What percentage of the 1 percent own businesses? I feel that many of the one percenters make way more than ,, but use tax shields as the ones you described to show less income. I know this is an older fourm but how much would I have to donate in order to pay no income taxes. I make less than 25k a year and have no assets. I just feel the feds are misusing my funds. This year will be the 1st year I will not get anything back due to being self employed. How much in taxes are you paying now?
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I just stumbled upon this forum. Which way would be most beneficial tax-wise? I am selling my business to my son under a formula that is good for both of us. I was astounded at the amount. I do not want to go to work again on a startup company. I am an S corp. Hi Sam, thanks for the piece.
I just wanted to add that a Solo k, while great, may not be applicable as most small-business owners who employ full-time employees will have to make equal contributions to all employee accounts. Of course, there are certain ways to circumvent this by hiring only employees who are non-resident alien, or union, or under 21, etc. If there was a way to have a decent income and not pay taxes, the government would shut that down in a hurry. I used to prepare taxes for individuals and businesses, and I have yet to see anything that really eliminates taxes beyond the obvious stuff like K contributions and charitable deductions.
There was one return that I worked on where someone purchased some hideous looking yard sculptures, let them sit around for several years, had them appraised at pretty high values and then donated them to some organization. I think the key to making this whole thing work is buying something from a semi-legitimate artist and then finding an appraiser who knows how to justify the high value of your unique art.
Plus you really have to let the things sit around for a while to justify the appreciation in value. Other than that, the best way to avoid taxes is to have a small business and cheat. The only way to really not pay taxes is to cheat. Gotta love cash only businesses and huge deductibles that are obviously not real. Add transportation costs, over half our income is gone. Sad but true Nick, high tax rates take away the incentive to work. Is it worth it? For many the answer is no. Thank you progressive tax system. You also end up buying two rental properties.
The rental properties produce about 30k but you have 15k in operating expenses as well as mortgage interest etc. You can then also deduct about 12k for property depreciation. Focus on growing net worth over growing income! This is a mindset we need to change. There was NO personal income tax until It was promised that once that war was over, the Income Tax would be repealed. Yet today, the sheeple who struggle to make ends meet are content to be robbed, at what amounts to gunpoint, of a THIRD of their income by the government.
I understand bringing income to zero. But if you do that and you need a loan or a credit card with a greater credit line for your business—how do you do that? No financial institution seems to care about the amount of money flowing through your accounts. Just wondering if anyone could answer this. I like your examples Sam, but why not just live very low key?
I believe that we all should try to live by the old Spartan adage of never showing wealth. That Lamborgini over there? Locate suitable piece of land, water etc… Decide on a travel trailer, fifth wheel, boat, tiny house, stone house… As a slightly worse alternative, consider owner financing that land, renting it, or buying a fixer upper. But remember a house is not an investment! All for quality of life or take a gamble on the corporate ladder?
A personal business is a much safer bet, or an educated gamble with infinity times the reward. You must know that since you started this blog, right? I just turned Have been working as a business owner in a hectic, high risk, exhausting industry for 13 years hoping for the right opportunity to come along and just as I was about to throw in the towel and take a new direction in life….
Most of my business expenses related to this profit were incurred before the end of and I collected most of the receivables this year without many expenses to offset the income. I file cash basis as an S-Corp. This is pretty much a one shot business lick. I feel like there has to be ways to not give the government that kind of money to squander. I risked every dime I had to invest into this high risk endeavor, slept on a blowup mattress for 10 months miles away from home and worked hrs a day 7 days a week to make it happen.
I stuck it out in a crazy business that has robbed me of any normal social life constantly moving around the country , worked my tail off and risked it all and was fortunate enough to be in a good place at the right time and take advantage of an opportunity with every bit of energy I could muster. Any guidance would be much appreciated. I will caution you to not go in for scams that promise to eliminate your tax bill because chances are if you fall for one of these, you will wish to God you had just paid your taxes when faced with actual jail time, penalties and attorney fees.
Increasing business expenses has got to be the easiest most joyful way to enjoy life. Buy more assets which create more income. I cannot agree with you more on multiple points, great article, great way of thinking, thank you for sharing. You will see my email ID with this comment, you mention that for the past several years you have been doing your own taxes so that you can understand the nuances and create pro forma scenarios such as AMT etc, do you have those in Excel that I can see? I filled for bankruptcy chapter 7, 6 months ago, and got a letter 2 moths ago that i was granted and my case was closed.
