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HOT TOPIC How to legally pay no taxes... possible?

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SquatchMan

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This varies so much by country, and business model, that there isn't any good general advice.

You need to hire an accountant. And one that specializes in offshoring since most accountants have a very basic understanding of it. I'm gonna go out on a limb and say that you probably need to be in the top tax bracket and paying at least $xxx,xxx in taxes for it to be worth the time, money, and hassle. Offshore specialists aren't cheap.
 

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Rabby

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Own a hotel and live in the penthouse... Think of the write off's.
Good point. Build your lifestyle into the business, so that things you might perhaps pay for as an individual are legitimate expenses. Doesn't work with everything, but some are even protected in the tax codes this way.
 
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sparechange

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Funny thing I learned about taxes, in Alberta if you buy a Ferrari or Lamborghini you pay 5% sales tax on the car, so $400k car i.e would be $20k, and if you head to British Colombia we pay a luxury tax of 15% ($60k)

Asked about that at a dealership, heard of people leasing and doing tax write offs on these cars...... random post but somewhat related lol, gotta learn about stuff like that.
 

GlobalWealth

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I don't have a problem paying taxes. I want to minimize taxes I pay, but believe I have benefited greatly from entrepreneurship in the greatest economic opportunistic system in the world. I have paid a lot of taxes. I literally just caught some things up and paid what would be the equivalent of more than a great salary... but that was for a few years of catch-up. I believe in what Kyosaki said when he was facing a large tax bill... he just had to go make more. I see no ceiling in what I can earn.

People ask me all the time about Amazon fees. Amazon fees? Who cares? It is only a percentage of what I MAKE on Amazon. Same is true to a degree with taxes. I could be so blessed to have such a large tax bill. Means I am doing something right. So... taxes? You're worried about taxes? Go make more money. Go pay an accountant to handle your tax strategy.

There are a few on the forum whose whole existence is to avoid taxes. Personally, I'd rather live on the Gulf Coast of Florida and pay some taxes than live in some third world sh*thole but be "tax free." To each his own.
Florida is a 3rd world shit hole.... [emoji23]

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GlobalWealth

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So you know all those roads, and schools, and 911 service you enjoy so much? They all come from taxes. I suggest just paying taxes from a moral perspective. Now if you want to lower your taxes, I think that’s a different story.
Ironically none of those are funded by income tax

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GlobalWealth

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What is funded by income tax?

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Interest on government debt, military spending and social services are the biggest categories.

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sparechange

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Here in Canada my income taxes support people scamming welfare / disability and refugees.......

woops are we getting political herE?
 

Rabby

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Interest on government debt, military spending and social services are the biggest categories.

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Worth noting, nitty detail point: interest on government debt includes bonds that are used to build roads, so if the income tax doesn't directly pay for roads (and each state could potentially be different on this, for states with an income tax), then it may finance roads through bond issues, which are then paid back using income tax.
 

AgainstAllOdds

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Taxation is theft. Plain and simple. It's getting to the point where the government takes almost twice what you do.

Let's say you make $100,000 a year and live in California. You're self employed selling on Amazon. Then here's how your income taxes look:
  • $100,000 = what you earned gross margin
  • - 14,130 = self-employment tax
  • - 16,410 = federal income tax
  • - 6,760 = state income tax
$62,700. That's what you really made.

Now, you go out and spend that money. You're taxed an additional 7.25% "sales tax".

$58,145 of buying power. That's what your "6-figure income" really gets you.

Meanwhile, here's how much the government makes. Let's say you did $300k in revenue, and your product costs were roughly $200k. With the new 10% tax on China, you're paying 15% import tax on average. So:
  • $14,130 = Self-Employment Tax
  • $16,410 = Federal Income Tax
  • $6,760 = State income Tax
  • $4,702 = Sales Tax on your buying power
  • $30,000 = Import Tariffs
  • $21,750 = Sales tax charged to your customers
$93,752. That's the amount of money that you created for the government.

Meanwhile, you have $58,145. For every $1 you made, the government took in $1.62.

If that's not F*cked, then I don't know what is.

