Episode Description
CPA Sylwia Nazar is a perfect example of the American Dream in action. She came to the United States from Poland when she was 19 years old. Since then, she has risen to partnership in a major accounting firm and is committed to helping other women climb the ladder of success as well.
In this episode of Off the Fence, Sylwia demystifies the complex world of divorce and taxes. She explains the essential role a CPA plays in advising clients about the often-overlooked tax consequences of a divorce asset allocation. She also describes how a CPA works with the other members of a divorce professional team to provide clients with the advice and expertise they need to safeguard their interests both in and out of divorce.
Making good financial decisions requires a solid understanding of the tax implications of those decisions. Having a CPA on your divorce team can be just as critical - especially in divorces that involve complicated investments and tax issues.
If you're debating whether you need - or should use - a Certified Public Accountant in your divorce, this is a "must listen to" episode!
Show Notes
About Sylwia
Sylwia is a CPA, a CDFA and partner with Friedman Huey & Associates. She works with individuals, families, and businesses to deliver customized tax and wealth planning solutions.
She provides her clients with insights and integrity to their accounting matters and focuses on forming lasting relationships with her clients. She collaborates with financial advisors, attorneys and insurance agents to help her clients achieve their business and personal goals, get the best solutions for them.
Sylwia believes that the teamwork she uses is critical to providing her clients with the peace of mind they deserve.
Where to Connect with Sylwia
You can find Sylwia on LinkedIn at Sylwia Nazar, at Friedman & Huey Associates LLP or by email at [email protected].
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Transcript
How a CPA Can Help You Manage Unforeseen Tax Consequences of Divorce
Sylwia Nazar
SUMMARY KEYWORDS
divorce, sylwia, karen, cpa, taxes, divorce
SPEAKERS
Karen Covy, Sylwia Nazar
Karen Covy Host00:03
Hello and welcome to Off the Fence, a podcast where we deconstruct difficult decision making so that we can find out what keeps us stuck and, more importantly, how do we get unstuck. I'm your host, Karen Covey, a former divorce lawyer, mediator and arbitrator, turned coach, author and entrepreneur. With me today is my guest, Sylwia Nazar, and Sylwia is a CPA, a CDFA and a partner with Friedman Huey and Associates. She works with individuals, families and businesses to deliver customized tax and wealth planning solutions. She provides her clients with insights and integrity for their accounting matters and focuses on forming lasting relationships with her clients. She collaborates with financial advisors, attorneys and insurance agents to help her clients achieve their business and personal goals and get the best solutions for them. Sylwia believes that the teamwork that she uses is critical in providing her clients with the peace of mind they deserve. Sylwia, welcome to the show.
Sylwia Nazar Guest01:07
Thanks, Karen, for such a wonderful introduction. I'm so happy to be here and looking forward to our conversation.
Karen Covy Host01:13
So am I, and I want to dive in with, like starting with the very, very basics, right? People have heard the term CPA. They kind of sort of know what a CPA is, but if you could start by explaining what is the difference between a CPA and a regular accountant and what do you do differently?
Sylwia Nazar Guest01:35
Sure. So CPA stands for Certified Public Accountant and as a lawyer, you have to pass a test to give that certification. So obviously there is a little bit more of technical skills and knowledge that you have to pass to give that certification and there are a lot of CPAs who prefer the tax returns, different tax returns. There are also a lot of accountants who could be just finishing accounting school and not going for the CPA license. They still are knowledgeable but they cannot represent you in front of the IRS. So I would think that the difference between regular accountants who is not a CPA they still have the knowledge but sometimes higher technical issues that they need to address they might reach out to someone who is a CPA licensed person.
Karen Covy Host02:29
Got it. So, as you know, this podcast focuses a lot on decision making. Why did you decide to go for your CPA If you can do most things as a regular accountant, why bother yourself with going through the big testing, going the extra mile?
