7 ms·

Could you link to any "for dummies"-type resources that show how you can incorporate and use that corporation to reduce your taxes? Something that would hopeful

Could you link to any "for dummies"-type resources that show how you can incorporate and use that corporation to reduce your taxes? Something that would hopefully be applicable to your typical middle-class homeowner in their 30s with young kids and a 9-5 making enough to get by but is looking for any edge they can find? Edit: (in the US)

nsnick 9y ago
Start by getting paid on a 1099 instead of a w2
- ckinnan 9y ago
  Which means immediately higher taxes because you get to pay the employer side of payroll taxes, plus no pretax benefits like health care and no vacation or other untaxed benefits.
  - tdfx 9y ago
    You can elect to have your LLC taxed as an S-corp to avoid some of the self-employment tax [1]. 1. https://www.thebalance.com/what-is-a-reasonable-salary-for-an-s-corporation-officer-397939 https://www.thebalance.com/what-is-a-reasonable-salary-for-a...
  - hippich 9y ago
    this applies to the certain degree.. if you make less than FICA threshold - yes, you are right. If you make more from multiple contracts/jobs - it is more efficient to be paid as contractor (assuming that client will pay you your employee taxes share, which would otherwise be paid by employer in case of W-2 employment)
- prostoalex 9y ago
  I wonder then why those Uber drivers so adamantly oppose a path to riches.
  - pas 9y ago
    Because if you are a contractor then it's your responsibility to provide healthcare for yourself and think of the costs of that and factor that into your prices. But if you don't set your prices, because you're a one-of-a-million driver, then you're shit out of luck.
reboog711 9y ago
No link, but the gist in the US is this: 1) Start Business 2) Get Real Clients to buy your stuff 3) Deduct Expenses 4) Pay 40%* of whatever is left over to the Government * The 40% number can go up and down depending on your income amount [and local tax commitments].
- SilasX 9y ago
  That doesn't reduce your taxes, that just has you personally take on the accounting for an enterprise. It would only work if you could relabel personal expenses as a business expense, which is what I think the parent was looking for (and which is a time-honored practice with its own dangers, of course, but is hard for the IRS to stamp out entirely -- you "lose" a "business" pen and keep using it for personal stuff; how does the IRS know?).
  - reboog711 9y ago
    As always talk to an accountant. But, the 'deduct expenses' will help reduce taxes.
  - pas 9y ago
    Use a company car, and company pay for gas. You can deduct that as expense. Company phone. Company pays your data plan. Deduct. You register your company at home, okay you can make an office, you can then deduct some expense as facility operational costs. (Of course there are a lot of regulations for this, and you have to document how big the office is, and it can't be bigger than X% of the house, otherwise it'd be income tax hiding - because it'd be the company paying your rent or just giving you money to heat your bedroom, which is not a business expense.) Company sends you overseas on work? Business expense. But if you go there for 2 weeks and then post beach photos on Facebook for every day, you're in big trouble.
    - SilasX 9y ago
      What is that responding to? I said it has its own dangers and the IRS stamps it out but there are some minor ways where it cant.
random023987 9y ago
Tax shelters are not made for people like you. The middle class is best served by collective bargaining to increase their wages and benefits, strong consumer protections, and access to affordable health care. Up to about your first 5-10 million (depending on where you live) you need to play by the rules. After that, you can think about hiring a tax advisor to start scamming the system. But the downmarket financial advisors that serve people with a paltry million or two are mostly focused on selling high-commission financial products.
- dougk16 9y ago
  The OP mentioned starting their strategy when they were 25, implying they are/were a "normal" person, which is why I asked, since my vague understanding of the situation in the US matches what you describe, that you have to have gobs of money to begin with before you can really start gaming things.
  - brianwawok 9y ago
    It sounds like what they are doing may not be 100% audit proof. Do you want to play the shady taxes game and hope you don't get caught?
    - hippich 9y ago
      I will agree with brianwawok. Amount of BS I hear from friends "optimizing" their taxes is staggering. Be very careful about any advice you receive from such entrepreneur. Most of them either breaking laws, or breaking IRS rules, which, unless you got plenty of time and money to challenge in the court, is equivalent of laws for you (I guess until you get to these 10m+ where you can afford to fight IRS - I am not there yet, so can't comment)
- tanderson92 9y ago
  There are tax shelters and loopholes for upper middle class workers. The whole tIRA -> Roth IRA conversion is a trivial way to avoid the Roth IRA income contribution cap. The 401(k) system is itself a tax shelter, and is a larger portion of middle class earners' salary than it is for those with tens of millions. Need I mention HSAs which are like triply-tax protected?

