Telling the New Tax Hikes to F*ck Off

[Russ H]

This thread was created at the perfect time. I just setup my LLC on Monday and I was already doing research on the way I wanted to be taxed. Looks like I am going for the S-Corp option.
What is also great is that my attorney and future CPA work in the same building and often do business together. :banana:

Now THAT is the reason MJ posted this thread.

Great to hear that, LL!

-Russ H.

 

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[EastWind]

This thread was created at the perfect time. I just setup my LLC on Monday and I was already doing research on the way I wanted to be taxed. Looks like I am going for the S-Corp option.
What is also great is that my attorney and future CPA work in the same building and often do business together. :banana:

you must not have read the entire article.

They're Clipping Your Dividends - Forbes.com

Let's now consider savings--specifically, four ways in which dividend earners will be punished.Come next January the favorable 15% rate on dividends will expire, making them subject to taxation as "ordinary income." At the same time the maximum rate is kicking up from 35% to 39.6%. The third thing that will happen in 2011 is the resurrection of a rule that ostensibly limits deductions but for the majority of taxpayers is nothing but a boost in their tax bracket. This rule adds 1.2 percentage points to your rate.
In 2013 comes a fourth tax increase: a 3.8% surtax on investment income. Add it up. Dividends that used to be taxed at 15% are set to be taxed at 44.6%.

 

[PaulRobert]

you must not have read the entire article.

They're Clipping Your Dividends - Forbes.com

Let's now consider savings--specifically, four ways in which dividend earners will be punished.Come next January the favorable 15% rate on dividends will expire, making them subject to taxation as "ordinary income." At the same time the maximum rate is kicking up from 35% to 39.6%. The third thing that will happen in 2011 is the resurrection of a rule that ostensibly limits deductions but for the majority of taxpayers is nothing but a boost in their tax bracket. This rule adds 1.2 percentage points to your rate.
In 2013 comes a fourth tax increase: a 3.8% surtax on investment income. Add it up. Dividends that used to be taxed at 15% are set to be taxed at 44.6%.

I read the entire article and the one you just supplied. While I am no expert in S-Corp structure, I am pretty sure that you do have some tax havens.

Example from Wiki-

While an S corporation is not taxed on its profits, the owners of an S corporation are taxed on their proportional shares of the S corporation's profits.
Example: Widgets Inc, an S-Corp, makes $10,000,000 in net income (before payroll) in 2006 and is owned 51% by Bob and 49% by John. Keeping it simple, Bob and John both draw salaries of $94,200 (which is the Social Security Wage Base for 2006, after which no further Social Security tax is owed).
Employee salaries are subject to FICA tax (Social Security & Medicare tax) --currently 15.3 percent--half of which is paid by the employer and half by the employee. The distribution of the additional profits from the S-Corp will be done without any further FICA tax liability.
Widgets Inc now has $9,797,187 of net income for 2006, after paying salaries ($10,000,000 - ($94,200 * 1.0765 ["grossing up" the $94,200 salary for the 7.65% employer FICA tax for each employee, using the factor 1.0765] times 2 employees)). On Bob's personal tax return, he will report $4,996,565 of business income (in addition to his $94,200 salary), and John will report $4,800,622. Also, remember that Bob and John each had the employee half of the FICA tax withheld from their salaries (94,200 * 0.0765 = 7,206.30 each.)
If for some reason, Bob (as the majority owner) were to decide not to distribute the money, both Bob and John would still owe taxes on their pro-rata allocation of business income, even though neither received any cash distribution. To avoid this "phantom income" scenario, S corporations commonly use shareholder agreements that stipulate at least enough distribution must be made for shareholders to pay the taxes on their distributive shares.
Quarterly estimated taxes must be paid by the individual to avoid tax penalties, even if this income is "phantom income".
Bob and John will recognize significant tax savings compared to drawing the remainder of the business income as a salary subject to FICA taxation. While they have paid the maximum salary for which Social Security tax is assessed, there is no wage base for the continuation of the 1.45 percent Medicare tax portion of FICA. By avoiding the employer and employee portions of FICA on this amount (2.9 percent) they will together save a total of $284,118.
The difference would be even greater, percentage-wise, if Bob and John were paying themselves less than the Social Security Wage Base, as the Social Security portion of FICA is 12.4 percent (total for the employer and employee halves).

