How to legally pay no taxes... possible?

[RazorCut]

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).

 

[RazorCut]

Oh and @Contrarian I do agree with you on a lot of what you wrote in your post.

 

[Niptuck MD]

And we pay to protect them. They spend almost nothing on military.

Why should they? they dont cause any problems around the world for the sake of a few greedy bastards that take money from american businessmen and hard working proles to fund their games....

They dont need a military like america. America needs a military now more then ever because they are the biggest shitstirrers in the world. The scumbags in DC need Troops to protect their Arses.

Anyway back to the OP post. I hope the OP gets some good counsel from reputable professionals in both the legal and accounting realms.

 

[Rabby]

Blows my mind how some people on this forum are so ignorant on taxes and what they do and what PRIVILEGES they get out of it. Believe it or not, entrepreneurship is a privilege. Be glad you have the opportunity of a capitalist system. Perhaps, you'd like to work 12-16 hour days of backbreaking work for crumbs in some poor country.

No, stop. I can't get drawn into a debate over rights... I can't... aw for crying out loud. Look, you have the right to do anything you want, so long as you do not directly harm another individual. You live in the united States, for heaven's sake. The States were founded on the argument that your right to your life, liberty, and property are inherent, inseparable, so obvious as to require no further argument.

But this is not a statement about politics or government. It is about entrepreneurship. You were born with the right to be an entrepreneur. Probably the inclination too, if my observations of the human condition are worth anything. The only things a government or another person can do to those rights are (1) defend them, (2) interfere with them, or (3) attempt to take them away.

Obviously the job of government is to defend your rights, so please do not ask for permission to be an entrepreneur.

I'm having an allergic reaction suddenly. I'm going out to buy 40 copies of The Road To Serfdom and scrub myself with them.

 

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[CareCPA]

....
But, a hotel would be a very tax advantageous business to own. You have to admit.

It would. Plus it would give you a massive amount of real property to leverage for future endeavors.
Also, paying tax on fringe benefits is still cheaper than paying for those items with after-tax dollars.

 

[Raoul Duke]

@MJ DeMarco @Vigilante

Can either of you separate the noise from this thread? I believe this thread was going notable status. Until a few folks started bringing in personal beliefs/attacks.

I was learning a great deal. Thank you @AgainstAllOdds @Kak & @CareCPA.

 

[CareCPA]

So an example company brings in 200k in revenue, 100k in expenses, 100k profit. It has no employees and is structured as an S-Corp (LLC’s can elect to be taxed as an S-Corp). The owner pays himself 25k salary and is taxed only on that. He takes the 75k remaining as dividends tax free. So you pay 5-8 grand or so in taxes and enjoy the rest. If you make 200k and pay it as dividends then you get the 175k tax free. That’s big money.

No. No no no.
Yes, the distribution of the $75k is tax-free, but you still pay income tax on the profit in the year it is earned (in this case, presumably, the same $75k). An S Corp is still a passthrough entity, meaning any income from the S Corp still flows through to your individual tax return. The biggest tax savings comes from not having to pay FICA/Self-employment on those additional earnings.

 

[Raoul Duke]

After reading a lot of the nonsense on here (and several good posts as well), I thought I'd actually chime in on the topic.

Taxation can be a very complicated subject to address, especially when you consider international factors.

For example, all countries in the world fall into 4 tiers for personal taxation. Keep in mind, this ONLY relates to your personal taxation based on your RESIDENCY, not necessarily your citizenship:

• Tier one: zero tax. This would be your tax havens like Cayman Islands and Bermuda. They have no tax on any income source for residents.
• Tier two: residency based territorial tax. This would be places like Panama, Hong Kong and Singapore. They only tax local income and only when resident in the country. For example, a Panamanian who lives in Panama but derives all of his income from outside Panama does not need to report or pay anything to Panama.
• Tier three: (this is about 90% of the world). residency based worldwide tax. Nearly the whole world uses this system. Basically if you are resident in that country, you pay tax on worldwide income.
• Tier four: citizenship based worldwide tax. There are only 2 countries in the world in this category: The US and Eritrea.

The situation further complicates as you may guess based on your citizenship and residency. For example, a Canadian that spends most of his time abroad may still owe tax in Canada if he has not renounced his residency status (not citizenship). However, if that Canadian renounced his Canadian residency, he would then need to consider how many days he spends in a particular country, any other residency he may have acquired, or possibly other connecting factors or nexus.

