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How would you avoid companies-as-expense accounts? If I form "Coral-Snake & Co.", wouldn't I be able to pay 0% taxes by just directing all income/expenses into

How would you avoid companies-as-expense accounts? If I form "Coral-Snake & Co.", wouldn't I be able to pay 0% taxes by just directing all income/expenses into that shell? (Granted, I don't understand basically anything about tax law, so maybe this is already a well-defined problem with a well-defined solution.)

seibelj 7y ago
This is already doable with a multitude of ways. If I have profits, and I direct them to a business, then argue plausibly that my life expenses (lunches, travel, cars, computers) are for my business, I can write off all those expenses against my profits. Business owners do this all the time.
- coral-snake 7y ago
  Wouldn't a 0% corporate tax make it even more incentivized than it is today? As a novice, this feels like an approach that punishes the well-off, who may not expend the resources to structure all assets/liabilities this way, at the expense of the super-well-off who will simply pay multiple other people to re-organize their own financials.
- hcknwscommenter 7y ago
  Business owners that do that had better be very careful and keep plenty of documentation. There are legal "tests" (read requirements) that must be met for those lunches, travel, cars, computers, etc. to be considered an expense. In many cases, any "non-business" use/benefit/enjoyment renders the entire expense not a business expense. Yes, it is not so rare for small business owners to play loose with the rules. And then they get audited and end up paying a lot in back taxes.
asdfasgasdgasdg 7y ago
By making it illegal. People already do that and when they get caught they sometimes go to jail or otherwise pay severe penalties. Also a company with no profits already pays no taxes so to the extent you wanted to roll the dice this way you could do it just as well under current law.
deleted 7y ago
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manigandham 7y ago
You can already show a $0 profit today and pay no income tax, but a business that generates income will always pay sales, payroll and other taxes anyway.
- dnautics 7y ago
  No, you'd have to show $0 income (ignoring for a moment the low 0% tax bracket). So, very much negative profit, unless you're not paying rent, fuel for your car, food, not to mention taxes like property taxes, sales taxes, etc.
  - manigandham 7y ago
    Corporate taxes in the US are based on business profits. $0 profit = $0 net income (gross income minus expenses) => $0 income tax. There's no such thing as a negative profit. That's called a loss.
    - dnautics 7y ago
      by my reading the parent was comparing personal income tax policy with corporate income tax policy, and as a person you can take a loss and still be taxed.

seibelj 7y ago

This is already doable with a multitude of ways. If I have profits, and I direct them to a business, then argue plausibly that my life expenses (lunches, travel, cars, computers) are for my business, I can write off all those expenses against my profits. Business owners do this all the time.

coral-snake 7y ago
Wouldn't a 0% corporate tax make it even more incentivized than it is today? As a novice, this feels like an approach that punishes the well-off, who may not expend the resources to structure all assets/liabilities this way, at the expense of the super-well-off who will simply pay multiple other people to re-organize their own financials.
hcknwscommenter 7y ago
Business owners that do that had better be very careful and keep plenty of documentation. There are legal "tests" (read requirements) that must be met for those lunches, travel, cars, computers, etc. to be considered an expense. In many cases, any "non-business" use/benefit/enjoyment renders the entire expense not a business expense. Yes, it is not so rare for small business owners to play loose with the rules. And then they get audited and end up paying a lot in back taxes.

asdfasgasdgasdg 7y ago

By making it illegal. People already do that and when they get caught they sometimes go to jail or otherwise pay severe penalties. Also a company with no profits already pays no taxes so to the extent you wanted to roll the dice this way you could do it just as well under current law.

deleted 7y ago

[deleted]

manigandham 7y ago

You can already show a $0 profit today and pay no income tax, but a business that generates income will always pay sales, payroll and other taxes anyway.

dnautics 7y ago
No, you'd have to show $0 income (ignoring for a moment the low 0% tax bracket). So, very much negative profit, unless you're not paying rent, fuel for your car, food, not to mention taxes like property taxes, sales taxes, etc.
- manigandham 7y ago
  Corporate taxes in the US are based on business profits. $0 profit = $0 net income (gross income minus expenses) => $0 income tax. There's no such thing as a negative profit. That's called a loss.
  - dnautics 7y ago
    by my reading the parent was comparing personal income tax policy with corporate income tax policy, and as a person you can take a loss and still be taxed.