According to them i owed I feel like this is buishit. They are calling it Bankruptcy Discharge. Should fight against this. Can they charge me for tax that i never knew, and never received anything from them in 12 years. Can someone help me on how to deal with this. I think is an absurd. Send them a copy of your bankruptcy discharge. It is also helpful if you can get in touch with an individual revenue agent and get them to look at your case.
Do not pay anything no matter what they tell you, a single payment could be construed as affirmation of your debt and will only spur them on to collect the rest of it and possibly other taxes you might not know about either. I raised 3 kids who are all out on their own now. How can these principals work in my situation??
Just so you know, I file single and I have an excellent credit score of Thankfully I have enough to retire on, so I think this may be the year!!
It makes me sick paying this to the gov for worthless wars and welfare for those that choose not to work or take advantage of the system.. I can stop working.. You can always go John Galt too: I have a friend that has a wine blog where he makes about 10k a year off ads and consulting.
He deducts almost k in actual wine as business expenses he needs to drink wine in order to blog about it no? If I make only 23k a year now and want to stay in this tax bracket, what is my best way to lower my taxed income? My gross income is around kk filing jointly. There is no way I can pay no taxes. Do you have any suggestion in my case. Also buying mortgage worth 1million you atleast need k as down payment and if you do not take home any money. You will never be able to buy any mortgage.
How should I avoid paying this much? Should I create an LLC or an s-corp and report losses to that side business? What is the best way for a young single professional who is struggling to make ends meet due to high rent, deal with lowering taxes? This can shelter an additional per year. The paying interest is a sucker bet. Also consider utilizing savings strategies that grow tax deferred and the money can grow with uninterrupted compound interest over long periods of time.
This is called The Infinite Banking Concept. If done correctly, paying taxes only once on the seed and compounding over mulitple generations then you too can be like the Rockefellers and other wealthy Dynasties. Hence the reason I called my business Dynasty Banking!
If I start my own business, can I contribute an additional amount to save additional taxes? I am 60 yo, have 5 rental homes as a business. Another Business, Horse lessons. Wife is a contract computer person. Your examples are really geared toward 1 million dollar properties or more. Now, my plan has been to build an income, so I can retire and also leave my Son a money machine. I do realize, that locations change character and am planning on selling then buying in a different area utilizing the tax exchange.
How To Pay Little To No Taxes For The Rest Of Your Life
But your example numbers are sort of like a hotel in New York. And yes, you have little money to live on. Real estate or realty is the combination of land and improvements to land. Property taxes are usually charged on a recurrent basis e. A common type of property tax is an annual charge on the ownership of real estate , where the tax base is the estimated value of the property. For a period of over years from a window tax was levied in England, with the result that one can still see listed buildings with windows bricked up in order to save their owners money.
A similar tax on hearths existed in France and elsewhere, with similar results. The two most common type of event driven property taxes are stamp duty , charged upon change of ownership, and inheritance tax , which is imposed in many countries on the estates of the deceased. In contrast with a tax on real estate land and buildings , a land value tax or LVT is levied only on the unimproved value of the land "land" in this instance may mean either the economic term, i. Proponents of land value tax argue that it is economically justified, as it will not deter production, distort market mechanisms or otherwise create deadweight losses the way other taxes do.
When real estate is held by a higher government unit or some other entity not subject to taxation by the local government, the taxing authority may receive a payment in lieu of taxes to compensate it for some or all of the foregone tax revenues. In many jurisdictions including many American states , there is a general tax levied periodically on residents who own personal property personalty within the jurisdiction.
Vehicle and boat registration fees are subsets of this kind of tax. The tax is often designed with blanket coverage and large exceptions for things like food and clothing. Household goods are often exempt when kept or used within the household. Inheritance tax, estate tax, and death tax or duty are the names given to various taxes which arise on the death of an individual. In United States tax law , there is a distinction between an estate tax and an inheritance tax: However, this distinction does not apply in other jurisdictions; for example, if using this terminology UK inheritance tax would be an estate tax.
An expatriation tax is a tax on individuals who renounce their citizenship or residence. The tax is often imposed based on a deemed disposition of all the individual's property.
