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Taxes Strategy

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Ama

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Dec 2, 2017
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Spent a few years lurking and working on a business, have employees and some profit, much of it 40-50%+ gone to taxes each year. What are some mitigations you have had success doing? Looked around for CPAs, usually they learn more from me than the other way around. All this news about how the rich don't pay etc because of capital gains/borrowing does not apply here. For those operating cash flowing businesses, what strategies are you using? They printed over trillion dollars in a year, I am sure the tax revenue they collect is super useful to them.
 
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Kak

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If you enjoy running your businesses, you can get personal enjoyment out of some of your business expenses.

Investing in new and not-yet-profitable ventures has always been a good help to my profitable businesses at tax time.

That’s about it as far as I’m concerned. The 1031 exchange is great for real estate.

All of these supposed “loopholes” are mostly a political talking point. If you actually want to save money on taxes legally, you need to move and perhaps renounce.
 
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thechosen1

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The "loopholes" don't really exist. The only real advantage is that you pay taxes on what you make rather than your gross revenue (as opposed to an individual's gross for the year). Yes, there are things like the 1031 for real estate.

That being said, I'm sure there are a few optimizations you can do for your specific situation, but you'll need to talk to a CPA for that and share your financials. If they aren't helping, try someone else, preferably someone who works with business owners (not someone who just files tax forms like a robot).

I think the best you are going to be able to do is lose money on paper while actually having positive Cashflow. But you won’t be able to qualify for more financing if your documents show losses, so there’s that.
 
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ZCP

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Check out the Profit First book .... then find a profit first accountant.
Build a long term plan based on your end goals.
Make sure they have experience with companies bigger than you are to help get you where you want to get.
Fractional CFO could help as you get bigger.
 

MJ DeMarco

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Spent a few years lurking and working on a business, have employees and some profit, much of it 40-50%+ gone to taxes each year. What are some mitigations you have had success doing? Looked around for CPAs, usually they learn more from me than the other way around. All this news about how the rich don't pay etc because of capital gains/borrowing does not apply here. For those operating cash flowing businesses, what strategies are you using? They printed over trillion dollars in a year, I am sure the tax revenue they collect is super useful to them.

What type of business? Can you move that company out of California? That will save you a fortune.
 

eliquid

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I've spent a lot of time on this subject.

I am not saying I am smarter than someone here on FLF or one of our resident tax members, but I have looked into everything possible for my specific situation ( I'm sure plenty of us business folks have too ).

And yeah, if you want some real savings you might need to move out of your state or even country. Again, it depends.

Past that, look to see if you can get any Tax Credits or Tax Deductions. I see those less talked about than normal expense deductions.

Do you have children under 18? If you do, you can possibly pay them up to $12,500 a year each and there is no tax on it for them. If you have kids, you probably buy their computers and phones, etc... Now you can pay them to work for you and let them buy it and save on taxes too.

Can you upgrade your office and equipment? Write offs.

Do you have an HSA? Solo 401K ( specifically the SOLO 401k )? - More ways to move money around or defer later when you might be in a lower tax bracket.

What about R&D credits? Pretty sure if you get with the right company, you can find something here too.

Just trying to throw out the non-typical things people can use to lower their tax burden besides the normal expenses and such.
 

Johnny boy

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use your year end profits to buy an NFT (worth whatever, maybe like 150k)
immediately sell the NFT to an anonymous wallet for a dollar.
YOU just "lost" 150k and don't have any realized income that year. Bad for loans, good for taxes.
Some anonymous wallet then sells the NFT to someone else for the 150k that it's worth and has 150k in a cryptocurrency sitting around.
Our tax code would then suggest that the person who sold that NFT would have to pay taxes on that 150k....except it isn't a person, or a business, or any entity. It's a wallet. Wallets can't pay taxes. And wallets don't report ss numbers to the irs like a bank account would, or something similar.
As long as there isn't evidence that you bought the NFT from yourself or gave yourself the money...
 

Kevin88660

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use your year end profits to buy an NFT (worth whatever, maybe like 150k)
immediately sell the NFT to an anonymous wallet for a dollar.
YOU just "lost" 150k and don't have any realized income that year. Bad for loans, good for taxes.
Some anonymous wallet then sells the NFT to someone else for the 150k that it's worth and has 150k in a cryptocurrency sitting around.
Our tax code would then suggest that the person who sold that NFT would have to pay taxes on that 150k....except it isn't a person, or a business, or any entity. It's a wallet. Wallets can't pay taxes. And wallets don't report ss numbers to the irs like a bank account would, or something similar.
As long as there isn't evidence that you bought the NFT from yourself or gave yourself the money...
Kevin O'Leary: I smell jail time (I think in reality just a fine multiple times of the tax evaded)

The modus operandi has a flaw because you cant deposit your profit anywhere with proper kyc. Unless your sole intention is to spend them in small purchases like meals in cafe which accept crypto payment.
 

Ama

New Contributor
Dec 2, 2017
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8
13
California
MJ DeMarco" data-source="post: 973407" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
What type of business? Can you move that company out of California? That will save you a fortune.

Healthcare and Food Retail businesses, one isn't in california still there are property+state taxes going on. Have had similar experiences with you on single rentals they can be a nightmare.

It seems cost segregation buying large commercial real estate is a strategy, any ideas about this? Example buying a place and deducting most of it the first couple of years. Have been more focused on working and this basically leads to handing off a huge chunk away every year. If the pandemic destroyed my business, there would be no fruits from paying the taxes into the system for all those years. Any ideas to keep a safety warchest and to reach freedom would be helpful

Thanks for your books mj they are always lighting the truth especially when you mentioned the free range cattle. In order to escape we need the funds to last and doing the numbers the tax man is the largest expense by far.
 

Ama

New Contributor
Dec 2, 2017
12
8
13
California
I've spent a lot of time on this subject.

I am not saying I am smarter than someone here on FLF or one of our resident tax members, but I have looked into everything possible for my specific situation ( I'm sure plenty of us business folks have too ).

And yeah, if you want some real savings you might need to move out of your state or even country. Again, it depends.

Past that, look to see if you can get any Tax Credits or Tax Deductions. I see those less talked about than normal expense deductions.

Do you have children under 18? If you do, you can possibly pay them up to $12,500 a year each and there is no tax on it for them. If you have kids, you probably buy their computers and phones, etc... Now you can pay them to work for you and let them buy it and save on taxes too.

Can you upgrade your office and equipment? Write offs.

Do you have an HSA? Solo 401K ( specifically the SOLO 401k )? - More ways to move money around or defer later when you might be in a lower tax bracket.

What about R&D credits? Pretty sure if you get with the right company, you can find something here too.

Just trying to throw out the non-typical things people can use to lower their tax burden besides the normal expenses and such.
Thanks for your reply, are you able to have a solo401k while having employees? Providers have said this is not possible. And appreciate the 12.5k children thing, have advised this to many peers with working age children as well.
 

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