The American Revolution was ignited by "taxation without representation" - more specifically a few taxes that the colonies were expected to pay in order to recoup 1/3rd of the cost of the French and Indian War (a war the British had to pay to protect colonists).

Do you know what the taxes were at that time?

How high did taxes go in order to piss everyone off to the point of telling Britain to go F*ck itself?

1-3%. 3% if you were more in the south. 1% if you were more in the north.

Now, we've gone on to accept the numbers above as standard.

It's a new form of slavery. Except now, the master has thrown in enough math to confuse the masses.
 

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AgainstAllOdds

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To answer your original question, as @Kak said, if you make money, you have to pay taxes.

However, if you put nothing back in your pocket, then there are ways to get around paying taxes and instead investing in your business.

Product businesses that average under $1,000,000 in annual revenue are allowed to use cash based accounting.

So... it's to your benefit to empty your books as much as possible end of every year. An easy way to do this is to purchase a lot more product. December 30th is when you should be sending as many wires as possible overseas for purchases and stocking up for the new year.

You repeat this year over year. Your bank account doesn't grow, but your inventory levels and balance sheet does.

Finally, when you cross the $1MM revenue threshold, that's when you hire an accountant to take it a step further, or start paying taxes. At $1MM in revenue, you should have enough margin even post tax to pay yourself handsomely.

Or, you might want to create different businesses for different segments of your business, continuously reinvest. And then when ready, sell off the business for a significantly lower capital gains payment.
 

Greg R

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To answer your original question, as @Kak said, if you make money, you have to pay taxes.

However, if you put nothing back in your pocket, then there are ways to get around paying taxes and instead investing in your business.

Product businesses that average under $1,000,000 in annual revenue are allowed to use cash based accounting.

So... it's to your benefit to empty your books as much as possible end of every year. An easy way to do this is to purchase a lot more product. December 30th is when you should be sending as many wires as possible overseas for purchases and stocking up for the new year.

You repeat this year over year. Your bank account doesn't grow, but your inventory levels and balance sheet does.

Finally, when you cross the $1MM revenue threshold, that's when you hire an accountant to take it a step further, or start paying taxes. At $1MM in revenue, you should have enough margin even post tax to pay yourself handsomely.

Or, you might want to create different businesses for different segments of your business, continuously reinvest. And then when ready, sell off the business for a significantly lower capital gains payment.
Love this ^
 

CareCPA

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Product businesses that average under $1,000,000 in annual revenue are allowed to use cash based accounting.
This changed substantially with the new tax law. I believe the threshold is now $25 million for cash basis.
 

CareCPA

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Own a hotel and live in the penthouse... Think of the write off's.

Vehicle, food, servants, recreation, travel, home.

This gets you about as close to only taxed on what you retain as possible.
I know you're being facetious, but in case anyone reads this and thinks it's how it really works, the benefits from the corp to you would most likely be taxed as income to you.
 

markK

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Although, it's not income tax, it's still a revenue stream.
Here's the breakdown of the Fuel Tax on a gallon of gas purchased in Missouri, USA.
Federal Fuel Tax
  • 18.4 cents per gallon on gasoline
  • 24.2 cents per gallon on diesel
Missouri Fuel Tax
  • 17 cents per gallon - gasoline and diesel
  • 2.55 cents goes to cities
  • 2 cents goes to counties
  • 12.45 cents goes to MoDOT (Missouri Department of Transportation)
So, about $0.35 per gallon is extracted for federal and state usage.
 

Arun Siva

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RazorCut

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So, about $0.35 per gallon is extracted for federal and state usage.
lol You guys make me laugh. We pay around $4.90 IN TAX for a single UK gallon of Petrol (Gas).
 

Yzn

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Does the money go to building your country and it's people?

If so, taxes shouldn't be an issue.

If it's like in my country a gang of high ranking officials get it then spend it gambling, then screw them, find a way to legally not pay.

Just my opinion.
 

GoGetter24

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We pay around $4.90 IN TAX for a single UK gallon of Petrol (Gas)
Yeah your European governments take the cake for "parasitic scum thugs".
If I lived in the UK my only plan would be how to get out before the state found an excuse to arrest me for something I said, I got stabbed by streetscum (who wouldn't get arrested), or I got blown up by terrorists.

