How do you NOT get fucked in the ass by taxes? (Those making >$500,000 a year)

[Myst]

Im Canadian, and I am sick and fucking tired of losing close to half my income on taxes. I know that there are a lot of similarities between the Canadian and American system, so I think Americans are in the same boat.

Since I do not have a regular job, taxes arent automatically taken out of my paycheck. That means that I need to do taxes myself, and it also means that I need to keep track of every single freaking purchase and its receipt or else I cannot claim them as deductables, and I have to pay taxes on these purchases.

Everyone told me I need to setup a corporation or else I am going to get owned on taxes. So I set one up, and honestly I do not see how setting up a corporation saves you much on taxes (if at all). First you have to pay your 22% or so corporate tax, and then when you want to actually use your money for yourself (instead of it sitting in a corporate bank account) you need to give yourself a salary - and then pay tax on that again. So realistically, there is a damn good chance youll actually be paying more on taxes with a corporation. See some math below.

Say you make $500,000 a year - and you designate a salary of $200,000 for yourself. So you pay 22% corporate tax on $300,000 ($66,000) and an additional $65,565 on your salary personal income tax, for a total of $131,565. But of course, that $300,000 still in your corporate bank account is not YOUR money yet - so in the future, if you want to buy a house or a car or something with that money, you need to give it to yourself first (that means you pay income tax) and then you can spend it. Someone please tell me how having a corporation saves you any money? Unless you plan on making nothing for a few years, you can give yourself a salary of $30,000 or something and not pay any income tax (or very little).. but if you continue making money, youre gonna get fucked with a high tax rate on your 'income' withdrawal from your corporation. Say I stop working and bring in no money, and the next year I give myself $200,000 and the year later $100,000 - that means I pay another $65,565 and $27,261 - for a total of $224,391. Instead, if I didnt have a corporation, and paid income tax on that $500k, Id pay only $182,565 in income tax.

So what do you guys do?

Even if you setup an offshore corporation - the same problem occurs.. that money is not your money yet (its your businesses) and therefore you cant spend it on your house, groceries, etc until you give yourself a salary and pay income tax on that.

Am I missing something?

[farkedup]

send it all overseas is the ONLY option, live modestly and don't bring much back into the US ;)

No matter what route you take other than outright refusing to pay your taxes you only get taxed on the money that you bring BACK into this country and spend. Live off of $50k/yr and you pay taxes as if you made $50k... Even if you make $500k/yr if you're smart you'll still live on $50k/yr and you can either retire really early or do that for like 10 years (saving $450k/yr) then head for a 0 income tax country like the bahamas and cash out with $4.5M and keep spending minimal amounts and you can live forever

[drocd]

Why can't an offshore corporation purchase groceries and things for your home? What's stopping it from doing so?

[F-U-Jimmy]

First there are expenses then there are Roth IRAs. If you are married or have a girl friend she can work for you and get paid an amount that would fall below the taxable level. If you are truly in that tax bracket get yourself a good tax advisor its worth the money believe me .

[Peaches]

Originally Posted by farkedup

send it all overseas is the ONLY option, live modestly and don't bring much back into the US ;)

He's not in the US.

[L-Pink]

You got bad advise, if you set up a LLC (limited liability corporation) you have the protection of a corporation but the money is not handled per your example.

I have a llc. that owns commercial property. Each month the checks go into a corp account then some money is automatically swept into my personal account. At the end of the year personal and corp are filed on the same tax form.

[Myst]

Originally Posted by L-Pink

You got bad advise, if you set up a LLC (limited liability corporation) you have the protection of a corporation but the money is not handled per your example.

I have a llc. that owns commercial property. Each month the checks go into a corp account then some money is automatically swept into my personal account. At the end of the year personal and corp are filed on the same tax form.

is this a states thing or a canada thing too

[L-Pink]

Originally Posted by Myst

is this a states thing or a canada thing too

Sorry, that's US. I have no idea about Canada.

[pizzaid]

theres no such thing dude they rape you every chance they get...

[farkedup]

canada taxes are MUCH worse than the US, if you're near the border come on over..

BUT LLC or S-corp at the end of the year ALL profits are supposed to go on your PERSONAL returns, so YOU get taxed for it just like if you took out a pay check for all of it.

If you're seriously making $500k/yr and its online or in a business you can move I strongly suggest looking into costa rica or one of the islands and getting at least dual citizenship and only bringing the minimum amount back home.

[DirtyProfits]

It's funny how people like you take everything for granted, i.e. infrastructure, public transportation, police etc. but are not willing to pay for those benefits.
Obviously nobody likes to pay taxes but think about it this way. If you really make 500k per annum you probably have still about 10 times more money after taxes than the average person in the USA, not even talking about the majority of the world's population that lives in 3rd world countries.

[DirtyProfits]

Or the average person in the Canada in your case.

[xmas13]

Hmmmmmmmm, do you know the word "dividend"?

[Vick!]

Move out of the Canada, find a country with lower tax rates.

[xmas13]

Originally Posted by Vick!

Move out of the Canada, find a country with lower tax rates.

And you please change your sig

[RayBonga]

Why don't you have the corporation buy the car and the house and let you use them?

You'll just need pocket money.

[Myst]

Originally Posted by DirtyProfits

It's funny how people like you take everything for granted, i.e. infrastructure, public transportation, police etc. but are not willing to pay for those benefits.
Obviously nobody likes to pay taxes but think about it this way. If you really make 500k per annum you probably have still about 10 times more money after taxes than the average person in the USA, not even talking about the majority of the world's population that lives in 3rd world countries.

