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> The part that makes it not fraud is that both parties do actually do the work. It's far more nuanced than that. If you do the work but undervalue it, it's l
by bryanlarsen 6mo ago
> The part that makes it not fraud is that both parties do actually do the work.
It's far more nuanced than that.
If you do the work but undervalue it, it's likely tax fraud.
If you do the work but overvalue it, it's likely investor fraud.
Even if you fairly value the work it still might be investor fraud. The vendor may have been chosen not by merit, but by its willingness to accept an exchange of services. Saying you have $X in revenue implies you won that revenue by merit.
- retr0rocket 6mo ago[dead]
- scarby2 6mo agoThis isn't a good take. > If you do the work but undervalue it, it's likely tax fraud. A company can value it's services as it chooses. If the work is performed for $1 or $5000 the government doesn't get a say in that. > you do the work but overvalue it, it's likely investor fraud. Quite possibly. Assuming this was done with the intention of misrepresenting your revenue and gaining investment. >The vendor may have been chosen not by merit, but by its willingness to accept an exchange of services. Saying you have $X in revenue implies you won that revenue by merit. Vendors are chosen all the time because of their willingness to accept specific payment terms and a whole bunch of non-merit pipelines via family, via golf course deals etc.
- bloppe 6mo ago> If the work is performed for $1 or $5000 the government doesn't get a say in that What if you're getting paid in landscaping?
- scarby2 6mo agoOn a corporate level it doesn't really matter as you're only taxed on your profits/losses. If we do a service swap ultimately it's just adding a revenue item with a matching loss, and these are infact quantified. As an individual interestingly it does matter because services received for free are considered taxable income (but businesses are not taxed on their income).
- kube-system 6mo agoThere are corporate taxes on revenue in some situations
- danielmarkbruce 6mo agoYou are just making stuff up, this isn't remotely close to how tax law works.
- gamblor956 6mo agoThe first paragraph is generally correct. The second is not. Business are taxed on their net income but many jurisdictions tax businesses on their gross revenue as well (look up GRT and GET).
- cjbgkagh 6mo agoTax law is guilty until proven innocent. Investor fraud is usually brought as a civil case and takes a balance of evidence approach. Since enforcement is stochastic and rare these practices are pretty common. The freedom to do ‘whatever’ is really dependent on the discretion of the government and investors. Most companies can and do fly under the radar but have to be careful not to piss off the wrong people.
- philipallstar 6mo agoOkay but then why are we singling this out as tax fraud, if the justification is just "anything can be"? Why not claim that posting on HN is tax fraud?
- cjbgkagh 6mo agoBarter counts as income by many tax jurisdictions, if you don’t declare the fair market value of the exchange you are in violation. Most people don’t declare this and it is rarely ever enforced.
- gamblor956 6mo agoTax fraud is treated the same as other crimes and is subject to the same evidentiary threshold.
- cjbgkagh 6mo agoIt depends on jurisdiction, the US is unusual, most countries they’ll reassess you and it’s on you to prove them wrong. I did have to look it up, I didn’t know that the US was different in this way. I did have the California tax authority make a mistake and take money directly out of my account and there didn’t appear to be a way to fight it. It wasn’t enough to be worth hiring a lawyer over so I let it go but it didn’t give me much faith in the governance of California, very Kafkaesque.
- gamblor956 6mo agoI'm a tax lawyer... CA FTB does not take money out of your account unless you have explicitly authorized it to do so and it definitely does not do so automatically. It only pulls specifically authorized amounts when specifically authorized to do so unless you have a garnishment order issued by a court. (I deal with the CA FTB on a daily basis.) You're also wrong about most other countries as well, with the exception of France.
- cortesoft 6mo ago> A company can value it's services as it chooses. If the work is performed for $1 or $5000 the government doesn't get a say in that. It isn’t that black and white. If you are being paid in cash, you can charge whatever you want, that is true. But if you are exchanging goods or services for other goods or services, the government is going to care how you value that transaction.
- elil17 6mo ago> A company can value it's services as it chooses. If the work is performed for $1 or $5000 the government doesn't get a say in that. That's simply not true. You may get a certain amount of leeway, but it has to be reasonable.
- andix 6mo agoNo, it doesn't have to be "reasonable". Its only illegal if it is used to cover up some other illegal thing. For example giving huge discounts below cost only to family members, which is more or less like paying them money without paying taxes for it.
