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How to legally pay no taxes... possible?

biophase

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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.

So in the CASH scenario, I'm still not quite understanding.

Let's say I start with $0 and on credit buy $1000 in widgets. I sell it all for $2000. Now I have $1000 in my bank account on Dec 30th and no inventory at all. I have realized a $1000 profit correct?

Scenario 1:
On Dec 31st, I decide to buy another $1000 of inventory with the $1000 in my bank account and instantly receive the inventory. On Jan 1st, my business has $0 in its bank account and $1000 in widgets.

Scenario 2:
I do nothing on Dec 31st. On Jan 1st, my business has $1000 in its bank account and no inventory.

In my mind, my business still made $1000 and I will be paying taxes on the $1000 come April 15th.

Are you telling me that this is not the case? Are you saying that in Scenario 1, my business made no money?
 
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biophase

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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.
In your example it seems like you are saying that the money you use for inventory is counted as an expense and therefore lowers your taxes for the year. I don't believe that is correct. You can't just buy inventory to reduce your profit for the year. Inventory is an asset and not counted as an expense.
 
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Contrarian

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There are literally dozens of countries in the world where you can live and pay no (or minimal) taxes on production. And most of them are far from being shitholes. In Europe alone there are multiple options: Malta, Cyprus, Monaco, Andorra, Portugal, to name a few.

Hong Kong, one of the greatest cities on earth, doesn't tax income from outside Hong Kong for either individuals or businesses. So yes, you can even live tax free in the Asian equivalent of NY or London.

The media-government complex does a great job of convincing Westerners that life outside the borders is cruel, uncivilized and dangerous. Of course they do: their fleecing operations depend on keeping the farm animals inside the gates.

Yet that's far from the reality. Whenever I travel to the US or back "home" to the UK (which no longer feels like home to me), it feels like I'm entering an open air prison. I think the worst had to be waiting in line at passport control at Newark, being herded down the line like sheep for hours while being force fed CNN propaganda from omnipresent TVs.

In both countries, the constant indoctrination is palpable everywhere, which is something you just don't see in most places. I didn't really notice it before I left.

Yet neither country had an income tax at all, until the early 20th century. An ordinary person would almost never interact with the government at all, or even care about them or who was in power. Supposedly taxes are the price of civilization, but I struggle to see how the West was more civilized after World War I than before it. If you ask me, taxes (and acceptance of their legitimacy) are the biggest evil in the world right now, because they make all the other great evils possible.

Truth is, when the Berlin Wall fell, communism didn't die with it - it just moved west.

The 21st century, when it fully arrives, will look very different to the world we have today. Governments (especially democratic governments) will always trend towards taxing and controlling as much as they can possibly get away with. And for most of the 20th century, they had the perfect conditions for it - manufacturing-based industry which is rooted to one place, little to no competition outside the borders, and a compliant citizenry who didn't have the internet to offer alternative views.

Yet most work now is knowledge work, and geography provides few to no barriers anymore. Global mobility is available to anyone with a brain who wants it. Smart governments understand that, and offer incentives to the best and brightest to go and live there. Those countries become much richer, quickly, as a result.

The big western governments now look like very much the cranky senile uncle, demanding that things be one way even as reality says something else. Think that wealth, prosperity and security is still going to be there in 20 years? I don't. I don't want to be anywhere near Western Europe or North America in 20 years. It gives me no pleasure to say that, but I truly believe we'll be the new Latinos/Eastern Europeans/Indians - leaving home to seek better opportunity elsewhere. Better to get a headstart now, before they close the gates to the masses.

Every factor that made Western Civilization great either no longer exists, or is being killed off as we speak (usually by those same governments who want all your money). Superficially, it looks the same, but it's not the same civilization you grew up in. And only inertia is keeping it alive.

On a practical note. I'll be moving here later in the year, to Limassol, Cyprus:

delmar-limassol2.jpg


Limassol_Marina-630x420.jpg


Limassol-Promanade-2.jpg


Total shithole right? Or not.

I earned more money last year than I've ever earned before, living in the UK. And I'm on track to make 5x+ more this year. And I get to keep ALL of it. Every cent is mine.

But do you know what the greatest gift of leaving the gates is? It's not the money. It's peace of mind.

It's all the forms I don't have to fill in anymore.

It's the extortion demands that don't arrive in the mail and make me angry.

It's being completely detached from all the political bullshit and knowing I don't have to care anymore.