Sylwia Nazar Guest02:43
The regular accountants lot ofa times they enter the numbers into the tax software and to generate the tax return and if you have a very basic tax situation, this is all what you need. You don't need to have anyone who is highly qualified to do that going into the business. I really like consulting an advisory side of it, so I knew that I need to have specific technical skills to help in a little bit more complex situations, not only providing a tax return as an end product everyone needs the tax return but a lot of times in my area I provide consulting, an advisory. If someone is going through the divorce, is they're selling the business, or maybe they inherited some wealth and they really are not familiar with all the things they need to do. So I decided to go for the CPA licensing certification just to make sure that I have all the skills and all the knowledge that I need to better serve my clients.
Karen Covy Host03:48
That makes so much sense and I happen to know from us having conversations in the past that you do a lot of complicated stuff right? And you guide your clients to make I assume tax decisions. Can you tell me a little bit more about what kinds of decisions that you guide your clients to make? What situations might they be faced with where they need a CPA?
Sylwia Nazar Guest04:13
There could be. There are so many options and a lot of people when they look at their tax return they don't realize how much complexity could be there if you have something going on. So if you, let's say, inherit a wealth from your parents, there needs to be some estate planning. There need to be some trust that maybe you need to take things out of your estate so your estate is not taxable or there is no estate tax. If you go through the divorce, you look at all the assets. There needs to be division of assets and you have to start finding the return and conserve the wealth in a sense.
04:48
A lot of clients come to us show when they want to make sure that they have very complex investments with foreign disclosure, with multi-state disclosures, and they want to make sure that they're finding everywhere when they need to, so they're penalty protected but also, they're not going to have any issues with the IRS. So there are multiple situations. Every situation is very different. I work with a lot of multi-generational families when you have grandparents, parents and the children, and each of those generations has different financial and tax needs. So making sure that we have open discussions about their financial goals, what they want to do and just working with other professionals as one team to achieve the client's goal.
Karen Covy Host05:35
You know. I'm glad you said that because you mentioned I saw in your bio that teamwork is something that you really value. How does a CPA fit into a person's financial team?
Sylwia Nazar Guest05:52
So if someone has specific financial goals, because they have wealth, they want to preserve it or they want to make sure that it's there when they need it when they retire, it's not only about the tax planning. You have to have specific investments. So you have to have a financial advisor on your team when, if there is an opportunity to invest, they have someone who is going to analyze the tax consequences of that investment. Then, if you have a complex situation, you have to have a family attorney to make sure that everything is legally properly structured and then you have legal documents to protect your investment.
06:31
So I work with attorneys. If we need someone because they have an arts collection or a jewelry collection, I would work with the insurance agents. So in the sense, when the client hires me at that obvious complex level, I am a quarterback of everyone who needs to be part of their financial and wealth situation And we talk to each other all the time And I always say I don't work for Freeman and Huey and MR. I work for Mr Smith because I'm part of his team that is collectively made of other professionals.
Karen Covy Host07:06
That is so important and so wonderful that you do that for people. I'd like to steer the conversation a little bit into the area specifically of divorce. Now, you and I both know there are a lot of tax consequences that people need to be aware of when they're going through a divorce. Can you just list some of the most common ways that taxes affect divorce and what people have to keep in mind when they're going through it?
Sylwia Nazar Guest07:36
Absolutely. Some of the things that people are going to deal with is, first of all, what really goes on my tax return, how much income I'm reporting. People do have wages and business income, but there are also investments income. There are gains that they have from the investment and how is it going to be allocated between the spouses? There are retirement accounts that need to be divided as well, and how does it affect your tax return after you get divorced and also your cash flow? That's why we need financial advisors need personally, so they can run the projection of how much cash needs I'm going to have for all the expenses, but also how much taxes I'm going to pay, so I can preserve that and save for that.