 

[Pinnacle]

you must not have read the entire article.

They're Clipping Your Dividends - Forbes.com

Let's now consider savings--specifically, four ways in which dividend earners will be punished.Come next January the favorable 15% rate on dividends will expire, making them subject to taxation as "ordinary income." At the same time the maximum rate is kicking up from 35% to 39.6%. The third thing that will happen in 2011 is the resurrection of a rule that ostensibly limits deductions but for the majority of taxpayers is nothing but a boost in their tax bracket. This rule adds 1.2 percentage points to your rate.
In 2013 comes a fourth tax increase: a 3.8% surtax on investment income. Add it up. Dividends that used to be taxed at 15% are set to be taxed at 44.6%.

Now that I read these details, I can see how hilarious this all really is. Russ was right. Thanks for the further clarification, EastWind, I had forgotten about this section of the article. It's like we need to continue the assault by adding something like:...then, they're going to tax your unrealized income. 1031 exchanges will be outlawed beginning in 2015. All revenues of any kind into LLC's, S-Corps, or C-Corps will be subject to a 63% patriot tax. :smilielol:.

Forgive me, but the laundry list is just plain comical, now.

 

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[EastWind]

I read the entire article and the one you just supplied. While I am no expert in S-Corp structure, I am pretty sure that you do have some tax havens.

Example from Wiki-

...

okay. i'm showing you an article that was just written less than a week ago, and you are quoting week? i even did the job of putting some parts in bold, and you still don't get it. well, keep talking to your cpa and lawyer. print out that article and show it to them. good luck.

 

[PaulRobert]

okay. i'm showing you an article that was just written less than a week ago, and you are quoting week? i even did the job of putting some parts in bold, and you still don't get it. well, keep talking to your cpa and lawyer. print out that article and show it to them. good luck.

Well, I am only starting out and just learning the ropes. And I am not worried by these numbers. The point of this thread is to figure out the strategy to minimize the taxation (legally). As always there will be loopholes and ways to get around these obstacles. As Russ states it, its just a game. You either play , learn the rules, and use them to your advantage or you can just become afraid of the changing rules and be on the losing team.

What is your strategy with the numbers you presented?

 

[andviv]

I have a question about munis.... if many municipalities are close to bankruptcy, how is this risky affecting them these days?

 

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[Russ H]

Eastwind, Pinnacle-- WHAT ARE YOUR PLANS???

Eastwind-- you've carefully taken all of this time to highlight things-- how much dividend income do you have currently?

And if you don't have much-- THAN WHY DOES THIS MATTER TO YOU???

It's like saying something that you don't own just rose in price 400%. So??

So you get something else.

Play the game.

-Russ H.

 

[Rem]

My concern is:

a) people going oversees with their business, ultimately weakening the U.S. economy that much more

b) more people earning money on the black market

c) small honest business's folding, while large company's get further bailouts. (Too big to fail mentality)

d) Thus whittling away at the middle class. You'll either be very wealthy or you will be poor and dependent on government assistance.

My plan:

a) Not sure

b) Don't know

c) Learn from others (this forum)

d) Spend more time with my kids


:iamwithstupid:

 

[MJ DeMarco]

I have a question about munis.... if many municipalities are close to bankruptcy, how is this risky affecting them these days?

Surprisingly yields haven't been affected much and the default rate on muni's are very low -- my plan is to stick to muni's that are pegged to actual operations with predictable revenue streams. Revenue bonds over GO (General Obligation) although the inverse is *supposed* to be safer ... but this is a new normal. Avoid funds that are heavy into states with serious budget crises ... I looked into a CEF fund a few weeks ago and most of their issues where from Cali and Florida -- two states facing big budget deficits -- I didn't buy the fund. Muni default/recovery rates are very low, almost non-existent ... but that also could change since times like these are new to the system.

