And this is very good news. Follow this: anyone who gets paycheck from any government agency has taxes taken out. This is rather absurd, since the money they are paid is taken from taxpayers. Just as it is impossible to tax a corporation, so it is impossible to tax government workers. What is taken from their paychecks was already taken from someone else's paycheck. It is all theatre.
So say the Undersecretary for Whimsical Things is paid $150,000 per year. Uncle Sam takes say 1/3rd in taxes, so the Undersecretary takes home $100,000. The $50,000 in taxes is recycled through again. The reason, I am sure, has something to do with street theatre suggesting the army of government workers pay taxes. Could we save tens of millions in transaction costs by just paying government workers net? Of course, but not so fast.
In individual cases, this should be run past a CPA, but say that Undersecretary was to spend $50,000 on a start-up business, yet made no money for his efforts yet. Then his net would be $100,000, not $150,000. He would be taxed on his $100,000, say about $30,000 for $70,000 take home.
No way! Why would anyone do that? Look at that $50,000... that is money that is actually spent by the Undersecretary in his new family biz. I talk about what business, ideas for start-ups, here. Time, creativity passion, joy... and the start of a business. Sure the take home is only $70,000, but the household spends $120,000 for the year, not $100,000. (70 take home + 50 expended in business start up = 120.)
What few people realize is the the tax codes are written to encourage people to start up businesses. The $50,000 is spent in time and money on what you love to do. It will necessarily be around the most satisfying part of your life. Talk this over with a CPA, and see what can be "written off" and how that matches what you would be doing anyway.
The government may decide to raise taxes on your government income, but they will never cut your salary. The government must, it has no choice, but to give us all, including you, some derogation of what we get for our money, in some way, to some degree.
To have a business cooking up something over the next few years is likely to be the best bet anyone can make over the next 30 years.
I'd welcome a critique of this idea from any CPAs out there.
Update:
If you are an employee, the problem is that "unreimbursed employee expenses" are only deductible to the extent they exceed 2% of your Adjusted Gross Income. I never wanted to open that can of worms for the relatively small deduction I would get once I subtracted that 2%.
If you file a Schedule C (Profit or Loss from a Business), you can deduct ski relates expenses there. If I were an equipment rep, or had some other kind of ski business, I would use Schedule C to deduct all my skiing expenses. There are special rules for "hobby businesses," and eventually you will need to show a profit, or they will limit your deduction to the gross revenue from the business. I could deduct my skiing expenses on the Schedule C for my consulting business, but I am afraid that it would not pass the laugh test in an audit.
Maybe you might better ... consult an actual CPA.
I am surprised people are not aware of this, but apparently not. Here
Feel free to forward this by email to three of your friends.
So say the Undersecretary for Whimsical Things is paid $150,000 per year. Uncle Sam takes say 1/3rd in taxes, so the Undersecretary takes home $100,000. The $50,000 in taxes is recycled through again. The reason, I am sure, has something to do with street theatre suggesting the army of government workers pay taxes. Could we save tens of millions in transaction costs by just paying government workers net? Of course, but not so fast.
In individual cases, this should be run past a CPA, but say that Undersecretary was to spend $50,000 on a start-up business, yet made no money for his efforts yet. Then his net would be $100,000, not $150,000. He would be taxed on his $100,000, say about $30,000 for $70,000 take home.
No way! Why would anyone do that? Look at that $50,000... that is money that is actually spent by the Undersecretary in his new family biz. I talk about what business, ideas for start-ups, here. Time, creativity passion, joy... and the start of a business. Sure the take home is only $70,000, but the household spends $120,000 for the year, not $100,000. (70 take home + 50 expended in business start up = 120.)
What few people realize is the the tax codes are written to encourage people to start up businesses. The $50,000 is spent in time and money on what you love to do. It will necessarily be around the most satisfying part of your life. Talk this over with a CPA, and see what can be "written off" and how that matches what you would be doing anyway.
The government may decide to raise taxes on your government income, but they will never cut your salary. The government must, it has no choice, but to give us all, including you, some derogation of what we get for our money, in some way, to some degree.
To have a business cooking up something over the next few years is likely to be the best bet anyone can make over the next 30 years.
I'd welcome a critique of this idea from any CPAs out there.
Update:
If you are an employee, the problem is that "unreimbursed employee expenses" are only deductible to the extent they exceed 2% of your Adjusted Gross Income. I never wanted to open that can of worms for the relatively small deduction I would get once I subtracted that 2%.
If you file a Schedule C (Profit or Loss from a Business), you can deduct ski relates expenses there. If I were an equipment rep, or had some other kind of ski business, I would use Schedule C to deduct all my skiing expenses. There are special rules for "hobby businesses," and eventually you will need to show a profit, or they will limit your deduction to the gross revenue from the business. I could deduct my skiing expenses on the Schedule C for my consulting business, but I am afraid that it would not pass the laugh test in an audit.
Maybe you might better ... consult an actual CPA.
I am surprised people are not aware of this, but apparently not. Here
Feel free to forward this by email to three of your friends.
3 comments:
What about if someone works for a private company and makes $100k/year? Could he use a big percentage of this money to operate a business and pay only $1000/year in taxes? Of course, for the start, he would be both employee and business owner.
Thanks
Yes, it does not matter the source of the income, all income is taxable, and legitimate business expenses are deductible. Look up up a local small business CPA and discuss your specific circumstances... they will likely give you 30 minutes no charge.
I'd love to have any CPA reading this to comment.
Wow, if that is correct, and I will check with my accountant, then employees who pay 1/3 in taxes are to be pitied.
I know quite a few of such people. They work like zombies in the hospital, bring in $200k+ home, then they pay a huge chunk of this as taxes.
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