It's being able to do basically whatever I want and being left alone without worrying about traffic cops, the law, or omnipresent CCTV.

It's knowing I can speak my mind on any topic at any time and not having to worry about there being consequences.

And it's knowing my future is no longer tied to the fortunes of a slowly collapsing civilization.

It's also easy to meet some really great and interesting people when you live in a tax haven. Every single one of my friends here is some kind of entrepreneur and some shade of libertarian. I didn't plan it that way, it just happened. I didn't know anyone like that back in the UK.

There's also nothing that says you have to live in a place 12 months a year. You just have to live there long enough to be tax resident, and you can spend the rest of the time wherever you want. Perpetual travel doesn't appeal to me either, but living in two or three countries throughout the year is my eventual plan.

Talk to @GlobalWealth , he'll hook you up.

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.

I always find it a very convenient coincidence that those "Happiness reports" are basically an advertorial for "social democracy". There are shitloads of Swedes and Danes here fleeing the same. Biased sample I know, but none of them have a good word to say about Scandinavia, the level of happiness there, or its future.
 

SquatchMan

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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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RazorCut

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I always find it a very convenient coincidence that those "Happiness reports" are basically an advertorial for "social democracy". There are sh*tloads of Swedes and Danes here fleeing the same. Biased sample I know, but none of them have a good word to say about Scandinavia, the level of happiness there, or its future.

Yes as you say it's not really a sample, it is a group of individuals who are dis-satisfied with their lot otherwise they wouldn't be in Malta so heavily skewed against their mother country.

So we can discount them as exceptions and certainly not a representative sample. I know by your username you like to play devils advocate but to say that a report is basically an advertorial for "social democracy" without some solid foundations to back up that statement is ridiculous. Not everything in life is a conspiracy to keep mankind in his hierarchical place. Not everything is related to the Free Masons, Bilderberg, the Illuminati, and the Black Pope.

It's like Gogetter's post:

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.

A poisonous opinion without any quoted form of credible facts most probably based on tabloid press and sensationalist news coverage. Yes you will get arrested for incitement if you are encouraging, instigating, or threatening racial hatred, terrorism and homophobic views etc.. And do you know what? I actually sleep better at night knowing those laws exist as do a lot of other people. I certainly don't fear I am going to be arrested because of them. Why would you?

At the moment we have a spike in knife crime in certain major cities. In the main due to the fact that we don't have huge numbers of guns on the streets.

However it has to be taken into context. Although knife crime is on the increase after years of falling statistics it's relatively unusual for a violent incident to involve a knife, and rarer still for someone to need hospital treatment. Most violence in the UK is caused by people kicking, hitting, shoving or slapping, sometimes during a coherent fight, but most often when drunk (alcohol abuse being a true British failing).

On the subject of terrorism:

We have faced terrorism here in the UK since the 70's. However, again the probability of dying in a terrorist incident is minimal and falls well below countries such as the USA and France.

2019-01-02_09.jpg

I'm all for debate but can we keep it factual so it actually provides some use rather than only being fit for Landfill?
 

RazorCut

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

Contrarian

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Yes as you say it's not really a sample, it is a group of individuals who are dis-satisfied with their lot otherwise they wouldn't be in Malta so heavily skewed against their mother country.

So we can discount them as exceptions and certainly not a representative sample. I know by your username you like to play devils advocate but to say that a report is basically an advertorial for "social democracy" without some solid foundations to back up that statement is ridiculous. Not everything in life is a conspiracy to keep mankind in his hierarchical place. Not everything is related to the Free Masons, Bilderberg, the Illuminati, and the Black Pope.

That's true. It's also the case that when the "official" evidence doesn't jive with anecdotal experience and what you can see with your own two eyes, it's usually because someone's trying to pull the wool over your eyes.

The World Happiness Report is created by the "Sustainable Development Solutions Network" and the "Global Happiness Council".

From the SDSN website:

"The UN Sustainable Development Solutions Network (SDSN) has been operating since 2012 under the auspices of the UN Secretary-General. SDSN mobilizes global scientific and technological expertise to promote practical solutions for sustainable development, including the implementation of the Sustainable Development Goals (SDGs) and the Paris Climate Agreement."