Further complication this for entrepreneurs would be CFC rules (controlled foreign corporation), subpart F income rules (for Americans or US permanent residents), GILTI (global intangible low taxed income rules - Americans and residents), country or state nexus, etc.

Another can of worms in which the rabbit hole goes deep: Perpetual Traveler.

 

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[GlobalWealth]

I believe this is my first post.
I would just like to say that most of the advice present in this thread is rather useless for OP as he is portuguese (takes one to know one) and our tax system is different from the U.S. as we don’t have federal taxes, etc.
I do have to say that it is very tradicional portuguese to want to avoid taxes all.

He is Portuguese, but specifically asked about US tax questions and the IRS.

 

[OlivierMo]

The irony here is that in the middle ages when the tax collector came the people knew they were being robbed. They paid out of a clear and present danger of direct violence that would and did happen in the event of immediate non payment.

Nowadays people are brainwashed to believe it is their moral duty for the greater good. The weak minded even argue for the morality of taxation as a higher moral authority.

Media is a powerful tool.

Amen brothers. Nobody thinks in terms of efficiency and productivity of government, waste, etc... They've been zombified by politicians, the bureaucratic class and the technocrats. It's fairly pathetic.

 

[red_cents]

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).

Good afternoon. I'd like to throw in my 2 cents on your post, for you and anyone else interested on this subject.

Firstly, it has been well argued that all income tax acts are entirely unconstitutional. It does not matter if you live in the US, Canada, UK, Australia or New Zealand. In fact, I suspect income tax acts around the world are all built following the same statutory guidelines.
Aaron Russo's "America: Freedom to Fascism" documentary is a must watch, if you haven't seen it, as it shines a light on a perspective most people are not even aware of. Food for thought if you will...

You've certainly heard the rich don't pay taxes. That's the job of the working class and the uninitiated and/or the ignorant, right? Or so it seems. How is this achieved? By hiding money and/or income oversees and in other countries? Maybe for some. Does it work? Again, maybe for some. The IRS has tentacles all over the world so I would recommend you really educate yourself before you take steps because you might unknowingly be stepping into a field littered with landmines. There are many ways of avoiding the tax man. Some are nonsensical; others very plausible.

Let's look at a fun, hypothetical scenario. Meet John.

John is looking to protect his wages from the tax man. In fact, John wants to protect his income from everyone including law suits, angry spouses and yes, the strong arm of the tax man too.

John knows his wages can be levied and taken away from him.

John is a pretty smart guy. He was lucky to learn asset protection strategies by a friend of his, nicknamed red_cents. As a result, his car is in a trust. His home is in a trust. His dog is in a trust. He owns nothing. Nothing of his can be taken away from him as he literally owns nothing. He could get married and divorced without worrying about his ex-wife taking half his stuff. Probate can't touch his estate if he dies. Everything goes to his beneficiaries. He's got some great trustees and sleeps well at night.

John decides to have his wages 100% levied by an entity he owes money too, for work done in the past. A contract is drafted and the appropriate steps are taken with the employer. Now John received NOTHING of his wages. They are sucked up before any deduction is taken out. John has to borrow money from the entity (or another entity) and goes further into debt. His wages now can never be touched (because they are already 100% levied) and he MAKES NOTHING, year after year. Has he lives, he BORROWS more and more, effectively growing the debt he owes to the entity. What taxes are to be paid if he takes nothing home? Food for thought...

With all this said, I would invite you to consider new ways at looking how money flows through your life and finances. Anytime your LEGAL NAME shows up in the PUBLIC somewhere, it is a potential LIABILITY to you.

I would advise to OWN NOTHING but CONTROL EVERYTHING.

A book I would recommend is: The art of passing the buck VOL I. It is a peek into how PRIVATE legacy trust are setup by the rich to avoid taxes, protect assets and pass everything they work for, onto their children.

red_cents

 

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[Tom.V]

That's pretty great. I wouldn't mind living in the Caribbean anyways. I'd happily make it my primary residence and totally comply with that.

Do either you or @GIlman know of any good resources out there that would enable me to really educate myself on this particular plan? Beyond the obvious of just googling.