08:22
When people get divorced. They don't realize that they look at the main number. So let's say the couple has a million dollars. If they're going to split it 500 and 500, that's a 50-50 to simplify it. The tax consequences of those two pools of assets could be totally different, because there could be assets that have no tax basis, meaning that if you have a sale, you have to pay gain on the total value of that, and there could be assets that have basis, meaning that portion of the transaction will not be taxable And you have to be really, really careful And that's why you have to hire a professional to tell you what will be the tax consequences after this asset allocation And maybe you prefer a different version making sure that both sides are going to agree and take responsibility of what's in their wealth family wealth.
Karen Covy Host09:15
You know what you've said is so important And I'm not sure that everybody really gets it right, because you just said it so eloquently and that people might not realize what the basis is and how getting. let's say there are two different investments and they have different tax bases how that would affect a divorce settlement. If one person says you get this and I'll keep that, but they have different tax bases, then how much actually gets into their pocket at the end of the day can be very, very different. And it sounds like you're the person who analyzes that and says, no, no, this one is going to cost you a lot in taxes, this one not so much. Is that what you do?
Sylwia Nazar Guest10:03
Yeah. So I work with the financial advisor when they provide me the information. So the basis, just to make it very simple, is the cost of the investment. So let's say if you bought Apple stock and you paid 20,000 or 2,000 for it, but it's worth much more, your basis is that original investment and you will pay gain on the difference between your cost original cost and the firm market value at the time of this sale. So if a couple has a million dollars of stocks, if, depending on how you are going to allocate them, there could be stocks with the low basis, meaning that there was a very low investment.
10:40
Let's say, let's look at the Tesla stock right, Someone could buy it very, very early and now it's worth much more. $500 of this stock will generate a lot of tax because there is a lot of gain included in that Your low cost versus the very high firm market value at the time. Even the other spouse is going to get a stock that maybe cost at 150 or 200,000. Obviously, that gain is much smaller and your tax liability is much smaller. So it's very important to go through the list of all the assets that each couple has and how it's going to be allocated. So it's fair. If someone is very specific and wants to keep that asset, they need to compensate the other spouse for the possible tax liability that are going to be in the future when they dispose the asset.
Karen Covy Host11:28
You know, it sounds like your expertise could also come in really handy for people where there is one like wage earner in the family, the spouse who makes a lot of money, and the other spouse maybe was the stay-at-home parent or doesn't make so much money. Is it possible, then, to allocate assets based on tax liability so the person at the lower tax rate actually pays the tax on that asset? Does that make sense?
Sylwia Nazar Guest11:59
Right, yes, so that's why it's so beautiful to bring different professionals, because everyone is going to have all the different perspectives and everyone is going to present some options that you have to decide which way you want to go. A lot of times, people just want to be done with everything what they do, but they also need to understand what the tax consequences are going to be. A lot of people are very emotional about specific assets and they don't want them to be divided or they don't want to let them go. You have to make sure that you understand all the financial consequences. If it's a tax liability, if it's a cash flow issue, a lot of times people love their houses and they want to keep the houses, but right after the asset division, there might not be enough income or cash flow to keep up with all the expenses. It might not make any sense.
12:51
The statistics do say that if there is a divorce, women are usually financially much more worse than men, and to understand all the options and then to protect each spouse, we have to be very, very careful how we are dividing it. So what I'm saying is a lot of times, include all those professionals So you will make educated decisions based on the facts and numbers And then you will understand everything. It's going to release that fear of running out of money or sticking to something that maybe just not right for you.
Karen Covy Host13:24
You know that is so, so important. I'm so glad you brought this up because everybody, when they're facing a divorce, their initial reaction is usually fear Am I going to run out of money? Do I have enough to do this? And so they look at the idea of putting together a team makes them crazy because they're like wait, I’m just bleeding money is what they feel like right, but what I'm hearing you say is that, far from it. that when you have that team with the right professionals on it, it actually saves you money in the long run. Is that right?