Historically, in many countries, a contract needs to have a stamp affixed to make it valid. The charge for the stamp is either a fixed amount or a percentage of the value of the transaction. In most countries, the stamp has been abolished but stamp duty remains. Stamp duty is levied in the UK on the purchase of shares and securities, the issue of bearer instruments, and certain partnership transactions. Its modern derivatives, stamp duty reserve tax and stamp duty land tax , are respectively charged on transactions involving securities and land. Stamp duty has the effect of discouraging speculative purchases of assets by decreasing liquidity.
In the United States , transfer tax is often charged by the state or local government and in the case of real property transfers can be tied to the recording of the deed or other transfer documents. Some countries' governments will require declaration of the tax payers' balance sheet assets and liabilities , and from that exact a tax on net worth assets minus liabilities , as a percentage of the net worth, or a percentage of the net worth exceeding a certain level.
The tax may be levied on " natural " or " legal persons. T , Single Business Tax, or Turnover Tax in some countries, applies the equivalent of a sales tax to every operation that creates value. To give an example, sheet steel is imported by a machine manufacturer. That manufacturer will pay the VAT on the purchase price, remitting that amount to the government. The manufacturer will then transform the steel into a machine, selling the machine for a higher price to a wholesale distributor.
The manufacturer will collect the VAT on the higher price, but will remit to the government only the excess related to the "value added" the price over the cost of the sheet steel. The wholesale distributor will then continue the process, charging the retail distributor the VAT on the entire price to the retailer, but remitting only the amount related to the distribution mark-up to the government.
For a VAT and sales tax of identical rates, the total tax paid is the same, but it is paid at differing points in the process. VAT is usually administrated by requiring the company to complete a VAT return, giving details of VAT it has been charged referred to as input tax and VAT it has charged to others referred to as output tax. The difference between output tax and input tax is payable to the Local Tax Authority. Many tax authorities have introduced automated VAT which has increased accountability and auditability , by utilizing computer-systems, thereby also enabling anti-cybercrime offices as well.
Sales taxes are levied when a commodity is sold to its final consumer. Retail organizations contend that such taxes discourage retail sales. The question of whether they are generally progressive or regressive is a subject of much current debate. People with higher incomes spend a lower proportion of them, so a flat-rate sales tax will tend to be regressive. It is therefore common to exempt food, utilities and other necessities from sales taxes, since poor people spend a higher proportion of their incomes on these commodities, so such exemptions make the tax more progressive.
This is the classic "You pay for what you spend" tax, as only those who spend money on non-exempt i. A small number of U. Such states tend to have a moderate to large amount of tourism or inter-state travel that occurs within their borders, allowing the state to benefit from taxes from people the state would otherwise not tax. In this way, the state is able to reduce the tax burden on its citizens. Additionally, New Hampshire and Tennessee levy state income taxes only on dividends and interest income.
Of the above states, only Alaska and New Hampshire do not levy a state sales tax. Additional information can be obtained at the Federation of Tax Administrators website. In the United States, there is a growing movement  for the replacement of all federal payroll and income taxes both corporate and personal with a national retail sales tax and monthly tax rebate to households of citizens and legal resident aliens. The tax proposal is named FairTax. An excise duty is an indirect tax imposed upon goods during the process of their manufacture, production or distribution, and is usually proportionate to their quantity or value.
Excise duties were first introduced into England in the year , as part of a scheme of revenue and taxation devised by parliamentarian John Pym and approved by the Long Parliament. These duties consisted of charges on beer, ale, cider, cherry wine and tobacco, to which list were afterwards added paper, soap, candles, malt, hops, and sweets. The basic principle of excise duties was that they were taxes on the production, manufacture or distribution of articles which could not be taxed through the customs house , and revenue derived from that source is called excise revenue proper.
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The fundamental conception of the term is that of a tax on articles produced or manufactured in a country. In the taxation of such articles of luxury as spirits, beer, tobacco, and cigars, it has been the practice to place a certain duty on the importation of these articles a customs duty. Excises or exemptions from them are also used to modify consumption patterns of a certain area social engineering. For example, a high excise is used to discourage alcohol consumption, relative to other goods. This may be combined with hypothecation if the proceeds are then used to pay for the costs of treating illness caused by alcohol abuse.