- thih9 6mo agoNote that we’re talking about two companies exchanging services. When two companies undervalue the services that they offer to each other, they pay lower taxes. This is the illegal part.
- tstenner 6mo agoIf the expense is tax deductable, it mostly doesn't matter whether you have $10 earnings vs $10 business expenses or $10K.
- deleted 6mo ago[deleted]
- thih9 6mo agoGood luck explaining that to the IRS.
- gamblor956 6mo agoThe IRS would be fine worth it if taxable income is unchanged. Businesses are taxed on their net income, not get gross.
- stymaar 6mo ago> A company can value it's services as it chooses. If the work is performed for $1 or $5000 the government doesn't get a say in that. Whether it you think it should or not depends on your personal preferences, but in practice the government does get a say in anything that it deems to be an undue way to reduce your taxes. Barter would be much more common if it was a legal way of avoiding taxes.
- hattmall 6mo agoHow would this reduce taxes? If I normally charge 20k for widget Z but only invoice company A 10k because they will see me widget B for 10k and we trade widgets, there is no taxable event. If company A was willing to pay the 20k instead obviously I would rather have that even if it creates 10k taxable income because profit. Investor fraud is much more likely if neither company actually needs each other's widgets and it's just to pump revenue.
- nine_k 6mo ago[dead]
- nitwit005 6mo ago[dead]
- danielmarkbruce 6mo agoThis is pure nonsense. In the US the internal revenue code doesn't allow you to just value services however you choose in what is effectively a barter arrangement.
- Gathering6678 6mo agoTax is a complex issue that differs from one jurisdiction to another, and I am in no way an expert in any of them, but I do believe most tax authorities would require fair value exchanges. Which means, "If the work is performed for $1 or $5000 the government doesn't get a say in that." --- it absolutely does, in the way of requiring the person getting a "$1 service" to calculate their tax as if they got $5000.
- mannanj 6mo agoAnd who chooses how to value unique, innovative and visionary work?
- singleshot_ 6mo agoArticle 1 judges in US Tax Court?
- bryanlarsen 6mo agoAnd the judges are likely to be looking for good faith as much or more than technical accuracy in the valuation. So the IRS is not going to bring you in front of the tax judge unless they have evidence of bad faith. OTOH, most work is not "unique, innovative and visionary" and has a relatively transparent fair market value.
- singleshot_ 6mo agoTypically how it works is you pay the taxes assessed, then you sue in Tax Court.
- brandensilva 6mo agoIf that is fraud then company evaluations are fraud too. Case in point SpaceX and it's smorgasbord of other companies rolled into it to save them. Who protects the consumer when they have been gutted of any power?
- andix 6mo ago> If you do the work but undervalue it, it's likely tax fraud Probably not, it's just giving a discount. Nothing wrong with that. Many companies sell goods or services below cost. To gain other benefits like market share, or new customers. Why not do it to get something else essential from another company? > If you do the work but overvalue it, it's likely investor fraud It probably depends on the situation. If it's mainly used to inflate sales figures and scam investors, then probably yes. If it's just a "good deal" then probably not.
- thih9 6mo ago> Probably not, it's just giving a discount. Nothing wrong with that. Discounting and undervaluing have differences, one of them is transparency. As you say, many companies offer discounts and don’t hide that. People who commit tax fraud usually aren’t transparent about their “discounts”.
- andix 6mo agoDiscounts are often not transparent. Have you ever seen a SaaS that lists "Enterprise pricing: contact us"? It's basically saying they give you as much discount as you need to be able to afford the service. And those discounts are very secret by design.
- deleted 6mo ago[deleted]
- DANmode 6mo agoThis is actually the most charitable interpretation of “Contact Us”. If I want to sell my SaaS to small primary schools for 90% off, I should be able to do that. Probably. Let’s discuss.
- c7b 6mo agoRe taxes: Barter exchanges are considered taxable revenue by the IRS and must be reported on a 1099-B form. [0] [0] https://en.wikipedia.org/wiki/Barter https://en.wikipedia.org/wiki/Barter Re investors: please list at least one credible source supporting this assertion.
- bryanlarsen 6mo agohttps://www.law.cornell.edu/wex/securities_act_of_1933 https://www.law.cornell.edu/wex/securities_act_of_1933 Any lie, misleading omission or misleading half-truth is investor fraud.
- DANmode 6mo ago> The vendor may have been chosen not by merit, but by its willingness to accept an exchange of services. If a firm can’t afford services cash, that’s part of the merit of the choice. This is not compelling.