Sylwia Nazar Guest14:01
Yes, so, for example, the example that you gave when you have a higher earner and lower earner the higher earner, you see the wages. But there are other ways of compensation. There could be benefits, there could be stock options. If you don't hire the right team, you can leave on the table a lot of wealth that you are not aware of, that's not going to be allocated to you because you just don't know about it.
14:25
We do have complex situations when there are super wealthy clients that, if they know that they go through divorce, they would like to hide some assets.
14:35
If we talk about cyber assets something that is not tangible in the sense you don't, you know it's out there, like PFCs and Coinbase current COs I was missing that word You can attach it, it's out there. So a lot of times, sometimes you have to hire forensic accountants to find those assets. Because I am experienced with multiple, with different kinds of returns, I know that a lot of times there are trust that maybe are not generating income, which means you don't see it on the tax return, but there are assets in the trust that are going to be triggered with some kind of event. If you don't know anything about this trust. There could be millions of dollars that the spouse is keeping from themselves and you're really eligible for that share. So that's why hiring specific professionals. It might look like you're spending all the money, but it's really worth when you have some kind of wealth and complex situation, because you're going to be multiplying that investment into more things that you're going to get after the divorce 100%.
Karen Covy Host15:50
So let's say I'm a divorcing client. I come to you how do I decide whether or not I need a CPA at your level to be part of the team? Or like, how do I know whether there's a chance of hidden assets or whether I'm just angry and upset? And so I'm thinking there's something there that really the chance is small that it exists.
Sylwia Nazar Guest16:16
Right. So when the client comes to me, I always would like to take a look at the last two years of the tax return And right now some people don't even have a physical copy. With everything being electronic, it could be something that it saves as a PDF and that person never looked at that tax return. A lot of times there could be a situation when the return is done and the one spouse is in charge of all the finances, signs the return and just hands you a page hey, please sign the return, we need to file it and you don't even look at that form. You don't know what goes there.
16:49
A lot of times when I ask the clients like how much tax did you pay or how much was your adjusted income, total income, I don't know. So I would always start with going through the return and selecting or specifying all the assets that generated income and were included on the tax return. But then also you follow up with a lot of questions. Sometimes you either reach out to their family attorney to see what trust are there. Are there any entity returns that the couple was filing? So you kind of start with a really, really good questions and because of my expertise, I know what kind of questions to ask and I know what could be out there And when you run into a business, how to evaluate the business.
17:34
What's the value of the business right now and what to do with that.
17:38
Do we want to stay in the business? Should the business be sold and divided? So you go through all the things that are out there and then you, with the other members of the team, like attorneys and financial advisors, you come up with specific options and then I would reevaluate that for tax consequences and point out a few things that maybe my client needs to be aware of or know that this is going to generate a little bit more tax, but in the long run it's better off because of the investments. So there could be multiple situations that we're going to have, but my job is to point out specific things that I'm aware of and, based on my experience I've seen before understanding the full financial situation of the client, knowing what could be out there, a little bit understanding of the family So there could be very wealthy grandparents, there could be parents who maybe paid for specific things. So the situation could be really, really complex and we want to make sure that we're going to look at every single aspect of it.
Karen Covy Host18:44
You know something that you keep saying that it's important for people to understand the tax consequences of something, that it's your job to make sure they're aware of how this is going to work and what the consequences are. but ultimately, who decides what they do or don't do?
Sylwia Nazar Guest19:03
They decide what they do, what to do with their spouse, so they need to make sure that everything is fair. So when they hire an attorney, they're going to tell her the state law and every state is different.
19:14
This is the recommendation. It's not always 50-50. It needs to be fair. People always think it's going to be 50-50. In the state of Illinois it's not So it depends on the situation. So they need to agree with the spouse based on the recommendation and based on everything that they know, and they discuss with their team And they feel comfortable with that.
