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Some of the tax laws can be complex, so let me provide you with a simple example of how tax avoidance and tax evasion works.
(Thread) https://twitter.com/AltWASONPS/status/1047275249572691968">https://twitter.com/AltWASONP...
(Thread) https://twitter.com/AltWASONPS/status/1047275249572691968">https://twitter.com/AltWASONP...
First I& #39;m not going to get into the intricacies of what is legal and what is not. Instead, I& #39;m going to show you how it works.
Now let& #39;s take a look at the corporate income tax brackets from 2017. I& #39;m intentionally using an older year as the older rates amplified the effect.
Now let& #39;s take a look at the corporate income tax brackets from 2017. I& #39;m intentionally using an older year as the older rates amplified the effect.
Now, let& #39;s assume for a moment that I have a business that makes $300,000 a year in profit. My total gross income (what I make before paying bills, employees, etc.) doesn& #39;t matter.
What does matter though is that I& #39;m in a 39% tax bracket. This sucks... So let& #39;s get creative.
What does matter though is that I& #39;m in a 39% tax bracket. This sucks... So let& #39;s get creative.
Now granted I& #39;m not taxed 39% on everything...
I& #39;m taxed 15% on my first $50k, then 25% on the next $25k, then 34% on the next $25k then 39% on the next $200k (remember I& #39;m at $300k).
But still that& #39;s a lot of money and I want to pay less.
I& #39;m taxed 15% on my first $50k, then 25% on the next $25k, then 34% on the next $25k then 39% on the next $200k (remember I& #39;m at $300k).
But still that& #39;s a lot of money and I want to pay less.
Ok so.. let me think about this.
If I only made $100k, I& #39;d be taxed at 34%.
Hmm, ok what if I split up my single business into three businesses?
I mean they would still do the exact same thing.. but if I split them up. All of the business would only be taxes on $100k...
If I only made $100k, I& #39;d be taxed at 34%.
Hmm, ok what if I split up my single business into three businesses?
I mean they would still do the exact same thing.. but if I split them up. All of the business would only be taxes on $100k...
... of income each. And that extra $200k which is currently taxed at 39% would now only be taxed at 34%.
That& #39;s a 5% savings, a whole $10,000 and I want MY MONEY!!!!
Ok let& #39;s do this.
That& #39;s a 5% savings, a whole $10,000 and I want MY MONEY!!!!
Ok let& #39;s do this.
So I split my single company into 3 companies. I will call them WASO-HR, WASO-Supplies, and WASO-Sales.
Now it& #39;s going to get a little bit more complicated from here....
Ok, so WASO-Sales, needs things to sell and make a profit.. so it buys them from WASO-Supplies....
Now it& #39;s going to get a little bit more complicated from here....
Ok, so WASO-Sales, needs things to sell and make a profit.. so it buys them from WASO-Supplies....
I structure this in a way so that $150k can be written off as business expenses...
Because of this, now both WASO-Sales and WASO-Supplies now only have $150k in profit each..but I& #39;m still not there.. I need to get to $100k in 3 businesses.
Because of this, now both WASO-Sales and WASO-Supplies now only have $150k in profit each..but I& #39;m still not there.. I need to get to $100k in 3 businesses.
Also.. each of these companies kinda needs people. I mean robots are cool and all..they just aren& #39;t there yet. So what to do.. what to do.
Oh, I know.
I hire WASO-HR to provide me with human resources via a contract!
Oh, I know.
I hire WASO-HR to provide me with human resources via a contract!
So WASO-Sales and WASO-Supplies each hire WASO-HR and pay them $50k for the people who will actually do the work. (Technically, more than $50k bit we are keeping it simple).
See, easy as can be...
But hmm.. well this was really, really simple and I& #39;d like to keep more money...
See, easy as can be...
But hmm.. well this was really, really simple and I& #39;d like to keep more money...
Oh I know.
I will have SASO-Supplies purchase, I dunno... Laptops for $1,000.
And then they will sell them to WASO-Sales for $1,500. Genius.
At first you would be like.. well I& #39;m just dumb and moving money from one company to another...
But, alas... As a business...
I will have SASO-Supplies purchase, I dunno... Laptops for $1,000.
And then they will sell them to WASO-Sales for $1,500. Genius.
At first you would be like.. well I& #39;m just dumb and moving money from one company to another...
But, alas... As a business...
... I can consider those as assets, and depreciate them (and again I& #39;m really, really, over simplifiying this).
So instead of only being able to deduct $1,000 for those assets, I now get to deduct $1,500 (per laptop).. and a little bit more shifting of where that $300k goes...
So instead of only being able to deduct $1,000 for those assets, I now get to deduct $1,500 (per laptop).. and a little bit more shifting of where that $300k goes...
And I keep all 3 businesses under $100k.
A little bit of work, and a little complicated.. but not too much so.
And I saved a whole bunch of money.
Now there is just one more thing...
A little bit of work, and a little complicated.. but not too much so.
And I saved a whole bunch of money.
Now there is just one more thing...
I could do a whole lot more...
Why stop at 3, why not make it, 10
Why not 100...
Why not 1,000
Just like Trump
(Source: https://www.wired.com/2017/01/kim-albrecht-trump-data-viz/)">https://www.wired.com/2017/01/k...
Why stop at 3, why not make it, 10
Why not 100...
Why not 1,000
Just like Trump
(Source: https://www.wired.com/2017/01/kim-albrecht-trump-data-viz/)">https://www.wired.com/2017/01/k...
