You Make $100K/Year. You Pay $30,000 In Taxes PER YEAR. Where does that money go?

[dsiomtw]

If you are a US citizen and make mid-6 to low 7-figures profit a year from a "digital" online business, there is really not much you can do to legally reduce your taxes in a meaningful way that will still allow you to actually control and spend that money. Period.

Disagree? Let's hear your plan, and I'll explain why you're wrong.

 

[vikingred]

If you are a US citizen and make mid-6 to low 7-figures profit a year from a "digital" online business, there is really not much you can do to legally reduce your taxes in a meaningful way that will still allow you to actually control and spend that money. Period.

Disagree? Let's hear your plan, and I'll explain why you're wrong.

Exactly. If you stay within the law, there is only so much you can do. Of course you need to have a corporation. You can split up the money a bit, take less on W-2 salary, take some in 401k and match it, take some as K-1 distributions, invest some in stock market where dividends are reinvested and untaxed for time being. Take every single write off imaginable (via a solid accountant), and I'm sure there's some other magic that helps you keep a little more here and there, but the bottom line is that your ass is gonna pay.

I cringe every month when I log into eftps.gov and do my 941 deposit. I think of obama's face and I get even more angry. But anyone who thinks they're gonna fuck the IRS, or play fraud games is gonna get fucked hard eventually. I've seen it go really bad for people. They will hunt you down. They will find you. And they will kill you. It happens all the time. Big bad above-the-law motherfuckers think they're slick, or they're stupid and arrogant, or some crooked accountant convinces them to cheat, or they're greedy and take the risk. Good luck with that.

Don't be a dick and fuck yourself. Don't fuck with the IRS. Get a great accountant and ride the line of the law like a boss.

:thumbsup:

 

[Second]

75% is only for the richest and if you think that they are really paying 75%, you're just being silly. Beyond that, the French need to pay for all the same things as Canada, and everyone else for that matter. US taxes may be low, but the country's infrastructure is crumbling.

On the upside, France has what is widely regarded as one of the best health systems in the world.

When you are preggers you get a state funded nanny who does laundry cooks cleans and watches the kids.

Im not kidding.

 

[charlesmartel]

Do any of you have solo 401k's? I'm planning on opening one in 2014. You can have a Roth and non-Roth portion. If you use a self-directed one, you can invest in practically anything, e.g, gold, real estate, etc.

Self Directed IRA Solo 401k Solo K Blog :: Jeff Nabers Alternative Investing Strategies

 

[charlesmartel]

If you are a US citizen and make mid-6 to low 7-figures profit a year from a "digital" online business, there is really not much you can do to legally reduce your taxes in a meaningful way that will still allow you to actually control and spend that money. Period.

Disagree? Let's hear your plan, and I'll explain why you're wrong.

Acquire a second citizenship that doesn't tax foreign-sourced income. Then drop your US citizenship. Move to that country, another that has low taxes, or spend your time between a couple to avoid triggering income taxes (PT).

As long as you're a US citizen, you're a tax slave and will be exploited regardless of location.

 

[taktikz]

Acquire a second citizenship that doesn't tax foreign-sourced income. Then drop your US citizenship. Move to that country, another that has low taxes, or spend your time between a couple to avoid triggering income taxes (PT).

As long as you're a US citizen, you're a tax slave and will be exploited regardless of location.

Reminds me of what that original Facebook investor did when he moved to Singapore.

 

[dsiomtw]

Acquire a second citizenship that doesn't tax foreign-sourced income. Then drop your US citizenship. Move to that country, another that has low taxes, or spend your time between a couple to avoid triggering income taxes (PT).

As long as you're a US citizen, you're a tax slave and will be exploited regardless of location.

Yeah, unfortunately that's not very realistic for most people with kids, spouses, families, friends and other ties to the US. Most people in this situation I know aren't going to up and move their family to Panama just to save money on taxes. I tried to convince my wife to do this at one point, but fortunately she said it wasn't worth it. Since then I've just focused on making more money, and taxes are just a cost of doing business ...

At the end of the day, if you consider yourself an "entrepreneur" and the difference between paying taxes or not makes a significant difference in your quality of life, you really just need to get better at being an entrepreneur. Help more people, make more money, and taxes don't really matter.