Same. I have reached out to several law firms at this point and awaiting responses. Had a few recommendations from friends on this front. Will let you know if I find someone solid to deal with.

 

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[GlobalWealth]

Pardon the ignorance ...

How does that work? Set up a PR C-Corp, and have accountant pay out dividends to shareholders (me) every quarter?

Seems it'd be problematic if it looks like you're taking dividends instead of salary to deliberately avoid taxes on work you do for the corporation...

View attachment 23711

Curious to learn at what point the IRS says "It's okay for you to take dividends based on XYZ criteria (like limited involvement, etc.)." Maybe the answer is don't take a salary for a few years, retain all the cash within the business, and by the time it runs itself without your involvement you can take dividends without the IRS batting an eye.

This has me in a bind; for this new company I won't be paying myself ANYWAY so we can have more cash on hand to grow, BUT I also don't want it to look like we're taking unfair advantage of Act 20.

Honestly you need to talk to a PR attorney. I am not an expert on act 20.

All I know is that I have several friends and clients who went the PR route and only get personal income through dividends.

I think @Tom.V has an attorney contact.

Sent from my VTR-L29 using Tapatalk
[/USER]

 

[Nova]

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?

 

[Rabby]

I keep laughing at the "well what about roads." Hahaha. Ok, but seriously guys, there is nothing wrong with an individual wanting their payments to the government to be nothing, especially when they are starting from nothing. Being obligated to pay taxes by a monopoly on the use of force is actually shitty, just admit it. Even if it might be necessary in some form to ensure your country's continued existence (defense).

That said, step one is income. Keeping 100% of your money by some convoluted trick that takes all of your time... nets you nothing if you're not making anything. Make some income the normal way (I mean, by creating capital assets and renting or selling them), and (step 1.5) hire a CPA. The first time I used a CPA he charged me something like $400 for a business and personal tax return. He saved me $8,000 that year. Later you'll need to do research and maybe find other CPAs and tax lawyers to uncover legitimate strategies, but don't put the cart before the horse.

For out-of-the-country strategies, keep a few things in mind. 1. You'll probably never pay "no tax." Their government runs on something, and someone pays for it. Best case, maybe it's an indirect tax on higher order goods, and so you don't have to think about it. 2. Property rights. If you incorporate in the New Kingdom of Outer Space, it goes almost without saying that you'll have nobody looking after your rights. So either invest in lasers, or just pay the taxes and fees in the jurisdictions where you need your trademarks, copyrights, property ownership, etc acknowledged. Yes, it's a protection racket, sortof, but where's your army? 3. I'm being silly, but it's also true.

 

[Greg R]

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 ^

 

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[Niptuck MD]

Ironically none of those are funded by income tax

He has spoken the truth. YOU HEAR the Truth folks!

Happy New Years @GlobalWealth lol

 

[100ToOne]

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.

 

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[Kak]

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.

 

[SquatchMan]

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.

View attachment 23081

View attachment 23082

Scandinavia during wintertime
View attachment 23083

I think the high level of happiness has more to do with the low crime rate and high quality infrastructure.

 

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[CareCPA]

@AgainstAllOdds @CareCPA @Kak - I lost track of the thread when it went full Lord of the Flies, but RE: using cash basis accounting and putting your money in inventory to reduce income tax:

Here's what I don't understand, and I'm guessing it's because I'm missing something fundamental. If you buy all that inventory before year end, you increase your property tax when you have to report your 12/31 inventory right? Are you really coming out ahead, or are you just decreasing income tax but getting hit with property tax?

Property tax does not exist on a federal level. Do you have a state-specific property tax that you're concerned about?

My general experience is that the threshold is high (or the exemption is high, depending on wording), and that tax is generally low. Usually property taxes target mainly real property (real estate) and higher-value tangible property (i.e. vehicles, heavy machinery, etc). This varies heavily by state. Example: PA does not have a tax on assets, only an income tax.

If you can provide more context, I may be able to help out more.

 

[G-Man]

Property tax does not exist on a federal level. Do you have a state-specific property tax that you're concerned about?

My general experience is that the threshold is high (or the exemption is high, depending on wording), and that tax is generally low. Usually property taxes target mainly real property (real estate) and higher-value tangible property (i.e. vehicles, heavy machinery, etc). This varies heavily by state. Example: PA does not have a tax on assets, only an income tax.