 

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[Pinnacle]

Eastwind, Pinnacle-- WHAT ARE YOUR PLANS???

Eastwind-- you've carefully taken all of this time to highlight things-- how much dividend income do you have currently?

And if you don't have much-- THAN WHY DOES THIS MATTER TO YOU???

It's like saying something that you don't own just rose in price 400%. So??

So you get something else.

Play the game.

-Russ H.

I am marketing a recently published book of mine that teaches Americans how to separate State from Economics by taking command of their personal finances and removing the Federal Government from their wallets. I am printing promotional items (hats, tees, mugs, business cards, license plates, etc.) to move an international marketing campaign for the blueprint of the 2nd industrial revolution that I am starting.

I am financing my company with what I call nanoloans, private individuals who loan me $20 or $40 dollars at a time and I pay them back with 50% interest over a 3 month period. I never over-leverage, and never take on more private lenders than I can handle. Already have a product (my book), about to have more (merchandising for the book).

Meanwhile, my company is an S-Corp, and my investment firm is an LLC. I recently paid off my car and will lease it (or seller finance it) to the S-Corp, will make the S-Corp a shareholder in the LLC (making it multi-member) so I'm not taxed as a sole proprietor, and going on a trip to San Diego in July for a week-long conference called Cato University--of which will be financed by my private investors and written off as a business trip.

This is just my plan for this year.

 

[andviv]

Surprisingly yields haven't been affected much and the default rate on muni's are very low -- my plan is to stick to muni's that are pegged to actual operations with predictable revenue streams. Revenue bonds over GO (General Obligation) although the inverse is *supposed* to be safer ... but this is a new normal. Avoid funds that are heavy into states with serious budget crises ... I looked into a CEF fund a few weeks ago and most of their issues where from Cali and Florida -- two states facing big budget deficits -- I didn't buy the fund. Muni default/recovery rates are very low, almost non-existent ... but that also could change since times like these are new to the system.

Thanks for the info...

I lack a good understanding of how munis work... my assumption is that municipalities get prob. 80% of their income from RE property taxes and personal property taxes (cars, boats, etc). I was expecting most munis that had a sudden increase on revenue thanks to the RE boom would be dying right now with lower RE valuations and people moving to cheaper areas.

Your info helps me get a little better understanding of the logic behind munis. Thanks again.

And, for now, going back to work to get money to buy munis.... so I can have something to really be worried about.

 

[CommonCents]

I have a pretty good contact in Curacao. Not sure how they stack up in the world of offshore asset protection but they've been in the biz for quite awhile and seem to be pretty stable. They also have tax advantaged ecommerce zones w/ supposedly good reliable high speed data. They are also ramping up their tourism push and have low rate long term property leases from the government.

I am going there sometime this summer to look at a few opportunities. Anyone have an overview on benefits of Curacao? GlobalWealth?

Happy tax day everyone!

If you are bummed about today, cheer up because just remember it'll be much much worse next year! (tax cuts expire, tax raises everywhere you look, etc.)


As far as not getting political, I won't for purposes of the focus of this site, but I firmly disagree with not getting involved in general. Everyone who sits silent and does nothing about politics and government deserves every last POS tax we get.

There is no calvary, we are the calvary.

There are ways to get involved. Attend tax day party, tea party, get active in your local politics, become your local precinct committee chair to help recruit solid business minded conservatives into local, state, national office.

 

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[Russ H]

I am marketing a recently published book of mine that teaches Americans how to separate State from Economics by taking command of their personal finances and removing the Federal Government from their wallets. I am printing promotional items (hats, tees, mugs, business cards, license plates, etc.) to move an international marketing campaign for the blueprint of the 2nd industrial revolution that I am starting.

I am financing my company with what I call nanoloans, private individuals who loan me $20 or $40 dollars at a time and I pay them back with 50% interest over a 3 month period. I never over-leverage, and never take on more private lenders than I can handle. Already have a product (my book), about to have more (merchandising for the book).