But, OP, on topic: look up "nomad capitalist". He's a specialist in what you're talking about.
 

RazorCut

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Yeah your European governments take the cake for "parasitic scum thugs".
If I lived in the UK my only plan would be how to get out before the state found an excuse to arrest me for something I said, I got stabbed by streetscum (who wouldn't get arrested), or I got blown up by terrorists.
It always fascinates me how people from other countries see the UK from the outside looking in. The US only ranks 1 place above the UK in the World Happiness report and we both only just scrap into the top 20.

It's one thing to want to pay as little tax as possible, quite another to trade money for happiness. What I find most strange though is that 7 out of the top 6 places in the Happiness report are some of the coldest countries to live in (mostly Nordic countries). And they rank at the top pretty consistently year after year. They also have some of the highest rates of tax. Personally I loathe the cold and and short days.

2019-01-01_09-31-16.jpg

World Happiness Report 2018.jpg

Scandinavia during wintertime

2019-01-01_09-20-43.jpg
 

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GlobalWealth

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Taxation is theft. Plain and simple. It's getting to the point where the government takes almost twice what you do.

Let's say you make $100,000 a year and live in California. You're self employed selling on Amazon. Then here's how your income taxes look:
  • $100,000 = what you earned gross margin
  • - 14,130 = self-employment tax
  • - 16,410 = federal income tax
  • - 6,760 = state income tax
$62,700. That's what you really made.

Now, you go out and spend that money. You're taxed an additional 7.25% "sales tax".

$58,145 of buying power. That's what your "6-figure income" really gets you.

Meanwhile, here's how much the government makes. Let's say you did $300k in revenue, and your product costs were roughly $200k. With the new 10% tax on China, you're paying 15% import tax on average. So:
  • $14,130 = Self-Employment Tax
  • $16,410 = Federal Income Tax
  • $6,760 = State income Tax
  • $4,702 = Sales Tax on your buying power
  • $30,000 = Import Tariffs
  • $21,750 = Sales tax charged to your customers
$93,752. That's the amount of money that you created for the government.

Meanwhile, you have $58,145. For every $1 you made, the government took in $1.62.

If that's not f*cked, then I don't know what is.

The American Revolution was ignited by "taxation without representation" - more specifically a few taxes that the colonies were expected to pay in order to recoup 1/3rd of the cost of the French and Indian War (a war the British had to pay to protect colonists).

Do you know what the taxes were at that time?

How high did taxes go in order to piss everyone off to the point of telling Britain to go f*ck itself?

1-3%. 3% if you were more in the south. 1% if you were more in the north.

Now, we've gone on to accept the numbers above as standard.

It's a new form of slavery. Except now, the master has thrown in enough math to confuse the masses.
Preach brother

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OlivierMo

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Taxation is a necessary part of modern life. I agree that tax money can be (and often is) mis-spent which can lead you to look at reducing your tax payments, but looking at paying no tax whatsoever is frankly pretty disgusting.

Do you use public roads, hospitals, schools, fire and police departments? Who do you think pays for these services?
Well taxation was there in the middle ages to finance the aristocracy in exchange for protection. Nothing really modern. In some countries like France it's become quasi "slavery" for the State. When your body and brains are taxed so much it's a new form of "slavery" since your labor and fruits of it aren't even your own, but are used to finance a bureaucratic class.
 

Nova

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Well taxation was there in the middle ages to finance the aristocracy in exchange for protection. Nothing really modern.
There are modern day parallels to this, with taxation (partly) financing the government to provide emergency services and militarised defence.
 

Rivoli

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I'm at a point in my business where I need to start worrying about taxes.

From what I've learned about IRS and IRC, the best way to legally pay no taxes is to either report zero net profit by balancing your expenses or open business in a country where there are no taxes.

Setting up business in a country where there are no taxes makes taxation simpler, but complicates your legal obligations. For example, the Principality of Monaco charges no personal income or business taxes for most business types, but to be considered a resident, you have to live there for 6 months and 1 day out of the year which is cumbersome.