Similar taxes may exist on tobacco , pornography , etc. A carbon tax is a tax on the consumption of carbon-based non-renewable fuels, such as petrol, diesel-fuel, jet fuels, and natural gas. The object is to reduce the release of carbon into the atmosphere. In the United Kingdom, vehicle excise duty is an annual tax on vehicle ownership. An import or export tariff also called customs duty or impost is a charge for the movement of goods through a political border.
Tariffs discourage trade , and they may be used by governments to protect domestic industries. A proportion of tariff revenues is often hypothecated to pay government to maintain a navy or border police. The classic ways of cheating a tariff are smuggling or declaring a false value of goods. Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy , investment policy , and agricultural policy. A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc.
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A customs union has a common external tariff , and the participating countries share the revenues from tariffs on goods entering the customs union. In some societies, tariffs also could be imposed by local authorities on the movement of goods between regions or via specific internal gateways. A notable example is the likin , which became an important revenue source for local governments in the late Qing China.
Occupational taxes or license fees may be imposed on businesses or individuals engaged in certain businesses. Many jurisdictions impose a tax on vehicles. A poll tax, also called a per capita tax , or capitation tax , is a tax that levies a set amount per individual.
It is an example of the concept of fixed tax. One of the earliest taxes mentioned in the Bible of a half-shekel per annum from each adult Jew Ex. Poll taxes are administratively cheap because they are easy to compute and collect and difficult to cheat. Economists have considered poll taxes economically efficient because people are presumed to be in fixed supply and poll taxes therefore do not lead to economic distortions. However, poll taxes are very unpopular because poorer people pay a higher proportion of their income than richer people. Scotland was the first to be used to test the new poll tax in with England and Wales in The change from a progressive local taxation based on property values to a single-rate form of taxation regardless of ability to pay the Community Charge , but more popularly referred to as the Poll Tax , led to widespread refusal to pay and to incidents of civil unrest, known colloquially as the ' Poll Tax Riots '.
Some types of taxes have been proposed but not actually adopted in any major jurisdiction. An ad valorem tax is one where the tax base is the value of a good, service, or property. Sales taxes, tariffs, property taxes, inheritance taxes, and value added taxes are different types of ad valorem tax. An ad valorem tax is typically imposed at the time of a transaction sales tax or value added tax VAT but it may be imposed on an annual basis property tax or in connection with another significant event inheritance tax or tariffs. In contrast to ad valorem taxation is a per unit tax, where the tax base is the quantity of something, regardless of its price.
An excise tax is an example. Consumption tax refers to any tax on non-investment spending, and can be implemented by means of a sales tax, consumer value added tax, or by modifying an income tax to allow for unlimited deductions for investment or savings. This includes natural resources consumption tax , greenhouse gas tax Carbon tax , "sulfuric tax", and others. The stated purpose is to reduce the environmental impact by repricing.
Economists describe environmental impacts as negative externalities. As early as , Arthur Pigou suggested a tax to deal with externalities see also the section on Increased economic welfare below. The proper implementation of environmental taxes has been the subject of a long lasting debate. An important feature of tax systems is the percentage of the tax burden as it relates to income or consumption. The terms progressive, regressive, and proportional are used to describe the way the rate progresses from low to high, from high to low, or proportionally.
The terms describe a distribution effect, which can be applied to any type of tax system income or consumption that meets the definition. The terms can also be used to apply meaning to the taxation of select consumption, such as a tax on luxury goods and the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption and decreases a tax burden on low end consumption.
Taxes are sometimes referred to as "direct taxes" or "indirect taxes". The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. An economic definition, by Atkinson, states that " In law, the terms may have different meanings. Indirect taxes are imposed on events, rights, privileges, and activities. Governments may charge user fees , tolls, or other types of assessments in exchange of particular goods, services, or use of property. These are generally not considered taxes, as long as they are levied as payment for a direct benefit to the individual paying.
Some scholars refer to certain economic effects as taxes, though they are not levies imposed by governments. Other records are granary receipts on limestone flakes and papyrus. In Genesis chapter 47, verse 24 — the New International Version , it states "But when the crop comes in, give a fifth of it to Pharaoh.