Meanwhile, my company is an S-Corp, and my investment firm is an LLC. I recently paid off my car and will lease it (or seller finance it) to the S-Corp, will make the S-Corp a shareholder in the LLC (making it multi-member) so I'm not taxed as a sole proprietor, and going on a trip to San Diego in July for a week-long conference called Cato University--of which will be financed by my private investors and written off as a business trip.

This is just my plan for this year.

. . . a DOER!!!! I love people that DO and don't just TALK!

Rep speed Pinnacle-- thank you for sharing what you're doing-- and where you're headed-- very ingenious.

-Russ H..

 

[tchandy]

I bought a tax class, books and CDs a few years ago. It mentioned having your company, or yourself, pay you kids money, sort of like an allowance. This money could be deducted from taxes you paid. I'm sure there's more too it but it's been a few years since I looked at this reference. The writer did say to be reasonable about the money you paid your kid. Could a six year old really do the job you assigned him (for instance, take out the trash, shred papers, vaccuum, etc,) Then as they get older you could assign them additional tasks. What do you think? This could be several thousand that Uncle Sam doesn't get but stays in the family.

Tom

 

[GlobalWealth]

I have a pretty good contact in Curacao. Not sure how they stack up in the world of offshore asset protection but they've been in the biz for quite awhile and seem to be pretty stable. They also have tax advantaged ecommerce zones w/ supposedly good reliable high speed data. They are also ramping up their tourism push and have low rate long term property leases from the government.

I am going there sometime this summer to look at a few opportunities. Anyone have an overview on benefits of Curacao? GlobalWealth?

Happy tax day everyone!

If you are bummed about today, cheer up because just remember it'll be much much worse next year! (tax cuts expire, tax raises everywhere you look, etc.)


As far as not getting political, I won't for purposes of the focus of this site, but I firmly disagree with not getting involved in general. Everyone who sits silent and does nothing about politics and government deserves every last POS tax we get.

There is no calvary, we are the calvary.

There are ways to get involved. Attend tax day party, tea party, get active in your local politics, become your local precinct committee chair to help recruit solid business minded conservatives into local, state, national office.

Sorry, I don't know much about Curacao. I do know the Netherlands Antilles is a good back door opportunity to obtain EU citizenship. Dutch citizenship is one of the few EU countries that does not tax residents on foreign sourced income. Most EU countries tax citizens on worldwide income if living in the country. Not the Netherlands.

Curacao is a no tax zone, but I don't know much about their asset protection. I am a bit leary though as it is a Dutch territory thus under EU law. I prefer to stay out of the EU for asset protection purposes.

 

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[EastWind]

Eastwind, WHAT ARE YOUR PLANS???

Eastwind-- you've carefully taken all of this time to highlight things-- how much dividend income do you have currently?

And if you don't have much-- THAN WHY DOES THIS MATTER TO YOU???

It's like saying something that you don't own just rose in price 400%. So??

So you get something else.

Play the game.

-Russ H.

Is there a problem? Really?
You don't see me complaining do you? I just highlighted the article ONLY because he thought dividends will help him in the future by filing as an S-corp. Don't freaking shoot the messenger! Gee! Did I add my opinion to that article? NONE! So I don't see the point of all this!

If you want to know what I'm doing, I'm doing exactly the same damn thing I have been doing. Making more money. I give a F*ck less if they want to raise the tax to 80%. If I make enough money, I'm better off paying 80% tax on $100million than 20% tax on $100k. So as for what I'm doing, the same damn thing. I'm not retired or a passive investor. I'm active and in the field.

Thank you!

 

[PaulRobert]

Is there a problem? Really?
You don't see me complaining do you? I just highlighted the article ONLY because he thought dividends will help him in the future by filing as an S-corp.

I did not think that dividends will help me by filing an S-Corp. I setup an LLC for my business selling my own product. I am not going to venture off into stocks, options, bonds immediately either.

 

[andviv]

As far as not getting political, I won't for purposes of the focus of this site, but I firmly disagree with not getting involved in general. Everyone who sits silent and does nothing about politics and government deserves every last POS tax we get.