19:34
Sometimes finding about small things, it's not worth all the emotional stress and dragging the process for months and months and months and they need to have someone who is going to tell them. I know that you're emotionally connected to this, but it's causing you to so much of your stress and the cost of it is just not worth it. So having that team together helps out, having a divorce code when you can provide different perspectives. And because of the emotions and stress, people have better days and worse days. They doubt their decisions. They doubt themselves in a sense. I don't know anything about it. That's why they need to have a great team who is going to always look at their best interests and provide them with the options. I'm not going to make the decision for anyone, but I'm going to make sure that I'm going to educate them and provide them all the options that are out there so they can re-evaluate those and decide on what's best for them.
Karen Covy Host20:35
Yeah, that makes so much sense And I know I work with a lot of people on making better decisions, starting from the beginning decision of should I stay or should I go, all the way through to how do I create a new life. And step number one in any decision-making process and I've studied many of them is always information. They can't make a decision if they don't know there is one to make, and hence getting it sounds like getting the information from you is so critical because you are not making the decision for them. So many people think that they're just going to hand it over to you and say, ok, you do it and that's not what you do, but they can't do what they need to do without your help, without your information.
Sylwia Nazar Guest21:24
That's what the education and giving different perspectives and different options And I always feel that if you have a good team, everyone can bring something different to the table because everyone has a little bit different experience. Everyone has so different situations And I can bring my technical skills and my experience, but then we can build on that with someone like you or another attorney or a financial advisor whose so different situations and that person is so much better off. I know it could be scary to have that many people involved, but in specific situations, when there are complex situations, it's critical to have that. You have to have a support system and that team is going to support you all the way.
Karen Covy Host22:10
Yeah, 100%. I'd like to switch gears a little bit now, and I happen to know that you are a strong believer in empowering other women and that you are working on your work with the FH Women's Leadership Intensive. Can you tell me a little bit more about what that is and what drives you to be so passionate about empowering women?
Sylwia Nazar Guest22:37
Before I joined, Friedman and Huey, I worked for 10 years for a big accounting firm downtown Chicago and when I was there it was right after school. There were a lot of similar people, in the sense they were go-getters. They wanted to make an impact, they wanted to do a lot of things. And I thought I didn't know any better. So when I started to work with Freeman and Huey, I realized that there are just different kinds of people and they needed some support, to be confident, to be free to ask for things. Because they were within the smaller firm, they didn't know about all the opportunities that are out there and they were just not empowered enough to go after their dreams. And I also realized it was such a great learning experience.
23:25
Everyone is at the different stage of their life. There are some people who maybe need to slow down with their career because they want to spend more time with their kids. Or maybe they have aging parents and they need to pull back because they need to take care of them. And supporting them in any way when it comes to confidence and asking questions and knowing that they have that support and building that network within my firm creates more happier people. And when they're happy and they know that they have a backup, they have this great loyalty and then they want to stay and even though sometimes they need to slow down,I know that after the bumpy time in their life, or maybe when they keep going to college, they'll come back and they're going to bring so much value to the firm their worth investing in.
24:16
So I created this woman's initiative just to meet from time to time as a woman, as a mom, as a career person, to talk about different things time management, confidence, taking care of some things. We have a book club that we go through different books, sometimes professional, sometimes just a good read, summer read. But I wanted to make sure that there is a space for people to come and share the experience because each of us has a different one and learn from each other, especially now during the post COVID stage, when all those people are remote. My firm is 95% remote, so we don't run into each other in the office anymore. So that's basically this place to get to know each other better from different perspectives, from the personal side of it, and I think once you feel like you have that support system, you can bloom to anything you want, and I just want to make sure that I provide the ground for it.
Karen Covy Host25:22
That is so beautiful and I can see how it ties together your passion for teamwork, because, again, it's not letting the people, even though you may be working remotely and not seeing each other, it's trying to bring together women as a team and there's real power in that right.
