Thread by @AltWASONPS

Some of the tax laws can be complex, so let me provide you with a simple example of how tax avoidance and tax evasion works.

(Thread)

https://twitter.com/AltWASONPS/status/1047275249572691968

First I'm not going to get into the intricacies of what is legal and what is not. Instead, I'm going to show you how it works.

Now let's take a look at the corporate income tax brackets from 2017. I'm intentionally using an older year as the older rates amplified the effect.

Now, let's assume for a moment that I have a business that makes $300,000 a year in profit. My total gross income (what I make before paying bills, employees, etc.) doesn't matter.

What does matter though is that I'm in a 39% tax bracket. This sucks... So let's get creative.

Now granted I'm not taxed 39% on everything...

I'm taxed 15% on my first $50k, then 25% on the next $25k, then 34% on the next $25k then 39% on the next $200k (remember I'm at $300k).

But still that's a lot of money and I want to pay less.

Ok so.. let me think about this.

If I only made $100k, I'd be taxed at 34%.

Hmm, ok what if I split up my single business into three businesses?

I mean they would still do the exact same thing.. but if I split them up. All of the business would only be taxes on $100k...

... of income each. And that extra $200k which is currently taxed at 39% would now only be taxed at 34%.

That's a 5% savings, a whole $10,000 and I want MY MONEY!!!!

Ok let's do this.

So I split my single company into 3 companies. I will call them WASO-HR, WASO-Supplies, and WASO-Sales.

Now it's going to get a little bit more complicated from here....

Ok, so WASO-Sales, needs things to sell and make a profit.. so it buys them from WASO-Supplies....

I structure this in a way so that $150k can be written off as business expenses...

Because of this, now both WASO-Sales and WASO-Supplies now only have $150k in profit each..but I'm still not there.. I need to get to $100k in 3 businesses.

Also.. each of these companies kinda needs people. I mean robots are cool and all..they just aren't there yet. So what to do.. what to do.

Oh, I know.

I hire WASO-HR to provide me with human resources via a contract!

So WASO-Sales and WASO-Supplies each hire WASO-HR and pay them $50k for the people who will actually do the work. (Technically, more than $50k bit we are keeping it simple).

See, easy as can be...

But hmm.. well this was really, really simple and I'd like to keep more money...

Oh I know.

I will have SASO-Supplies purchase, I dunno... Laptops for $1,000.

And then they will sell them to WASO-Sales for $1,500. Genius.

At first you would be like.. well I'm just dumb and moving money from one company to another...

But, alas... As a business...

... I can consider those as assets, and depreciate them (and again I'm really, really, over simplifiying this).

So instead of only being able to deduct $1,000 for those assets, I now get to deduct $1,500 (per laptop).. and a little bit more shifting of where that $300k goes...

And I keep all 3 businesses under $100k.

A little bit of work, and a little complicated.. but not too much so.

And I saved a whole bunch of money.

Now there is just one more thing...

I could do a whole lot more...

Why stop at 3, why not make it, 10

Why not 100...

Why not 1,000

Just like Trump

(Source: wired.com/2017/01/kim-al…)

You see when people do that...

It's because they are trying to scam the IRS and not pay taxes.