There is no calvary, we are the calvary.

There are ways to get involved. Attend tax day party, tea party, get active in your local politics, become your local precinct committee chair to help recruit solid business minded conservatives into local, state, national office.

I agree with you 120% about getting involved.

And that is why we don't talk politics here, cause there are many (thousands, actually) other places to talk politics. We leave that out cause it is not productive, which is our goal here. Thanks for that great insight.

 

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[GlobalWealth]

Eastwind, Pinnacle-- WHAT ARE YOUR PLANS???

Eastwind-- you've carefully taken all of this time to highlight things-- how much dividend income do you have currently?

And if you don't have much-- THAN WHY DOES THIS MATTER TO YOU???



-Russ H.

Russ,
I must disagree here with this statement. Even if you don't have a significant dividend income, this tax increase will have a negative impact on the business environment as a whole.

Just like any other form of taxation, it creates a disincentive to invest. If your taxes are going to increase from investing in the stock market, then you will do less of that and find more intelligent uses for your money.

However, if overal investment decreases, and it will, this will negatively impact all businesses. Businesses need cash, and if their cost of money increases, so do prices. They cost increase always shifts to the consumers in the long run which drives up prices of everything.

If the stock market takes a significant hit due to the mass exodus of cash, businesses will suffer. And while you may not work for or run a publicly traded company, there is no denying the impact they, and the stock market in general, has on the overall health of the economy.

Cash is like water, it flows through the path of least resistance, so this cash will end up somewhere. Now that is the magic question; where does it go?

 

[Cat Man Du]

GLOBE said:

Cash is like water, it flows through the path of least resistance, so this cash will end up somewhere. Now that is the magic question; where does it go?

Gold or real estate.

 

[andviv]

Global, if you are not making enough money then all this conversation is worthless... Russ' message is, I believe, to focus on making more money so these taxes become a problem for you.

Otherwise yeah, they are problems, but they are problems for your employers, not you directly. You have no CONTROL.

So, if you don't have any control, why worry?

Focus on what you can control (making more money, reduce expenses, find new markets, increase revenue/profits, etc).

*** And, of course, the "you" in my post is not you, as we all know you are already doing this. ***

 

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[GlobalWealth]

Global, if you are not making enough money then all this conversation is worthless... Russ' message is, I believe, to focus on making more money so these taxes become a problem for you.

Otherwise yeah, they are problems, but they are problems for your employers, not you directly. You have no CONTROL.

So, if you don't have any control, why worry?

Focus on what you can control (making more money, reduce expenses, find new markets, increase revenue/profits, etc).

*** And, of course, the "you" in my post is not you, as we all know you are already doing this. ***

MJ made a point in the post about his personal story. He had little or no income then it grew slowly then exponentially.

So maybe someone reading this doesn't have to worry about this NOW, but what about next year or the next? The exponetial factor of income can make this a problem in a rapid way. Of course, any problem that involves higher income is a good problem to try to solve. But a problem nonetheless.

But my point with the increase on taxes with dividend income was that no matter if you have a significant dividend income or not, this tax can have a negative affect on your business.

Take cigarettes for example. When you inccrease the tax on them, you get less consumption. With dividends, when you increase the tax, you get less investment. Businesses need money to survive and when there are less people willing to invest, it will have a negative impact on the stock market and businesses cost of capital.

Just because you don't earn $100k in dividends doesn't mean this doesnt affect you. It most certainly does. And I am certainly focusing on the things I can control, as should everyone. But this requires study and work, because there are things that can be done to solve the problem, you just have to find the solution.

Like I said, capital is like water, it follows the path of least resistance. We need to find where the money will end up and be there before the big money.

 

[Pinnacle]

One thing that I find most certainly productive is not to simply dodge the bullets of legislation, which is essentially what each of us is discussing, but to stand up and be the calvary that CommonCents spoke of.

