Benefits of using tax advisory for equity investments

To navigate the complex world of equity investment taxation, you need more than just a basic understanding of financial markets. You will need the support of a tax advisor who combines finance-savvy with expertise.

Professional tax advice can help you comply with evolving regulations and capitalize on opportunities for savings. A professional tax advisor will ensure you do not miss out on any opportunities for loss harvesting, and utilizing credits. Such expertise is especially important when dealing with complex equity investments like non-qualified deferred compensations (NQDCs) and international investments.

The key benefits of hiring a tax advisor for equity investments

Some of the key benefits of hiring a tax advisor for equity investments are as follows:

Expert Tax Planning and Strategy

Your tax liabilities can change drastically depending on the equity investment structures, timing, and whether you are an individual or a corporation. An advisor will understand these nuances and will ensure that you structure and time your equity investment to optimize outcomes.

Whether you are a corporation contemplating an acquisition or an employee trying to minimize taxes on your stock options, an experienced advisor can identify efficient equity investment opportunities for you.

Maximizing Tax Savings

You may be aware that you can reduce your taxable income by reporting your loss. This practice is known as tax-loss harvesting. However, there are various caveats relating to the type of loss that can be harvested and the extent to which a certain loss can be harvested.

Similarly, with tax deductions and credits, there are various terms and conditions you must be careful about.

To ensure that you take maximum advantage of loss harvesting, tax deductions and credits, you need the help of someone with in-depth knowledge. Employees can also get valuable insights from advisors about equity investment structuring cases like the early exercise of stock options and 83(b) elections.

Compliance with Tax Laws and Regulations

Tax laws and regulations can change over time because equity investments have evolved, for political reasons, or because of serious offenders. For instance, Section 409A was introduced because Enron’s executives were found abusing equity compensation plans as the company was headed toward bankruptcy.

It can be incredibly difficult to keep track of tax law changes and revisions in how authorities interpret them. Even the smallest misinterpretation can result in hefty penalties or audits.

Hence, you must rely on a tax advisor for proper reporting.

Optimizing Retirement Accounts and Tax-Deferred Investments

Tax advisors can help companies structure contributions to retirement accounts like Individual Retirement Accounts (IRAs) and 401(k)s in a way that secures favorable treatment. If you are considering equity investments, they can help you with strategies that secure exemption or tax deferral. Thus, advisors can help companies as well as employees minimize their liabilities.

Additionally, advisors can also recommend tax-efficient withdrawals from retirement accounts suitable to your financial situation and lifestyle needs.

Managing Complex Investment Scenarios

Tax advisors can help you expertly navigate the implications of international investments where you must consider the tax regulations and best practices in multiple jurisdictions. They can also help you structure private equity and venture capital investments to maximize efficiency.

When you receive equity-based compensations like stock options and restricted stock units (RSUs), you will have opportunities to lower your taxable income through the timing of investments and by avoiding double risks. Without the support of trusted tax advisors, you will lose such opportunities.

Estate Planning and Wealth Transfer

Tax advisors can suggest strategies for a tax-efficient wealth transfer. They can ensure that the beneficiaries have to bear the minimal burden. They can help you set up trusts and structure the wealth transfer to maximize the benefits from exemptions and deductions.

You can use their assistance in choosing from the numerous wealth transfer vehicles like revocable and irrevocable trusts, family limited partnerships (FLPs), and charitable remainder trusts (CRTs) so that the wealth transfer meets the financial needs of the beneficiary. Such alignment of vehicle structure and financial needs will help you minimize estate and gift taxes when you transfer equity investments.

Risk Management

You must carefully sidestep various tax-related risks while making equity investments. For instance, you should always check if you can qualify for long-term capital gains treatment by holding your equity investments for a little longer. If you want to harvest losses from an equity investment, you should wait until the wash sale rule is not applicable anymore to make a similar equity investment.

If you are receiving incentive stock options (ISOs), you must be careful not to trigger alternative minimum tax (AMT) since that can lead to unexpected liabilities.
A tax advisor can demystify such risks for you and help you manage risk exposure.

How to Choose a Tax Advisor?

Now that we have discussed how a tax advisor can optimize your equity investments, let us discuss how to choose the best advisor for you:

Qualifications and Experience

There are various kinds of tax advisors, some specialize in corporate taxation, some specialize in individual taxation, and not all advisors understand equity-related issues at the same depth. If your main concern is minimizing liabilities from equity investment income, you must look for advisors with certifications like Chartered Financial Analyst (CFA).