The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children". Joseph was telling the people of Egypt how to divide their crop, providing a portion to the Pharaoh. In the Persian Empire , a regulated and sustainable tax system was introduced by Darius I the Great in BC;  the Persian system of taxation was tailored to each Satrapy the area ruled by a Satrap or provincial governor. At differing times, there were between 20 and 30 Satrapies in the Empire and each was assessed according to its supposed productivity. It was the responsibility of the Satrap to collect the due amount and to send it to the treasury, after deducting his expenses the expenses and the power of deciding precisely how and from whom to raise the money in the province, offer maximum opportunity for rich pickings.
The quantities demanded from the various provinces gave a vivid picture of their economic potential. For instance, Babylon was assessed for the highest amount and for a startling mixture of commodities; 1, silver talents and four months supply of food for the army. India , a province fabled for its gold, was to supply gold dust equal in value to the very large amount of 4, silver talents.
Egypt was known for the wealth of its crops; it was to be the granary of the Persian Empire and, later, of the Roman Empire and was required to provide , measures of grain in addition to talents of silver. The Rosetta Stone , a tax concession issued by Ptolemy V in BC and written in three languages "led to the most famous decipherment in history—the cracking of hieroglyphics". Islamic rulers imposed jizya a poll tax on conquered non-Muslims. In India this practice began in the 11th century.
Numerous records of government tax collection in Europe since at least the 17th century are still available today. But taxation levels are hard to compare to the size and flow of the economy since production numbers are not as readily available. Government expenditures and revenue in France during the 17th century went from about In —89, it reached During the war-filled years of the eighteenth and early nineteenth century, tax rates in Europe increased dramatically as war became more expensive and governments became more centralized and adept at gathering taxes.
Another study confirmed this number, finding that per capita tax revenues had grown almost sixfold over the eighteenth century, but that steady economic growth had made the real burden on each individual only double over this period before the industrial revolution. Effective tax rates were higher in Britain than France the years before the French Revolution , twice in per capita income comparison, but they were mostly placed on international trade. In France, taxes were lower but the burden was mainly on landowners, individuals, and internal trade and thus created far more resentment.
Taxation as a percentage of GDP was In monetary economies prior to fiat banking, a critical form of taxation was seigniorage , the tax on the creation of money. Some principalities taxed windows, doors, or cabinets to reduce consumption of imported glass and hardware.
Tax - Wikipedia
Armoires, hutches , and wardrobes were employed to evade taxes on doors and cabinets. In some circumstances, taxes are also used to enforce public policy like congestion charge to cut road traffic and encourage public transport in London. In Tsarist Russia, taxes were clamped on beards. Today, one of the most-complicated taxation systems worldwide is in Germany.
Three quarters of the world's taxation literature refers to the German system. Europe and North America tend to rely more on direct taxes, while developing economies i. India and several African countries rely more on indirect taxes. In economic terms, taxation transfers wealth from households or businesses to the government of a nation.
Adam Smith writes in The Wealth of Nations that. The side-effects of taxation such as economic distortions and theories about how best to tax are an important subject in microeconomics. Economic theories of taxation approach the question of how to maximize economic welfare through taxation. Law establishes from whom a tax is collected.
In many countries, taxes are imposed on business such as corporate taxes or portions of payroll taxes. However, who ultimately pays the tax the tax "burden" is determined by the marketplace as taxes become embedded into production costs. Economic theory suggests that the economic effect of tax does not necessarily fall at the point where it is legally levied. For instance, a tax on employment paid by employers will impact on the employee, at least in the long run. The greatest share of the tax burden tends to fall on the most inelastic factor involved—the part of the transaction which is affected least by a change in price.
So, for instance, a tax on wages in a town will at least in the long run affect property-owners in that area. Depending on how quantities supplied and demanded vary with price the "elasticities" of supply and demand , a tax can be absorbed by the seller in the form of lower pre-tax prices , or by the buyer in the form of higher post-tax prices. Yes, it paid estimated taxes for , and also made payments for previous years. Think of it as your having paid withholding taxes on your salary in , and sending the IRS a check on April 15, , covering your balance owed for He declined to say how much of that was for federal income taxes, except to say that some of it was.
Williams also pointed to a company press release , from April 17, on taxes paid by GE. However, we did pay federal income taxes. Again, the company has clearly been aggressive in reducing its tax burden through various tax credits and deductions created by the federal government one example is clean energy incentives.
It also has been creative in moving a good deal of its profits offshore. The company does pay payroll taxes and local and state taxes. And GE says it also pays federal income taxes. Nor is it required to.