(None of this applies if your #1 priority in life is to be a "baller" and make as much money as you can and don't care about much else. Renounce your citizenship and bail the US as soon as possible!)

 

[vikingred]

gotcha!

 

[charlesmartel]

At the end of the day, if you consider yourself an "entrepreneur" and the difference between paying taxes or not makes a significant difference in your quality of life, you really just need to get better at being an entrepreneur. Help more people, make more money, and taxes don't really matter.

Quality of life is subjective. Some people think getting ass-raped by taxes lowers their quality of life, so making more money won't solve the problem. It actually gets worse the more you make. Taxes really do matter. That's why there are trillions of dollars in offshore accounts.

Even if you want to remain a US tax slave, there are still options:

1. Move to a low-tax state.
2. Leave the country a year at a time for the $97,600 foreign income exclusion for a single person or $175k for married couple both working.

Some citizenships like Singaporean let you travel to the US for 3-months at a time. i think Canadians can stay in the US for 6 months, so a person could acquire Canadian citizenship, leave Canada, and then visit the US 6 months a year and not pay US or Canadian taxes. There are a lot of options and you don't have to move to Panama. You can live in Europe, etc. as long as you plan wisely.

 

[dsiomtw]

Quality of life is subjective. Some people think getting ass-raped by taxes lowers their quality of life

I think you're missing the point. It really doesn't if you make enough so you can still live the life you want after paying taxes. For example, say you make 1 million a year, and you're left with roughly half of that after paying all the various forms of taxes in the US. If you can live the life you want with 500k in discretionary income per year, no rational person is still going to up and move to a foreign country just to "stick it to the man".

1. Move to a low-tax state.
2. Leave the country a year at a time for the $97,600 foreign income exclusion for a single person or $175k for married couple both working.

Neither of these things make much of a difference at all once you're making any real money.

 

[charlesmartel]

I think you're missing the point. It really doesn't if you make enough so you can still live the life you want after paying taxes. For example, say you make 1 million a year, and you're left with roughly half of that after paying all the various forms of taxes in the US. If you can live the life you want with 500k in discretionary income per year, no rational person is still going to up and move to a foreign country just to "stick it to the man".

They're not sticking it to the man. They're keeping their money. Maybe they'd rather keep most of that $500k, pay for the needs of relatives/extended family, buy a sailboat, a vacation home, save it for retirement, live in Monaco, etc.

 

[charlesmartel]

Neither of these things make much of a difference at all once you're making any real money.

Moving from California to Texas, assuming you're making a million dollars a year, will save you about $100k.

 

[dsiomtw]

It really doesn't if you make enough so you can still live the life you want after paying taxes ... If you can live the life you want with 500k in discretionary income per year, no rational person is still going to up and move to a foreign country just to "stick it to the man".

They're not sticking it to the man. They're keeping their money. Maybe they'd rather keep most of that $500k, pay for the needs of relatives/extended family, buy a sailboat, a vacation home, save it for retirement, live in Monaco, etc.

Hopefully Santa brings you some reading comprehension for xmas!

 

[ayzo]

If you're a US citizen, Puerto Rico

[ame=http://www.youtube.com/watch?v=92B8713i_YY]Why's Puerto Rico's Attractive as a Tax Haven - YouTube[/ame]

 

[charlesmartel]

If you're a US citizen, Puerto Rico

Why's Puerto Rico's Attractive as a Tax Haven - YouTube

That's a good option but I don't think it would work for most of the WF crowd. If you earn money from US sources, you'll still get the screw.

Tax Topics - Topic 901 Is a Person With Income From Puerto Rican Sources Required to File a U.S. Federal Income Tax Return?

 

[miketpowell]

Neither of these things make much of a difference at all once you're making any real money.

Moving from California to Las Vegas increased my take home pay for 2013 by 25% - so it was a pretty sizable amount...

California's top tax rate is 13%... it makes a big difference since they calculate that 13% on you entire income. Not after the IRS already takes the ~38%.

For me it made sense to make the move to increase take home pay by 25%.

 

[ayzo]

That's a good option but I don't think it would work for most of the WF crowd. If you earn money from US sources, you'll still get the screw.

