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Trump Tax Plan = Big Tax Cut for Fastlaners

Taxes and regulation

MJ DeMarco

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Must read article regarding Trump's proposed tax plan ...

http://www.forbes.com/sites/anthony...ent-trump-what-does-it-mean-for-your-tax-bill

While I typically don't hold much weight into a politician's promises, this might actually happen with an all-Republican congress and the fact that Trump isn't a politician. If it does, take a look at how it might benefit you.

The bigger changes under the Trump plan come in the treatment of so-called “pass through” taxation. Under current law, S corporations and partnerships do not pay entity-level tax; instead, the income is allocated to the owners, who pay the corresponding tax at the individual level, based on the applicable individual rates laid out above.

Trump, however, would provide a unified business rate of 15%, meaning not only would corporations pay tax at that rate, but all business income – even the income earned by an individual from an S corporation, partnership, or sole-proprietorship and reported on the individual’s tax return — will be subject to the same 15% rate. This means that a taxpayer earning business income would experience a drop in top tax rate from 39.6% to 15% under the Trump presidency.

Since many Fastlaners have S-Corps, including myself, this means I will now pay 15% instead of 40+%.

This is YUGE -- and for Fastlaners doing five and six-figures monthly, a pay raise amounting to thousands which could translate into more spending, more employees, and more capital investment.

For those of us with CORPORATIONS, watching this "promise" evolve or die is something to watch in the coming months/years.
 
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juan917

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Anyone know if this tax cut applies to W2 workers or is it only at the corporate level?
 

Evil_Jester

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I'm surprised I haven't seen a thread about import tariffs, mainly for chinese goods. That'll be a crazy shakeup
 
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MJ DeMarco

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I'm surprised I haven't seen a thread about import tariffs, mainly for chinese goods. That'll be a crazy shakeup

There is a thread about this on the INSIDE. The consensus there from the importers is that the tariff threat is only that, a threat.
 
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Mineralogic

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Must read article regarding Trump's proposed tax plan ...

http://www.forbes.com/sites/anthony...ent-trump-what-does-it-mean-for-your-tax-bill

While I typically don't hold much weight into a politician's promises, this might actually happen with an all-Republican congress and the fact that Trump isn't a politician. If it does, take a look at how it might benefit you.



Since many Fastlaners have S-Corps, including myself, this means I will now pay 15% instead of 40+%.

This is YUGE -- and for Fastlaners doing five and six-figures monthly, a pay raise amounting to thousands which could translate into more spending, more employees, and more capital investment.

For those of us with CORPORATIONS, watching this "promise" evolve or die is something to watch in the coming months/years.

excellent, Trump is one cool dude
 

TKDTyler

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If I funnel excess income from my slowlane business into my LLC for purposes of building the business, buying inventory, etc... would that money that is put into the LLC be taxed at 15% or 30%, thus allowing me to have 15% more capital to work with year by year?

I should probably consult a tax professional...
 
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MJ DeMarco

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Anyone know if this tax cut applies to W2 workers or is it only at the corporate level?

The article explains how W2 workers are impacted.

LLC be taxed at 15% or 30%, thus allowing me to have 15% more capital to work with year by year?

Not sure, but creating an S-Corp is pretty easy and might be worth the organizational shift. You might also avoid CALI's punitive LLC annual tax.
 

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Now more than ever it's important to become a fastlaner ASAP to take advantage of the lower taxes. Who knows how long it will be this low until they go back up again. I don't want to get too much into politics but I just have to mention this. Bernie Sanders did say that a 90 percent tax rate on the wealthiest Americans is not too high. Whether or not you become fastlane can depend what the tax rates are. Literally.

EDIT: Also watch what accounting method you're using for taxes because for example you might not be able to write it off as an expense until it's sold. Your business could go down in flames before even getting off the ground.
 
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jazb

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I'm across the pond, low corporate tax rates are completely necessary now. global economy, companies can choose where they want to be. you guys paying 40% is just insanity
 

hellolin

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Now more than ever it's important to become a fastlaner ASAP to take advantage of the lower taxes. Who knows how long it will be this low until they go back up again. I don't want to get too much into politics but I just have to mention this. Bernie Sanders did say that a 90 percent tax rate on the wealthiest Americans is not too high. Whether or not you become fastlane can depend what the tax rates are. Literally.