From the GHC report:

"It’s no accident, for example, that the Scandinavian countries routinely top the list of happiest countries in the annual World Happiness Report. These countries are prosperous, healthy, and trusting. Corruption is low. Generosity is high. Individuals feel empowered to make key life choices. The social welfare state limits the inequalities between wealth and poverty, and delivers public services to all citizens. The rich do not run politics.

On the other hand, in some other high-income countries, the happiness ranking is far lower. Wealth may be high, but the wealth is accompanied by an excessive inequality of income, wealth, and political power. Trust, as a result, is often reduced by high inequalities of income."

And:

"Inequality not only creates suffering among those left behind, but also adds considerable social and political stresses to highly unequal societies. To achieve social inclusion, governments must act as an instrument of the common good, rather than as a source of power for one faction or group within society. When parts of society are deprived of power and prosperity, not only do those particular groups suffer, but society as a whole is inevitably destabilized."

So the agenda becomes clear.

Does the agenda invalidate their report? Not necessarily.

Should their agenda make you suspicious of its findings? Damn right.

As a good Swedish friend of mine said on this very topic, "it's not that Sweden is a happy country, it's just that they've been demoralized into settling for less". There's a concept in Scandinavian society called Tall Poppy Syndrome - which basically boils down to it being socially unacceptable to rise above the average in any way.

So as far as I can tell, Sweden is a fine place to be if you want to be a completely average person with an entirely routine and unremarkable life. Otherwise, perhaps not.

RazorCut said:
It's like Gogetter's post:



A poisonous opinion without any quoted form of credible facts most probably based on tabloid press and sensationalist news coverage. Yes you will get arrested for incitement if you are encouraging, instigating, or threatening racial hatred, terrorism and homophobic views etc.. And do you know what? I actually sleep better at night knowing those laws exist as do a lot of other people. I certainly don't fear I am going to be arrested because of them. Why would you?

I'll just leave these here:

Police Scotland on Twitter

SouthYorkshirePolice on Twitter

Arrests for 'offensive' Twitter and Facebook messages up by a third

RazorCut said:
At the moment we have a spike in knife crime in certain major cities. In the main due to the fact that we don't have huge numbers of guns on the streets.

However it has to be taken into context. Although knife crime is on the increase after years of falling statistics it's relatively unusual for a violent incident to involve a knife, and rarer still for someone to need hospital treatment. Most violence in the UK is caused by people kicking, hitting, shoving or slapping, sometimes during a coherent fight, but most often when drunk (alcohol abuse being a true British failing).

On the subject of terrorism:

We have faced terrorism here in the UK since the 70's. However, again the probability of dying in a terrorist incident is minimal and falls well below countries such as the USA and France.

View attachment 23104

I'm all for debate but can we keep it factual so it actually provides some use rather than only being fit for Landfill?

Agree with your bolded point - mostly. I can describe how the "air", the energy, the vibe, feels different outside of the UK/similar countries. More open, more free, people are happier and focused on their own lives and their families rather than whatever empty political platform or "cause" they're hooked on this month. Could I give you any facts about that? Nope, it's just something intangible that I can sense.

The only place I've ever felt unsafe was in a certain ghetto in Paris I accidentally wandered into. And I grew up in London. So yes, I agree with avoiding hyperbole.

What I'm really interested in are the trends. Is the UK becoming more or less free? More or less socially cohesive? Does it have a brighter or darker future?

I know what I think about that, but I don't have a crystal ball. All I know is that I've lost little and gained massively by leaving, even if my predictions about the downfall of the West never come true.

All said and done, I'm not trying to spark or engage in any kind of debate here. I'm simply painting a picture from my experience that I hope will help people facing a similar decision make a more informed choice. Some of that will be factual and some of it will naturally be subjective.

But everyone has to make their own choices.
 
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NewManRising

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Why not pay your taxes? Why are we encouraging a crime in this forum?
 

NewManRising

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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.
 

Chapas

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I always find it a very convenient coincidence that those "Happiness reports" are basically an advertorial for "social democracy". There are sh*tloads of Swedes and Danes here fleeing the same. Biased sample I know, but none of them have a good word to say about Scandinavia, the level of happiness there, or its future.

THIS! I grew up in Denmark and spent the majority of my life there. Even though I love the country and the taxes I have paid gave me a lot of great things back (like free education, free healthcare etc) then this happiness report is in my opinion pure bullshit. Yes, the 3-4 weeks of summer we usually have is amazing and everyone is happy. But people in the winter time look sooooo depressed. I was one of them for many many years!