If your equity investments include private equity investments, you might be better served by a tax advisory firm with Certified Valuation Analysts (CVAs) on their team. You should also check if the tax advisor you are considering has experience in dealing with equity investment taxation.

Services Offered

While selecting a tax advisor, you must first identify your needs. You can do this by noting down the tax-related issues you are facing or the tasks that are taking away your valuable time. Then, you should check if the shortlisted advisors actually provide relevant solutions or not.

For instance, a large corporation with in-house lawyers may not need support for filing tax reports. Such outfits would rather want a tax planning specialist. However, a smaller firm may prefer all-in-one services that include planning, filing, and consulting. Similarly, individuals will have different needs than companies.

Fee Structure

Unfortunately, not all tax advisors have the same fees or even the same fee structure. Once you have shortlisted qualified advisors who provide the services you need, you must group them based on fee structures which could be hourly fees, flat fees, or fees as a percentage of assets. Then, you can list the actual fees of each advisor.

This kind of data preparation will equip you well to perform a cost-benefit analysis.

Reputation and References

Before confirming your purchase, you should check the advisor’s reputation through client reviews and testimonials. You can also ask people in your network about their experience with a tax advisor you are interested in. It is important to form an independent opinion before looking at reviews which could include biases. Hence, we recommend this as the last step.

Why choose Eqvista as your tax advisor?

Some of the reasons why you should use Eqvista as your tax advisor are as follows:

• Comprehensive Tax Planning and Strategy – Eqvista’s suite of equity-related tax advisory services includes guidance on qualified small business stock (QSBS) status, 83(b) filings, equity vesting advice, and much more!
• Expertise and Experience – In the six years since Eqvista’s inception, our team of accredited tax advisors has minimized the liabilities of more than 15,000 companies.
• Specialized Services for Equity Investments – Eqvista’s tax advisory team can provide specialized services for various kinds of equity investments including restricted stock awards (RSAs), incentive stock options (ISOs), and non-qualified stock options (NSOs).
• Compliance and Risk Management – Eqvista invests a considerable amount of time in understanding changes in tax regulations at an organizational level to ensure compliance and provide top-notch risk management services.
• Advanced Financial Tools and Technology – At Eqvista, we use advanced financial tools and technology to help our clients with ASC 718 reporting, providing detailed guidance on income tax accounting for stock-based compensations and filing Form 3921.
• Holistic Financial Advisory Services – Eqvista provides a wide range of tax advisory services and valuation services. Additionally, we have partnered with various law firms, neobanks, fintech companies, and incorporation and accounting services companies. Thus, through our in-house capabilities and partnerships, we provide holistic financial advisory support.
• Client-Centric Approach – Eqvista approaches every new client with a clean slate. We do our utmost to avoid bringing misguided preconceptions and biases to ensure that every client gets the service they need and not the service we are used to providing.

Frequently Asked Questions (FAQs)

Some questions people frequently ask about Eqvista’s tax and equity services are as follows:

What makes Eqvista different from other tax advisors?

Eqvista’s tax and equity services are not limited to just recommending the right course of action. We also provide filing services and business valuations for equity income calculations. Additionally, we have partnered with various law firms to provide value-added services like drafting and filing of paperwork, and risk evaluations.

How does Eqvista help with equity investments and tax planning?

At Eqvista, we help startups and employees reduce their taxable income and maximize their gains through prudent, research-backed, and tested solutions.

What is the process for getting started with Eqvista?

To get started with Eqvista’s tax and equity services, you can simply set a calendar meeting with our sales team via this link.

Can Eqvista assist with international tax issues?

Yes, Eqvista operates in various countries including the US and the UK. We have an intimate understanding of local regulations as well as cross-border tax issues.

What kind of clients does Eqvista typically work with?

Eqvista provides tax and equity services to startup founders, early employers, investors, entrepreneurs, and startups from various stages.

Maximize equity gains and minimize tax liabilities with Eqvista!

Involving a tax advisor in your equity investment decisions has various benefits, including expert planning, maximizing savings, ensuring compliance with evolving tax laws, and optimizing retirement accounts.

Complex taxation scenarios like international equity investments and equity compensations can be simplified by advisors. Employees can benefit from professionally optimized retirement plans, estate plans, and gifts by getting tax advisory support. A good tax advisor can also provide risk management support.

If you are someone who needs assistance in maintaining compliance and minimizing tax liabilities, consider choosing Eqvista for our holistic financial advisory and client-centric approach. Contact us today to explore the benefits of our tax advisory services.