Also watch what accounting method you're using for taxes because for example you might have to pay taxes on inventory you haven't sold yet. You might not be able to write it off as an expense until it's sold. Your business could go down in flames before even getting off the ground.

I totally agree with what you said, people who think this will last forever lives on another planet. There are always a group of people in society that needs to be taken care of by the others no matter what, we can only temporarily stop taking care of them, but ignore them for too long, they will come back with a vengeance. Society works as a cycle, the other side have had too much already, thus our system of democracy swings it back a bit. This time if implemented correctly, which will essentially render a John Galt like speech unnecessary (We almost got there, almost).

The day that this tax plan becomes a reality is the day that all the prime movers comes back to the real world and starts to produce real wealth again.

There are a lot opportunity a fastlaner can do, I foresee there should be some kind of program set up to encourage people to open businesses or create ideas to help out people in the flyover countries who did not experiencing any economic recovery from 2008, this is a huge under served market screaming "Help us and take my money and let me work for you", we only need ideas and get to start something.
 

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There is a thread about this on the INSIDE. The consensus there from the importers is that the tariff threat is only that, a threat.

I noticed (talking to trump supporters) that the negative things he said/Implied/ .. like the wall, tariffs, Muslim ban are assumed to be just threats. I'm not saying that is untrue but he does get a very generous amount of benefit of the doubt. This allows people to pick and choose positive things for them in his platform - which was generally sketched out rather than complete... to allow people to come to their own conclusions on what they thought he meant.

Just my observation from chatting to folks on both sides.
 

fhs8

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If you're talking about the United States, you're way off base here...

First, any business with inventory is going to be limited to the accounting method allowed by the IRS. In general, any business with inventory and gross sales over $1M is *required* to use accrual method of accounting for merchandise sales. See IRS Publication 334, Chapter 2 for details.

That said, under all IRS recognized methods of accounting (cash, accrual, combined) you don't recognize income and owe taxes until your inventory is sold (year of cash received or year income earned). Additionally, unless you're disposing of it or donating it, you never write off inventory as an expense -- inventory is COGS and is only deducted as such in the year the income was earned (or cash received).

If you're paying income/sales taxes on inventory you haven't yet sold, or if you're writing off inventory as expense (or deducting COGS prior to inventory sale), you really need to talk to a bookkeeper or accountant to get you back on track.

Looking back I do think I was confused/wrong about it. How about this example? If a retail business buys let's say $200,000 in inventory from China (near end of year) and only sold $30,000 of it and generated $100,000 in revenue. Along with $20,000 in all other expenses (rent, internet, selling fees, cc fees, etc). Then according to the IRS the business made a profit of $50,000 but in reality the business liquid assets (cash) went down by $150,000. So now the business has to pay taxes based on that $50,000 gain but is down by $150,000 in cash as if it lost big for the year. I guess it could be a big issue when the business is in the higher tax brackets. Additionally the tax code is absurdly complex and an accountant / CPA wouldn't be a bad idea.
 

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Looking back I do think I was confused/wrong about it. How about this example? If a retail business buys let's say $200,000 in inventory from China (near end of year) and only sold $30,000 of it and generated $100,000 in revenue. Along with $20,000 in all other expenses (rent, internet, selling fees, cc fees, etc). Then according to the IRS the business made a profit of $50,000 but in reality the business liquid assets (cash) went down by $150,000. So now the business has to pay taxes based on that $50,000 gain but is down by $150,000 in cash as if it lost big for the year. I guess it could be a big issue when the business is in the higher tax brackets. Additionally the tax code is absurdly complex and an accountant / CPA wouldn't be a bad idea.

Yes, you can't deduct inventory as an expense. You pay taxes on $50k. Your business made $50k and is not down $150k in the books.

If buying inventory was a loss, every business would be losing money because you ALWAYS have inventory.

This is also why many people need loans to grow. You cannot sustain any type of growth without increasing your inventory year after year.
 