If this is about productive discussion, why not also have productive discussion as to how each of us can change this...that is, those of us who care enough or are aware enough of our abilities to know that we as private individuals can directly change this. Our politicians are not the leaders of the United States, we the private citizens are. They are not our elected leaders, but our elected followers. We operate on the notion that it is proper for the federal government to plan our economy. Economies do not require planning. It is because of the aforementioned notion that we have threads about how to profit from tax hikes (or in spite of them), but none about how to eliminate taxes across the board. We're not venting about this just to cry and moan, but to fuel a productive discussion about how to put our fastlane plan for ECONOMIC freedom together. This is a plan that we must follow as a team. With the boundless abilities on this forum, why not do something about this? Why not separate State from Economics?

May we simply start a new thread on this? Will all participate?

 

[Rawr]

I am financing my company with what I call nanoloans, private individuals who loan me $20 or $40 dollars at a time and I pay them back with 50% interest over a 3 month period. I never over-leverage, and never take on more private lenders than I can handle. Already have a product (my book), about to have more (merchandising for the book).
.

Why 50%??? You can take a cash advance at a lot less than that. If you can guarantee 50% with a backed up asset, can I come by with a blank check for you tomorrow?!


MJ, I looked at the article and it was talking about frequency of trading being the important one. See if you can find out what you can get away with - it is really easy to put 25k in your Zecco account and get free trades and then just play a little each day if all it takes is say 30 trades in a month.

 

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[Pinnacle]

Why 50%??? You can take a cash advance at a lot less than that. If you can guarantee 50% with a backed up asset, can I come by with a blank check for you tomorrow?!

I am well past the consideration of payday loans. I cannot make a return on investment fast enough to pay off those types of loans without using my paycheck...at least not yet. Using payday loans for investment is tricky when your investment return is below the finance charge. The time horizon is the challenge. I'm working on it.

My purpose in doing this is to engage people who have never invested in anything before to start using investing as a means to free themselves from their money problems. None of these people (rat-racers, wage slaves, welfare statists) are going to be willing to dump their paychecks into anything right now, nor should they. That is why I want to present something that is digestible with low-risk and low-committment that is equally digestible for me. I have a ceiling: I offer 50% on all loans up to $100 USD. So if you loan me $100, I pay you back $150. My collateral is my job, I make more than enough to take on, say, 15 private individual lenders loaning $40 each in a round of financing. If my investment does not produce a sufficient return, my paycheck will...and I can still pay the bills. What is most important for me is to build credibility and a relationship with these prospects. If part of my mission is to eliminate poverty, what better way to start than with ground-up economic capitalism? If I don't make that return on investment, I can also use my job to simply return the principal to them. RE pros use creative financing all day long, I figured why shouldn't an author-entrepreneur? :fastlane:

 

[tchandy]

I've been thinking about this for a while and how best to legally avoid paying the tax man in the upcoming years. With possible changes in tax laws, I was thinking that a self-directed IRA may be the best option. I'll have to do more research but leaning in this direction. Enclosed is a thread on self-directed IRAs from a year or two ago:
http://www.thefastlanetomillions.com/asset-protection-taxes-legal/8511-self-directed-ira.html Here's another one: http://www.thefastlanetomillions.com/general-business-discussion/22397-self-directed-iras.html What do you think?

Tom
http://www.thefastlanetomillions.com/asset-protection-taxes-legal/8511-self-directed-ira.html

 

[Cat Man Du]

Pinnacle said:

Our politicians are not the leaders of the United States, we the private citizens are. They are not our elected leaders, but our elected followers. We operate on the notion that it is proper for the federal government to plan our economy. Economies do not require planning.

Ahhhhhhhhh..................if only this was true, but it isn't!

 

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[Pinnacle]

Not yet.

 

[eloise]

I like this idea of helping others. It really shows your generosity as a person.Keep this up as people in this ecomony really need people like you. I have my own ministry and my goals are to give back as much as I can to people in need. I love to help people in need, just to see their face makes it worth every tiresless fundraiser that our ministry does. Remember your generosity and what you are doing for others will be blessed and move forward. When we help others, it all comes back full circle.