Tax Topics - Topic 901 Is a Person With Income From Puerto Rican Sources Required to File a U.S. Federal Income Tax Return?

That's what I thought too until I ran it through a tax attorney and he said that's not the case as long as the "service" being rendered inside Puerto Rico and you meet the residency requirement.

KPMG's take:

https://www.kpmg.com/Global/en/Issu...ond-borders-2011/ies-tbb-2011-puerto-rico.pdf

Definition of source

Employment income is generally treated as Puerto Rican–
sourced compensation when the individual performs the
services while physically located in Puerto Rico. It is not
where the wages are paid from that determines the source,
but rather where the services are performed.

This IRS page also shows a few examples on what would qualify as income sourced from Puerto Rico:

Publication 570 (2012), Tax Guide for Individuals With Income From U.S. Possessions

Example.

In 2012, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. Your Puerto Rico source income is $60,000, figured as follows.


180 days / 240 days × $80,000 = $60,000

Pension example:

Example.

You are a U.S. citizen who worked in Puerto Rico for a U.S. company. All services were performed in Puerto Rico. Upon retirement you remained in Puerto Rico and began receiving your pension from the U.S. pension trust of your employer. Distributions from the U.S. pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U.S. source income.

Connected income example:

Marcy Jackson is a bona fide resident of American Samoa. Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services.

Another IRS page:

Source of Income - Personal Service Income

All wages and any other compensation for services performed in the United States are considered to be from sources in the United States. The place where the personal services are performed determines the source of the personal service income, regardless of where the contract was made, the place of payment, or the residence of the payer.

Special instructions for Puerto Rico residents 1040:

http://www.irs.gov/pub/irs-pdf/p1321.pdf

And this PDF titled: Tax Guide for Individuals With Income From U.S. Possessions

http://www.irs.gov/pub/irs-pdf/p570.pdf

Of course everyone should talk to a tax attorney because your situation may be different, my attorney could be completely wrong, and the laws could change but it seems clear that the IRS defines "source of income" based on where that service is being performed or that asset is located which is why for the Puerto Rico exemption to work hedge fund guys can't just rent a cheap condo in San Juan or setup a corporation in Puerto Rico and do business in New York, keep their Connecticut drivers license, send their kids to school in Miami, etc. You (and your family if you have one) have to physically live and work inside Puerto Rico.

 

[Andrew Scherer]

For example, say you make 1 million a year, and you're left with roughly half of that after paying all the various forms of taxes in the US. If you can live the life you want with 500k in discretionary income per year, no rational person is still going to up and move to a foreign country just to "stick it to the man".

Why don't you phrase it a different way.

It would cost $40,000 per month just for the opportunity to keep living in America.

Considering 99% of the posters here are location independent, I am not sure how well your argument is going to resonate here.

 

[conjamuk]

Sometimes living in the EU is great. You can just fuck off to Malta for as long as your making serious bank. You only have to pay 5 percent even on 1 million.

 

[thehobbster]

Why don't you phrase it a different way.

It would cost $40,000 per month just for the opportunity to keep living in America.

Considering 99% of the posters here are location independent, I am not sure how well your argument is going to resonate here.

I feel ya. The guy above said "rational person," but I think he meant any rational person that had attachments and reasons to stay in the States.

For instance, I'm 100% free to go where ever. I'm single again, no children, a couple pets. I could leave the country, but I also love seeing my sibling's children several times a week. I love being Uncle Thehobbster and they come running up and hug me and jump on me. Lil Toddlers who I've been around since the day of their birth. I love driving down the road and seeing my parents. I love all my buddies in my town that I've come to know over the past 16 years or so.

I'd pay FAR MORE than $40k a year for that, versus leaving the country to save that much money.

One day, all these lil knucklehead kids will be grown, and I might bounce. Otherwise, I still have the option of traveling a ton until then. All of my buddies are already married or getting married, moving off for jobs, and dropping off the face of the earth. One day I'll be in a situation where I want to leave the country, but it'll never be as petty as saving some money over taxes. That's about the least important thing on the planet to me. I'll never stay because of it, or leave because of it. But I'll do either for family, friends, experiences, and living an authentic life.