Not sure what the happiness report is build on, but I really cannot understand why we keep ranking in the top year after year. Can it be the "low-crime" rates? Seriously doubt it. After living 2 years in Moscow I returned to Copenhagen, Denmark this summer. I live in a pretty good area, and on the SAME night I returned a man was gunned down in the street next to mine. The whole summer there were shootings almost EVERY DAY in Copenhagen! In comparison I almost did not see or hear of any violent crimes in Moscow throughout those 2 years.

Nevertheless, I love Denmark and think it was the best place for me to grow up. But times has changed. Even though I would love to live there again someday, I just know that there are better places for me as an entrepreneur to live and raise a family.
 
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RazorCut

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Yes, the 3-4 weeks of summer we usually have is amazing and everyone is happy. But people in the winter time look sooooo depressed. I was one of them for many many years!

This is why I don't get why Scandinavian countries rank so high. I suffer from SAD (although self-diagnosed) and truly hate the winter months even in the South of England. I think I would jump off a bridge if I lived in Sweden or Denmark.

I don't think the surveys are bullshit. They just focus on areas in society that maybe we as entrepreneurs don't necessarily correlate with. I also think that, apart from a slight rise in anxiety at the time of the incident, most people do not worry overly about being shot or killed Unless they have been directly effected, or are in a social group where this is a real threat (youth gangs, narcotics, crime etc.).

When I posted the report it was more about how taxation (for the general public) does not seem to be a factor in reducing happiness. In fact the ability of high taxation to fund free health, education etc. seems to be a positive.

The only place I've ever felt unsafe was in a certain ghetto in Paris I accidentally wandered into. And I grew up in London. So yes, I agree with avoiding hyperbole.

What I'm really interested in are the trends. Is the UK becoming more or less free? More or less socially cohesive? Does it have a brighter or darker future?

I know what I think about that, but I don't have a crystal ball. All I know is that I've lost little and gained massively by leaving, even if my predictions about the downfall of the West never come true.

I spent some time in Egypt the year after significant unrest. The people in Cairo that depended on the tourist trade were devastated. A tour guide (who specialised in guiding English speaking tourists) was telling me that pretty much only the Brits were visiting and American's had completely abandoned the country. That was 70% of her business.

It was probably due to the fact that the Brits had become accustomed to terrorism after decades of conflict with the IRA over Northern Ireland. I didn't feel any fear or threat but then I wouldn't have seen it coming most likely.

Is the UK becoming more or less free? I think the whole world is becoming less free. I see little cohesiveness in the UK, and the issues around the country being pretty much equally split on Brexit further erode this. I don't think the media help and there seems little to no trust in politicians.

There's also nothing that says you have to live in a place 12 months a year. You just have to live there long enough to be tax resident, and you can spend the rest of the time wherever you want. Perpetual travel doesn't appeal to me either, but living in two or three countries throughout the year is my eventual plan.

If I were single with no children I would certainly move to different countries. Domiciled in several countries is a very attractive proposition. It wouldn't be just for tax purposes however and it certainly wouldn't be further North regardless of what statistics suggest. lol
 

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Yeah, @RazorCut, you're right. The UK is on the up and up, so is Europe, terrorism will slowly peter out and become a thing of the past, the state arresting people for speech or thought crimes never ended badly and will fade out rather than accelerating, your kids have a bright future, the tax rates are completely reasonable for peacetime, the crime is just transient, and if it doesn't fear of the commensurately growing surveillance state is "for people who have things to hide", "it's just as bad everywhere else", and the weather will stop being shit.

Let me guess which generation you're from -- it's the previous one, right? The one that created us millennials? I.e. the worst, most destructive, self-indulgent, and anti-social generation that ever graced the west? The future-annihilators? The "we know best" tisk-tiskers who actually know nothing? Of course you're all happier in your country! Despite how shit it is versus a few dozen that aren't on that list. To say otherwise would be to, in a way, admit you're wrong about something you think, which simply will not do!

One more aggressive defender of "conventional wisdom" slow laner destructive force for the ignore list. Do go down with that ship and don't dare pipe up and question the status quo. Hopefully it sinks fast so we don't have to watch too long.

The only thing your generation has going for it is that it'll be gone before ours.
 
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RazorCut

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Is that all you have got?

Location Various: What does that mean? Where are you from? Where do you live now? What experience do you have of the UK? How long have you lived here?