On the other hand, reporting zero net profit by balancing expenses is more generally applicable, but we're faced with the challenge of where to put our money, when there are no more inescapable business expenses.

I was hoping you guys could provide information about countries where there are no taxes and their legal obligations (if any) and what flexible expenses could a business incur that would put the money somewhere we could 1.) easily access and 2.) wouldn't be as harshly taxed (or not at all).
Paying a little taxes is a good thing man
That’s what banks look at
 

biophase

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So... it's to your benefit to empty your books as much as possible end of every year. An easy way to do this is to purchase a lot more product. December 30th is when you should be sending as many wires as possible overseas for purchases and stocking up for the new year.

You repeat this year over year. Your bank account doesn't grow, but your inventory levels and balance sheet does.
I don't think that inventory is counted under this. If you count inventory purchased on a wire sent on Dec 31st, then wouldn't you need to add that inventory into your COGS calculation on that day?
 

Vigilante

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I don't think that inventory is counted under this. If you count inventory purchased on a wire sent on Dec 31st, then wouldn't you need to add that inventory into your COGS calculation on that day?
Yes
 

MJ DeMarco

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I don't think that inventory is counted under this. If you count inventory purchased on a wire sent on Dec 31st, then wouldn't you need to add that inventory into your COGS calculation on that day?
I think you're talking about two different accounting methods. Cash is the former, Accrual (COGS) is the later. You have to pick one ... you can't expense $10,000 in product and then again add it later as a COGS expense.
 

AgainstAllOdds

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I don't think that inventory is counted under this. If you count inventory purchased on a wire sent on Dec 31st, then wouldn't you need to add that inventory into your COGS calculation on that day?
I think you're talking about two different accounting methods. Cash is the former, Accrual (COGS) is the later. You have to pick one ... you can't expense $10,000 in product and then again add it later as a COGS expense.
MJ hit it right on point.

They're two different forms of accounting, cash-based accounting being extremely favorable to businesses in a growth stage (and why larger corporations can't use it).

View: https://www.youtube.com/watch?v=FfdpupKByiU


Here's an extremely simplified video, but it captures the general gist. You can plan ahead and minimize your tax liability while maximizing your growth.

To add onto this point, here's why these accounting methods matter (note: this is primarily for other users since I'm sure @biophase already gets this):

Let's say you make 50% returns cash on cash per year.

Under a system where you're reinvesting everything, here's what you make using each accounting method.

Cash Based Accounting
  • Year 1: $100,000 starting bankroll.
  • Year 2: $150,000 in cash or inventory equivalents.
  • Year 3: $225,000 in cash or inventory equivalents.
  • ...
  • Year 10: $3,844,336 in cash or inventory equivalents.
Accrual Based Accounting (Assuming 25% effective tax rate)
  • Year 1: $100,000 starting bankroll.
  • Year 2: $137,500 in cash.
  • Year 3: $189,062.5 in cash.
  • ...
  • Year 10: $1,756,808 in cash.

Year 10, you decide to stop investing and cash in.

Cash Based Accounting:
$3,844,336 * 50% = $1,922,168 in profit. You leave this amount in your account, reinvest the rest in inventory so this is the only amount taxed. Taxed at let's say even half, you're left with $961,084 in take home profit.

Accrual Based Accounting
$1,756,808 * 50% profit margin = $878,404. Your tax rate is still super high. Let's say 40%. Your take home is $527,042.40

Obviously these examples are extreme, but they hit the point home: if you're reinvesting in your business, you should not be paying taxes on that amount that stays in the business. You should be paying on the amount that you take out and utilize, meanwhile allowing the "investment fund" to keep growing without taking a hit.

@CareCPA - hopefully I didn't miss anything.
 

Kak

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I know you're being facetious, but in case anyone reads this and thinks it's how it really works, the benefits from the corp to you would most likely be taxed as income to you.
Yep, that is why I said this...

The only real way to pay no tax is to make no money.
But, a hotel would be a very tax advantageous business to own. You have to admit.
 

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