

How US companies can avoid paying taxes (video) - rmah
http://video.nytimes.com/video/2011/06/19/business/100000000870844/inside-the-accountants-playbook.html

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nhebb
They single out the drug companies in this video, but really it's C
corporations as a whole that can game the system. And the system is designed
to be gamed. The US tax code is a rabbit's warren of incentives that
accountants and tax lawyers get paid well to navigate. Meanwhile, most S corps
and LLC's, with their pass through tax structures, bear the full load.

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parfe
Video is only 3m35s long and I thought it was worth a watch.

Nothing shocking or new, but the video does a good job of tying all the steps
together for how (drug) corporations can reduce their tax load.

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fierarul
The key word being "(drug) corporations" since they are large enough to afford
this.

This is beyond the reach of your average small company / startup. 'Little
people' do pay quite close to the 35%.

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parfe
Do the little people pay that? Or do they take all revenue as salary and zero
out the profit? Which is what I assume every small business does.

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natnat
After you make about 375k, you have to pay 35% tax on every extra dollar of
salary too.

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Nrsolis
Source?

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dangrossman
The IRS, that's the top income tax bracket. They're listed in the form 1040
instructions if you want to see it on paper.

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Nrsolis
Actually, I was referring to the assertion that you're in the 35% tax bracket
when your salary hits ~375K. There is a lot of confusion in this area,
especially when things like pass-through entities (like LLCs and S-Corps) are
involved.

Keep in mind that salary income from an LLC or from an S-Corp is also taxed by
Soc. Security and Medicare (the dreaded ~15% self-employment tax) while
capital gains from an LLC/S-Corp isn't necessarily subject to it.

My point (and I do have one) is that the tax picture is considerably murkier
when there is a business involved, be it a small one or a large one. Income
taxes for salaried workers are a relatively straightforward matter. Income
taxes for owners of businesses are another thing entirely. Deductions for
business expenses are just a small part of that circus. The rules for
businesses are a BIG part of the tax code and responsible for much of the
shenanigans. If you think paying $250 for H&R block to prepare your return is
steep, try paying something like $15-$30K for a moderately complex return for
an LLC.

(NOTE: My next-door neighbor just retired from the IRS after 30 years doing
small business audits and my ex-fiance is a tax accountant. I've also owned
and filed taxes for S-corps and LLCs as a principal. Shit just got real.)

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dangrossman
I pay my accountant $275 to do the returns for my LLC. I keep my own books the
rest of the year. I've been audited by the IRS and owed no money after the
audit. Having a business doesn't automatically make things super complex. It's
only complicated if your business is complicated.

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Nrsolis
Do you have employees? How about lots of capital assets with varying
depreciation schedules? Do you operate in a business that gets different tax
treatment for operating in a special zone? Do you get income from many states?

Your situation isn't typical. In fact, it's probably an outlier. I know
performers who have to file 43 different state tax returns.

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DrHankPym
> Even though the American corporate tax rate is 35%, nobody pays that.

Is she saying no corporation pays that or just drug corporations?

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cheez
Another reason why income taxes are silly.

Downvote? Do you enjoy bearing the burden?

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krschultz
While my car currently needs to be repaired, I don't go around saying that
cars are silly. The US tax code is a broken mess, but that is just an
implementation problem.

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cheez
With all due respect, that's akin to saying my car would be a plane if it
could fly.

Tell me, how would you fix the incentives to loophole the hell out of the tax
code?

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mkr-hn
Convince the loophole abusers to support a new tax system that incentivizes
what needs to be incentivized, and funds what we as a society decide needs to
be funded. The hard part is finding that tax system. I think the needed change
is possible, but I think it'll require things getting so bad that even the
worst of abusers are convinced that there's a problem.

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cheez
By definition, the worst of the abusers will benefit the most so why would
they ever see anything wrong?