I will tell you one thing, the older I get the more I realise how much there is that I don't know. However when I was in my teens and twenties I thought I knew it all because my experience of life was so much smaller. Oh and I was also angry at the world back then, for reasons I still haven't fathomed out.
 
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CareCPA

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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.
Sorry, had to wade back through all the crap that accumulated here to get to your post. I didn't double-check the numbers (sorry, not the time of year for me to be doing that), but I believe you have the essence correct.

The trouble people run into is they elect cash basis, and as they grow, they have to spend increasing amounts at the end of each year to lower their income and tax burden. This usually creates a cash flow issue (especially if your sales are Q4 heavy like a lot of Amazon guys). It could also create a large reversal in some year when you are no longer able to use cash method. This reversal would cause you to show massive income, almost all of which will be taxed at the highest levels considering the numbers we're talking about.

The other issue is when you go the bank and want funding, you show $0 profit. The banks always request tax returns. You may be able to talk your way around this one in the current lending environment, but I imagine lending will tighten up again soon if the economy falters.

In your example it seems like you are saying that the money you use for inventory is counted as an expense and therefore lowers your taxes for the year. I don't believe that is correct. You can't just by inventory to reduce your profit for the year. Inventory is an asset and not counted as an expense.
It is correct with the new tax law if you are a cash-basis taxpayer, under certain scenarios.
1. Inventory can be treated as non-incidental materials and supplies
2. Your tax treatment can conform to your financial accounting treatment of inventory.
(I paraphrased here)

So, if your financial statements are cash-basis, and you are under the $25 million average revenue threshold, then your tax return can theoretically be cash-basis as well in respect to inventory expenditures.

It should be noted, we in the tax community are still awaiting guidance on some of these changes, so this information could be inaccurate as soon as I post. Always check with your tax accountant or CPA (how's that for a disclaimer?).

Either way, my recommendation is to use accrual for tax and financial accounting if you are doing any serious retailing or wholesaling.

The biggest benefit under the new law is the exemption from UNICAP (or 263a), which many CPAs don't bother to do anyway.
 

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[also what i meant @ChrisV was that americans that are not Entrepreneurs pay a LOT for almost nothing in return. people that i know that are engineer and doctors Get taxed more and more living in NYC, FRISCO, DC etc. (If you factor in city + state taxes it is greater then countries in western europe) and they dont have free healthcare, child CARE, education etc etc. It is blasphemous....
And in Norway and germany the tax Is high but so much more is returned to the people. Great healthcare and free education in places were yes There is low population (Norway) but also moderate population (germany). The usa albeit heving 320 million HAS enough money circulating but a lot of it is held up due to corrupt practices and the corrupt government that continues to spend like no other causing hardship to many others.
And we pay to protect them. They spend almost nothing on military.
 

WJK

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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).
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).
Your US tax bill depends on the type of business that you're in. I've been in real estate for the last 43 years. Now I'm in the residential rental sector -- I provide low to moderate income housing for my community. Yes, it's a pain in the @%$## to manage. My tax bill is offset by my depreciation -- it's the can kicked down the highway. Yes, I will have to pay taxes on that depreciated income stream when I sell my properties. And I have seen people get upside down on those taxes due. But, it's a hell of deal in the meantime!
 
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Niptuck MD

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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.
 

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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 sh*tstirrers 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.
Hey Young Guy -- as long as US protects them, they can spend their money on social programs. I guess you've never heard of WWI or WWII -- or the USSR -- or the Iron Curtain -- and those are just recent threats...

I'm sorry you are negative on the USA. Us old folks have paid in blood to give you and yours a good life. Sorry you don't know what you have!
 

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Hey Young Guy -- as long as US protects them, they can spend their money on social programs. I guess you've never heard of WWI or WWII -- or the USSR -- or the Iron Curtain -- and those are just recent threats...

I'm sorry you are negative on the USA. Us old folks have paid in blood to give you and yours a good life. Sorry you don't know what you have!

I say what i say sir because my family has lost and shed blood as well in both Vietnam AND Iraq. Two of the most despicably useless wars do i need say more? The last meaningful war the US has ever fought was like you States WWII. The world is greatful for this but after that please.... Korea, Vietnam, so called BS cold war, gulf war, Somalia, Afghanistan, iraq.... all flat out rubbish.
 