If you can provide more context, I may be able to help out more.

So I’m in TX which is no state income tax but high property tax - I’m so used to working in big companies that I was assuming - but now that you mention threshold, I think inventory value has to be north of a certain relatively high amount before it kicks in

 

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[Longinus]

This. Many anti-tax people don’t realize that taxes also pay for roads, rule of law, a military to keep invaders from plundering your business because there’s no protection etc. etc.

You clearly haven't read the whole (and most interesting part of this) thread.

 

[EvanOkanagan]

How to avoid paying taxes:

Step 1: Acquire a large portfolio of under-valued rental properties in appreciating areas. Make sure you’re timing the market to be near the end of the “slump” phase of the Real Estate cycle so you can buy once values have troughed.

Step 2: During the “recovery” phase of the cycle property values will be increasing— either renovate to add value or simply hold since you bought them at a discount while renting them out to cover expenses.

Step 3: During the “boom” phase of the cycle the values will be at peak, cash up on your properties by refinancing or getting Home Equity Lines of Credit on all of your (now appreciated) properties. You now should have access to hundreds of thousands of dollars (even millions?) and because it’s considered DEBT you won’t be taxed on this money and can spend as you wish.

Step 5: Make sure to lower your rents/increase expenses to show a loss on your properties to avoid paying taxes.

Step 6 (optional): Either move back in to your parents house or move to Vietnam to make the money stretch until old age.

Disclaimer: I have no idea if this plan will work and am not liable for any legal issues that ensue. Let me know if you try it though-seems legit!

 

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[CareCPA]

Is there any way you can explain it a little more? At first you agree with him, but then you recommend using a different method than what he seemed to be making look like the better one. If that makes sense lol

It's a timing issue.
If you buy the inventory this year, and sell it next year, you're just manipulating when the cost is recognized ("manipulate" in this sense is not intended to be negative).

This means at some point, you can expect a large reversal. What happens when you get to the end of 2020, need to buy $3 million in inventory to bring your cash-basis income to $0, but you only have $2 million in cash (from any number of reasons - delayed payouts from holiday sales, taking distributions from the company, etc)? Now you've accidentally recognized $1 million in income. Think of the effective tax rate on that.

Assuming I'm US-based, and have to pay taxes at some point, I'd rather pay for several years at lower rates than in one year at a high rate. This is personal preference.

I've been reading up on this a lot lately, and I have not gone back to re-read the thread, but some clarifications: you can only really use cash-basis for taxes as a retailer if your financials are cash-basis. If you are using accrual-basis for financials (i.e. recognizing COGS when item is sold so you can evaluate profitability, and tracking inventory on your balance sheet), then it's difficult to get away with.

I should go back through my responses here to make sure I haven't made any claims otherwise.

 

[jon.M]

The thing is the US was never intended to be a democracy. The great men that founded this nation were well aware of the perils of democracy.

Even to this day the US is technically a Constitutional Republic, however, the law of the land has been subverted.

It's ironic that the 13 colonies that revolted against Britain are some of the most liberal and heavily taxed states in the nation.

Once again history repeats itself.

It's the most beautiful idea ever. Really, it's beautiful.

If it was the same today, I wouldn't even think about it. I'd take a flight over to you guys and do anything to become a proud American.

Democracy is a tyranny of the majority.

 

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[jpanarra]

I agree... As long as you are in a low tax state, the benefits of being able to conduct business from the USA currently outweigh the costs of doing business here, taxes.

Hire a good accountant and do everything you can to minimize your tax burden legally... Why? Because why look over your shoulder?

Now, even though I have this view, of just take care of it... I am about the most anti-taxation voter on the face of the earth. I view the government with similar disdain that I would an organized crime ring.

An organized crime ring might have slightly more ethical morals than the people in office today...

That being said I always pay my dues to uncle sam. All of my life i've done my own taxes but 2019 will be different, I'll have to start hiring an accountant to take care of it because I'm started to get confused with what can be written off and such with the different income streams I have.

I'm curious how much do you guys recommend I put down for budgeting an accountant for 2019. It seems to be a range of 1k to 2.5k which usually pays for itself in the tax writeoffs they can find. Does that sound right to you?

 

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[Niptuck MD]

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.

Superb

 

[Rabby]

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.

 

[sparechange]

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.