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Hyrum

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One thing that wasn't mentioned in the article was if there would be any changes to the "Reasonable Compensation" clause. Basically, if all my peers are making 120k a year, I can't pay myself 40k a year and claim the rest as a shareholder dividend to save on payroll taxes. If this gets implemented, I would expect the IRS to scrutinize a lot more S corps with a high dividend to payroll ratio since dividends would have a much lower tax rate on top of the payroll tax benefit.

So although this would benefit me, like @JScott said this would take a pretty hefty chunk out of governmental revenue so I'm not counting those chickens yet.
 

GeoffP

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Yes, you can't deduct inventory as an expense. You pay taxes on $50k. Your business made $50k and is not down $150k in the books.

If buying inventory was a loss, every business would be losing money because you ALWAYS have inventory.

This is also why many people need loans to grow. You cannot sustain any type of growth without increasing your inventory year after year.
Try telling that to Mary Kay/Amway/Avon peeps. My unfortunate colleagues who service these clients inform me that for some magical reason, many of their direct seller clients purchase as much merchandise as they can fit in the hideous pink Caddy on the theory that it will cause a tax deduction.
 

GeoffP

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The article explains how W2 workers are impacted.



Not sure, but creating an S-Corp is pretty easy and might be worth the organizational shift. You might also avoid CALI's punitive LLC annual tax.
Unfortunately we (being the People's Republic of Californiastan) apply the minimum tax to S-Corps as well. We're just special like that. A straight single owner LLC is usually disregarded for tax purposes. This means that you'd pay the same tax as a sole proprietor.
 
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YoungPadawan

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Must read article regarding Trump's proposed tax plan ...

http://www.forbes.com/sites/anthony...ent-trump-what-does-it-mean-for-your-tax-bill

While I typically don't hold much weight into a politician's promises, this might actually happen with an all-Republican congress and the fact that Trump isn't a politician. If it does, take a look at how it might benefit you.



Since many Fastlaners have S-Corps, including myself, this means I will now pay 15% instead of 40+%.

This is YUGE -- and for Fastlaners doing five and six-figures monthly, a pay raise amounting to thousands which could translate into more spending, more employees, and more capital investment.

For those of us with CORPORATIONS, watching this "promise" evolve or die is something to watch in the coming months/years.
Yuge!
 

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I think it's still too early. Trump's not sworn in yet. Anyway, he's a businessman and he would most likely have business as an efficient tool to bring America roaring back. A big tax cut should then be the order of the day.
 

TheDillon__

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Now more than ever it's important to become a fastlaner ASAP to take advantage of the lower taxes. Who knows how long it will be this low until they go back up again. I don't want to get too much into politics but I just have to mention this. Bernie Sanders did say that a 90 percent tax rate on the wealthiest Americans is not too high. Whether or not you become fastlane can depend what the tax rates are. Literally.

EDIT: Also watch what accounting method you're using for taxes because for example you might not be able to write it off as an expense until it's sold. Your business could go down in flames before even getting off the ground.
I smacked my screen because of your post - thanks friend.
 

Owner2Millions

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So is this confirmed yet? I would like to know before I start my company and Im deciding between a C corp or S corp......I stay in IL and a LLC is $615 for the state fee plus 75 for the EIN smh......
 

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So is this confirmed yet? I would like to know before I start my company and Im deciding between a C corp or S corp......I stay in IL and a LLC is $615 for the state fee plus 75 for the EIN smh......

Just start the damn business and make a sale. This isn't worth putting off starting your business over.

And why the hell are you considering starting out as a C corp? Do you plan on having over 100 investors from day 1? Do you like paying more taxes (double tax)? Do you like filling out tons of paperwork?

NOT ACCOUNTING ADVICE:
Individuals (not necessarily you) are better off forming as an S corp that way they can write loses off on their tax return, at least in the beginning when you lose money. It's also a pain in the a$$ to switch from C corp to LLC, but not from LLC to C corp.


I do not provide tax or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax or accounting advice. You should consult your own tax and accounting advisors before engaging in any transaction or business.
 
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