nsnick 9y ago

Start by getting paid on a 1099 instead of a w2

ckinnan 9y ago
Which means immediately higher taxes because you get to pay the employer side of payroll taxes, plus no pretax benefits like health care and no vacation or other untaxed benefits.
- tdfx 9y ago
  You can elect to have your LLC taxed as an S-corp to avoid some of the self-employment tax [1]. 1. https://www.thebalance.com/what-is-a-reasonable-salary-for-an-s-corporation-officer-397939 https://www.thebalance.com/what-is-a-reasonable-salary-for-a...
- hippich 9y ago
  this applies to the certain degree.. if you make less than FICA threshold - yes, you are right. If you make more from multiple contracts/jobs - it is more efficient to be paid as contractor (assuming that client will pay you your employee taxes share, which would otherwise be paid by employer in case of W-2 employment)
prostoalex 9y ago
I wonder then why those Uber drivers so adamantly oppose a path to riches.
- pas 9y ago
  Because if you are a contractor then it's your responsibility to provide healthcare for yourself and think of the costs of that and factor that into your prices. But if you don't set your prices, because you're a one-of-a-million driver, then you're shit out of luck.

reboog711 9y ago

No link, but the gist in the US is this: 1) Start Business 2) Get Real Clients to buy your stuff 3) Deduct Expenses 4) Pay 40%* of whatever is left over to the Government * The 40% number can go up and down depending on your income amount [and local tax commitments].

SilasX 9y ago
That doesn't reduce your taxes, that just has you personally take on the accounting for an enterprise. It would only work if you could relabel personal expenses as a business expense, which is what I think the parent was looking for (and which is a time-honored practice with its own dangers, of course, but is hard for the IRS to stamp out entirely -- you "lose" a "business" pen and keep using it for personal stuff; how does the IRS know?).
- reboog711 9y ago
  As always talk to an accountant. But, the 'deduct expenses' will help reduce taxes.
- pas 9y ago
  Use a company car, and company pay for gas. You can deduct that as expense. Company phone. Company pays your data plan. Deduct. You register your company at home, okay you can make an office, you can then deduct some expense as facility operational costs. (Of course there are a lot of regulations for this, and you have to document how big the office is, and it can't be bigger than X% of the house, otherwise it'd be income tax hiding - because it'd be the company paying your rent or just giving you money to heat your bedroom, which is not a business expense.) Company sends you overseas on work? Business expense. But if you go there for 2 weeks and then post beach photos on Facebook for every day, you're in big trouble.
  - SilasX 9y ago
    What is that responding to? I said it has its own dangers and the IRS stamps it out but there are some minor ways where it cant.

random023987 9y ago

Tax shelters are not made for people like you. The middle class is best served by collective bargaining to increase their wages and benefits, strong consumer protections, and access to affordable health care. Up to about your first 5-10 million (depending on where you live) you need to play by the rules. After that, you can think about hiring a tax advisor to start scamming the system. But the downmarket financial advisors that serve people with a paltry million or two are mostly focused on selling high-commission financial products.

dougk16 9y ago
The OP mentioned starting their strategy when they were 25, implying they are/were a "normal" person, which is why I asked, since my vague understanding of the situation in the US matches what you describe, that you have to have gobs of money to begin with before you can really start gaming things.
- brianwawok 9y ago
  It sounds like what they are doing may not be 100% audit proof. Do you want to play the shady taxes game and hope you don't get caught?
  - hippich 9y ago
    I will agree with brianwawok. Amount of BS I hear from friends "optimizing" their taxes is staggering. Be very careful about any advice you receive from such entrepreneur. Most of them either breaking laws, or breaking IRS rules, which, unless you got plenty of time and money to challenge in the court, is equivalent of laws for you (I guess until you get to these 10m+ where you can afford to fight IRS - I am not there yet, so can't comment)
tanderson92 9y ago
There are tax shelters and loopholes for upper middle class workers. The whole tIRA -> Roth IRA conversion is a trivial way to avoid the Roth IRA income contribution cap. The 401(k) system is itself a tax shelter, and is a larger portion of middle class earners' salary than it is for those with tens of millions. Need I mention HSAs which are like triply-tax protected?