hiding profits?? HOW

Discussion in 'Business Operations' started by MacLawnCo, Apr 13, 2003.

  1. Tharrell

    Tharrell LawnSite Silver Member
    Posts: 2,964

    That's a tough one. I used to be a mainframe computer operator for a large international company. We would run certain programs for accounting that itemized our tax liabilities and such. Every time we did it, it was guaranteed to be an all day thing because we had to do it over and over so they could massage the numbers. You need someone to massage the numbers.
     
  2. Rob T

    Rob T LawnSite Member
    Posts: 165

    Look into putting the money into a tax deferred IRA. Being a biz owner you can open a ?Simple IRA and invest most of your profits into it. Then when your ready to buy the property there is a way to withdraw the funds without penalty for FIRST TIME HOMEOWNERS. Assuming your purchase will be a home and a shop on the same property you may be able to do this.
    Good Luck
     
  3. Shuter

    Shuter LawnSite Bronze Member
    Posts: 1,171

    You could buy the property today with a low downpayment as a commerical expense and make payments through the company.
     
  4. lsylvain

    lsylvain LawnSite Senior Member
    Posts: 777

    there is basicaly no way to get out of paying taxes. You can deffer taxes and pay them later through different things. Like the Simple IRA you don't pay tax on that money now but you will when you start pulling that money out when you retire.

    The bonds you are talking about are non-taxable however usually the rates on such bonds are lower than you can get on the open market. And you still have to pay the taxes on the income you earn and put into those bonds anyway.

    Incorporating is a good idea to lower your taxes when you are in the lower tax brackets. Becarefull with the loans to the owner stuff. If you are the primary shareholder and the IRS feels like it they can forse you to pay taxes on that money by declaring it a constructive dividend. which means you pay the 15% C-tax plus your personal tax on that same amount of money.

    Buy at least 35k in equipment each year and section 179 it that will save you quite a bit.

    If I'm understanding right, you want to not pay taxes on money you are going to spend on personal stuff, you just can't do it. sorry.
     
  5. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Posts: 1,847

    It is definately NOT personal stuff. I completely realize that is illegal.

    I talked to my acct professor and he told me that it can not be done legally. His only advice was to max out a Roth IRA each year.

    I dont want to purchase the property now since i dont have a need for it currently. The idea was to save up a nice chunk so when i graduate, i can use some of that money as a downpayment on a place to run the business from.

    I wish i could convince the parent that its a good idea to purchase up to $35k worth of stuff, but i honestly dont NEED anything else.

    Thank you all for your ideas and advice.
     
  6. Turf Medic

    Turf Medic LawnSite Bronze Member
    Posts: 1,073

    If I understand you correctly, you do not want to pay tax on the money your business earns not just the interest you earn on the money you earned and then saved:dizzy: You might consider setting up a corporation, it would have to be a C corporation as an S corp is taxed like a sole proprietor, another option is to set up a LLC and then have the IRS tax it like a C corporation. With either set up you would pay a lesser tax on the money you left in the corporation, you would not have to pay the soc sec tax on this money. You would then be considered an employee of your corporation, could pay your medical insurance, educational expenses, pay "office" rent, your truck expenses as part of the business expenses. All of this would be allowed without first having to pay soc sec and Medicaid taxes on this money, you would only pay this on the the wages you took out, you would also be entitled to collect un-employment during the off season. Some of my information is dated due to the fact that it has been several years since we had corp status, so you will want to run it by your lawyer or CPA.
     
  7. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    The key is to not make a profit, re-invest the $ in the buisness. I operate an LLC and did not pay a dime in taxes last year (other than sales tax collected).
     
  8. bruces

    bruces LawnSite Senior Member
    Posts: 648

    This kind of defeats the purpose of being in business and working hard.

    If you are going to continually keep investing all profits back into the business, why bother?

    I would rather make money and pay taxes than have nothing left at the end of the year because whatever I made had to go back in to the business.
     
  9. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    The long term plan IS to make money...just setting myself up for it. I would also make money if I sold the business.

    My situation was kind of uniquie...I took advantage of Bush's bonus 30% depreciation for 2002 by buying lots of stuff and taking the write off, which helped to offset some one-time income from other sources.

    When it comes down to it, the only way to avoid paying taxes is to not make any...either that or cheat!
     
  10. strickdad

    strickdad LawnSite Senior Member
    Posts: 544

    laughing,,, i bet you do.. uncle sam knows you well huh john...
     

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