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WJK

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I say what i say sir because my family has lost and shed blood as well in both Vietnam AND Iraq. Two of the most despicably useless wars do i need say more? The last meaningful war the US has ever fought was like you States WWII. The world is greatful for this but after that please.... Korea, Vietnam, so called BS cold war, gulf war, Somalia, Afghanistan, iraq.... all flat out rubbish.
I agree about especially Afghanistan... several countries have been there before us and it's all ended the same way. It's a bottomless pit. Korea and Vietnam are interesting choices for you to bring up. I lost a bunch of friends in Viet Nam. I too don't believe in perpetual wars. Sometimes we must go in; then we should then get out quickly.
I understand your anger about paying taxes. (I too think that the federal government spends way too much money and they mess in things that are un-Constitution.) So, create a business that helps to shelter your income. Owning a business and/or rental income property are two of the best tax shelters. And the new tax cuts will help you with that program. Take care of your business interests -- that's a full-time job!
 

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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

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....
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.
 

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@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.
 

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I am no lawyer or tax attorney so don’t take my word for it.

But.

You’ve got different taxes.

Local

State

Federal

Being in Washington, I have to add sales tax what customers buy but they pay that so it’s irrelevent.

I have to pay a percentage of payroll taxes. You could pay workers under the table, but payroll taxes aren’t all that much in my opinion. Depends on your industry.

The big daddy is the income tax that everyone is worried about.

It depends how your company is structured. As a sole proprietor or partnership then you pay a self employment tax on all profits (15.3%). If you have a normal LLC it will be taxed like a sole prop just the same, the difference comes when you have an S-corp or C-corp, which are taxed as their own separate entities.

But as an S corp, you now become employed by your business. You can now take a salary (which must be not unreasonably low. Talk to an accountant to find out the right salary to pay yourself that isn’t too low). The rest of the profits are distributed as dividends to the “shareholders” (you). Those dividends are tax free.

If you are making 100k+ from your business in profit, you should have an S-Corp. having a C-Corp is for big, big businesses that have many shareholders. If it’s just you there’s no need for more than an S-Corp.

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.

You may have other various taxes depending on where you are and what your business does.

But once you’re making big money, the tax free dividends are heaven. Now you just need to grow your profits with investments without paying taxes on your gains.

If I’m wrong about anything I said, correct me. I don’t have tons of experience but this is what I’ve learned from lots of reading and talking with my accountant.

Being in a cash industry helps. You can fudge some numbers that can’t really be proven and avoid lots of taxes. Not me though. I would never do that.
 
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CareCPA

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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.
 

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I am no lawyer or tax attorney so don’t take my word for it.

But.

You’ve got different taxes.

Local

State

Federal

Being in Washington, I have to add sales tax what customers buy but they pay that so it’s irrelevent.

I have to pay a percentage of payroll taxes. You could pay workers under the table, but payroll taxes aren’t all that much in my opinion. Depends on your industry.

The big daddy is the income tax that everyone is worried about.

It depends how your company is structured. As a sole proprietor or partnership then you pay a self employment tax on all profits (15.3%). If you have a normal LLC it will be taxed like a sole prop just the same, the difference comes when you have an S-corp or C-corp, which are taxed as their own separate entities.

But as an S corp, you now become employed by your business. You can now take a salary (which must be not unreasonably low. Talk to an accountant to find out the right salary to pay yourself that isn’t too low). The rest of the profits are distributed as dividends to the “shareholders” (you). Those dividends are tax free.

If you are making 100k+ from your business in profit, you should have an S-Corp. having a C-Corp is for big, big businesses that have many shareholders. If it’s just you there’s no need for more than an S-Corp.

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.

You may have other various taxes depending on where you are and what your business does.

But once you’re making big money, the tax free dividends are heaven. Now you just need to grow your profits with investments without paying taxes on your gains.

If I’m wrong about anything I said, correct me. I don’t have tons of experience but this is what I’ve learned from lots of reading and talking with my accountant.

Being in a cash industry helps. You can fudge some numbers that can’t really be proven and avoid lots of taxes. Not me though. I would never do that.
Q

You have to take a reasonable salary for your industry/job. 25k (with a 175k dividend) is probably too low and might trigger an audit if you continuously do it.
 
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biophase

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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.

Of course this is now not that simple because of the 20% pass-through of 2018!

A business making $200k, you would want to pay yourself $56k.