Sylwia Nazar Guest25:46
Absolutely. It takes so much from others, from dealing with you, having conversations and discussions and building up the energy, and when you surround yourself with people that are like-minded, that they really believe in you and they want to cheer you up, you really couldn't do a lot of things. And everyone is going through something we don't even know. People are sometimes very open and sometimes they're not. We just want to make sure that we are very graceful about them, about each other, learning how to be graceful about yourself. It was one of the topics that we were discussing, joe. We expect so much from ourselves working moms, not working moms. There is so much judgment around us. We want to please everyone and we forget ourselves. So just making sure that we support each other. So helpful and it gives me so much. I'm basically giving back. I wouldn't be here if it wasn't for some of the wonderful woman in my life and I just want others to have the same experience.
Karen Covy Host26:53
That is so wonderful and it's like I often say we all stand on the shoulders of giants, of those who have gone before us and we don't you know, we don't often acknowledge that. And it's beautiful that you are helping encourage and empower other women and give them confidence. That's a subject we don't talk about a lot because you don't want to admit if you don't have it. It's kind of a lot of people fake it or they put this stuff on social media that looks great, but inside they're dying. So I, what I hear you saying and doing, is that it's about support, it's about putting like-minded people together and about empowering yourself to have that confidence.
Sylwia Nazar Guest27:40
That's authentic right, and we do too. So it's nice that you know we know each other and we can build a team when it's needed for our clients, because we share the same values. And you know, that's why I'm here on your podcast, because we do share the same values and we have the same passion. So I love it.
Karen Covy Host28:01
As do I. Okay, so now I'm going to throw you a total curveball. Okay, are you ready? In your life, what's the best decision you've made? Personal or professional doesn't matter, but what do you think is, or I'll say, one of the best decisions you've ever made?
Sylwia Nazar Guest28:22
Even though I don't like it. I like to take a risk because I know that sometimes when you do that and you step out of your comfort zone, beautiful things could happen and everyone can hear my lovely Polish accent and maybe you cannot tell right now, but I was a very shy person. I hated to talk to people. I was not confident about how I sound. Can they understand me? A few years ago I said I love to talk to people, no matter what, if they listen to me. If they don't, but I really want to help out. I think they're urged to.
29:01
I live the American Dream. I immigrated here when I was 19 and I'm a partner at the accounting firm. I help people who are super wealthy, who hold governmental positions or they have a multi-generational wealth. That gives me that confidence to go out and just believe in myself that I can bring something to the table. I bring value and I just wanted to spread that out. So I'm very. I guess the best decision I made was not to be afraid of showing who you are and be outstanding with my beautiful Polish accent. But I know my value and I will be out there sharing what I know and just help other people.
Karen Covy Host29:45
That is beautiful. I don't even have words to follow that, so I think that's a great place for us to call this a wrap. Sylwia, thank you so much for sharing your wisdom, for empowering so many people who I know are listening. Where can people find you if they want to do that?
Sylwia Nazar Guest30:03
The best way to find me is on LinkedIn. I know that not a lot of people have those professional sites. You can find me on the Freeman and Huey website. If you're watching, you'll have it here on the name of the firm. You can go to the website and there is my profile with my contact information and that will be the best choice to find me. I'm on Facebook too, but it's a personal site and I'm always available to if you're not sure if I'm the right person.
30:38
I'm not right for everyone. You have to have some complexity to use my expertise, because if I'm not going to bring value to you, then it's not worth it to you to pay for something that you can get somewhere else much cheaper. But I'm more than happy to reevaluate situations. I do a lot of things for my professional colleagues’ financial advisors and attorneys When I reviewed the tax return and I provide some feedback about maybe things that I could do better and if it's a good fit or not. So always happy to help to look at, answer any questions, so you can feel like you're not there alone and then you have someone who wish you well and wants you to succeed.
Karen Covy Host31:21
Sylwia. thank you so much and for those listening or watching, all of the places are going to be linked in the show notes where you can find Sylwia. And for those of you who are listening, I hope you've enjoyed this episode. If you have, then please give us a thumbs up like subscribe to the podcast, subscribe to the YouTube channel, and I look forward to talking to you again next time.
