributions are 100% deductible, and when carried forward, they are subject to limitations. When an itemized deduction is disallowed, taxpayers can incur a negligence penalty which is 20% of the unpaid balance, plus interest. Taxpayers should work with tax attorneys who specialize in tax litigation and tax dispute resolution to navigate the complicated rules surrounding charitable contributions.
The tax years at issue for Beyoncé are from 2018 and 2019, which could explain the nearly $500k in penalties and interest. Tax planning attorneys like Pietro Canestrelli can help high net worth individuals like Beyoncé and Jay-Z minimize their tax liability by optimizing their income tax planning and estate tax planning.
There are a few things we can learn from Queen B. Suing the IRS in tax court is public record, and celebrities are used to being scrutinized by the public. But for most taxpayers, this loss of privacy might be an issue. Taxpayers can consult with tax attorneys who specialize in tax audits and IRS disputes to help them navigate the complex world of tax litigation and tax dispute resolution.
It is worth noting that it is very seldom a tax case goes to trial, so if you're worried about your neighbors showing up to your tax hearing, it is unlikely. Before trial, you or your attorney will discuss potential resolution options with an IRS counsel. More than 80% of tax court cases are settled outside the courtroom, making it critical to work with a tax attorney who specializes in tax penalty abatement, innocent spouse relief, and other tax debt relief strategies.
Additionally, tax planning is essential for high net worth individuals who want to optimize their tax situation. The IRS can issue what is called a Private Letter Ruling, which is a written statement by the IRS on how it would interpret and apply the tax laws to a taxpayer's set of facts. Taxpayers can consult with tax planning attorneys who specialize in tax minimization strategies, tax avoidance, and tax shelter planning to help them structure their transactions in a tax-efficient manner. Private letter rulings provide taxpayers with certainty about the resulting tax consequences of a transaction.
Part of tax planning is also considering your filing status. Although Beyoncé and Jay-Z are legally married and residents of a community property state, the petition is filed only under Beyoncé's name. This is most likely because they filed “MFS” or “Married Filing Separately.” In certain situations, you don't want to combine tax filing with your spouse, especially in instances where you are in a higher income tax bracket. Taxpayers should work with tax planning attorneys who specialize in income tax planning and estate tax planning to determine the optimal filing status for their situation.
If you are under audit or received a notice from the IRS, don't “just pay it, make it go away,” move like Yoncé and consult with the Law Office of Pietro Canestrelli today.
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