Because:
50% of $56k is $28k
20% of $144k is $28.8k

You want the lowest of those 2 numbers to be as high as possible. Right? @CareCPA
 
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This is why I don't get why Scandinavian countries rank so high. I suffer from SAD (although self-diagnosed) and truly hate the winter months even in the South of England. I think I would jump off a bridge if I lived in Sweden or Denmark.

I don't even like winter in Malta. :D

Turns out you have to go really far south to enjoy year-round warmth.

I was in Berlin a couple weeks ago. Enjoyed it a lot more than I expected to, but damn, there's no way I could voluntarily deal with that freezing cold and greyness several months a year. And Sweden is even colder.

RazorCut said:
I don't think the surveys are bullshit. They just focus on areas in society that maybe we as entrepreneurs don't necessarily correlate with. I also think that, apart from a slight rise in anxiety at the time of the incident, most people do not worry overly about being shot or killed Unless they have been directly effected, or are in a social group where this is a real threat (youth gangs, narcotics, crime etc.).

When I posted the report it was more about how taxation (for the general public) does not seem to be a factor in reducing happiness. In fact the ability of high taxation to fund free health, education etc. seems to be a positive.

It's an interesting learning experience to spend time in a place where things work differently. While the local Maltese don't get to live tax free, the general taxes here are pretty low by Western standards (max income tax band 35%, no property tax, no capital gains). The welfare system is almost (but not quite) non-existent, and the rental market is virtually regulation-free.

It's super easy to rent an apartment here, you can view half a dozen places in a day and then just agree privately on the one you like. No credit checks, no bureaucracy and paperwork. On the flipside, if you're late on the rent, the landlord can technically kick you out immediately and you have no recourse. It's all about what you agree in the contract.

I believe the two things are related: if Malta had tenant laws like the UK, it would be much harder to find a rental. And I wouldn't be able to see nine cranes from my roof.

And despite the lack of welfare state, I've never seen a homeless person in Malta. Ever. The average Maltese person lives a much more comfortable and worry-free life than the average Brit, even with the low salaries and skyrocketing prices.

The "hamalli" (Maltese chavs) are uncouth but harmless rather than the feral and violent British equivalent. You can go anywhere in the country, poor area or rich, any time of day or night, and never have any worries whatsoever about your personal safety.

Why?

They still have close-knit families. And community. Churches and charities. People take care of each other, which is how I imagine things would have been in the UK long before I was born. It's a much more natural way of life.

I also get full coverage medical insurance for under 500 euros a year. Much better value than (bleurgh) "our NHS".

Another interesting thing is that it's super easy to get a job here (and also super easy to fire people). Not something I've personally experienced, but my girlfriend has. Since they can get rid of you whenever they want, they're a lot less reticent to take a risk on you and see how it goes.

It's like a fusion of Mediterranean community/family values and British commercial ethic (pre-big government). It works.

RazorCut said:
Is the UK becoming more or less free? I think the whole world is becoming less free. I see little cohesiveness in the UK, and the issues around the country being pretty much equally split on Brexit further erode this. I don't think the media help and there seems little to no trust in politicians.

The western world is becoming less free. Lots of places are becoming more free. But it's true that there's no new America to run to. Freedom today is found through mobility itself, and/or in small, obscure countries.

RazorCut said:
If I were single with no children I would certainly move to different countries. Domiciled in several countries is a very attractive proposition. It wouldn't be just for tax purposes however and it certainly wouldn't be further North regardless of what statistics suggest. lol

Yeah, that can complicate things!
 
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CareCPA

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Of course this is now not that simple because of the 20% pass-through of 2018!

A business making $200k, you would want to pay yourself $56k.

Because:
50% of $56k is $28k
20% of $144k is $28.8k

You want the lowest of those 2 numbers to be as high as possible. Right? @CareCPA
It's complicated (or as we like to say: it depends).

The QBI deduction is not a simple deduction. At the numbers we're talking about here, the W-2 limitation is phased in. But overall, the question is: Is the [increased QBI deduction times your marginal rate] less than the [extra wages times the payroll taxes] (employer and employee, plus any unemployment taxes, etc).

OR, additional food for thought, does the lower taxable income from higher wages (after factoring in the QBI deduction and extra employer tax expense) make you eligible for other benefits that you may not have otherwise qualified for? Does it get you under the cliff for ACA subsidies? Can you get low enough to get the EIC? If you're a higher earner, does it get you under the threshold for the Child Tax Credit?

This is why it's so hard to give a one-size-fits-all answer to these questions.
 

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