Dont get me wrong I truly appreciate these things - but I also know how incredibly wasteful government spending is. Especially as student, seeing the kind of grants professors received for complete BULLSHIT research makes me sick to the stomach. My friend was bring paid $25/hr counting beetles during a government summer job, and he proudly claimed he only worked 1/10th of the time he was getting paid.

Regardless.. I want to retire by the time im 25. Having half my money go away each year means its going to take twice as much time to be able to do so.. and thats not even factoring the interest of the money im losing as well.

[WiredGuy]

The idea behind having a corporation is to shelter everything under it and you basically just take out cash for things you need to buy. The car you buy, company car. The house you live in, you own it and rent it to the company, etc. You will save money in the long run once you shelter everything you would normally do under your personal name within the corporation. That's when the expenses really mount up and then that lowers your overall profit.

In the end of the day, if you keep taking money out of the corp into your own pockets, your in no different position than before. The key to the corporation is to expense everything and anything possible.

WG

[xmas13]

Retire at age 25? To do what? Watch television? Become a full time GFY sig whore?

You are such a lazy ass.

[WiredGuy]

Originally Posted by Myst

if I didnt have a corporation, and paid income tax on that $500k, Id pay only $182,565 in income tax.

If you took the 500k in one shot your tax bracket would be in the 40%+ which would be closer to 225k.
WG

[xmas13]

Man i can't believe a teenager is talking about government spending and the need to not pay taxes so he can retire at 25.

The world is fucked up. Get a fucking life.

[Myst]

Originally Posted by xmas13

Retire at age 25? To do what? Watch television? Become a full time GFY sig whore?

You are such a lazy ass.

hahaha - there are actually some full time gfy sig whores that I am sure made their millions already

But by 'retire' i mean being financially secure for the rest of my life - and working because I want to and not because I need to to put food on the table.

[Myst]

Originally Posted by WiredGuy

If you took the 500k in one shot your tax bracket would be in the 40%+ which would be closer to 225k.
WG

http://www.walterharder.ca/MarginalT...alculator.html

Not quite.. Im an Alberta resident, and remember its just the amount over $120,887 that gets taxed the 29% federally (and 10% provincially)

[DirtyProfits]

Originally Posted by Myst

Dont get me wrong I truly appreciate these things - but I also know how incredibly wasteful government spending is. Especially as student, seeing the kind of grants professors received for complete BULLSHIT research makes me sick to the stomach. My friend was bring paid $25/hr counting beetles during a government summer job, and he proudly claimed he only worked 1/10th of the time he was getting paid.

Regardless.. I want to retire by the time im 25. Having half my money go away each year means its going to take twice as much time to be able to do so.. and thats not even factoring the interest of the money im losing as well.

Well the government has to pay professors a competetive wage to the industry. Most professors could make way more money by not working for the government but most of them want to teach students and then they just accept the opportunity cost. One of my professors wrote a famous book about economics and he told us that he does not make very much money from it. If he had worked the time he needed to write that book he would have made more money. But he got ethos and credibility from that book and that is worth more to him than money.
Moreover you cannot compare your lazy friend doing a summer job with people working for the government every day. When I was young I used to work for a government insurance company too. 10 hours paid per day and I was only working 4 hours maybe. They do not expect summer employees to work as much as the other workers.

[96ukssob]

Originally Posted by Myst

hahaha - there are actually some full time gfy sig whores that I am sure made their millions already

But by 'retire' i mean being financially secure for the rest of my life - and working because I want to and not because I need to to put food on the table.

my goal has always been to make about $10mm and live off the interest for the rest of my life. I met a few people that have done this from the dotCom boom

[RichCashMike]

When I went to see a financial advisor, he set things up so I am not an employee, I don't have a "job", I am a shareholder, and as such I get paid a dividend. You pay capital gains on those, which are less. Still a lot, but less. Something to look into.

[WiredGuy]

Originally Posted by bossku69

my goal has always been to make about $10mm and live off the interest for the rest of my life. I met a few people that have done this from the dotCom boom

Funny you say that, that's my goal too (the exact same number).
WG

[Myst]

What do you currently do with your tax situation WG?

[slapass]

In the US you would have the corporation buy a car and other stuff so that it pays for as much as it can and you only use your "salary" for little stuff. Corp pays car, health ins, life ins, corparate retreats, pays wages for others close to you for work done. Things like that. You need to spread the pain out as lower brackets pay less. Also the cash that stays in the Corp is used to invest for your future. Making 500k and blowing 500k is not the greatest strategy.

[fuzebox]

The biggest problem I see with your math is the fact that you want to take a $200k salary. Why?!?! The whole point behind putting your money through a corporation is to enjoy the lower tax on it. You should be paying yourself a very minimum salary for food and clothing and to help your credit rating, and leave everything else in the company (while deducting every single humanly possible thing through your company).

[WiredGuy]

Originally Posted by Myst

What do you currently do with your tax situation WG?

Balancing income between 3 corporations and taking out the bare necessities to live off of.
WG

[GrouchyAdmin]

You pay someone who knows what they're doing to take a cut of saving you money. You don't ask a free registration web forum full of people who put shit on blogspot and bitch when their sites (against the TOS) are shut down.

[Pipecrew]

i suspect you are the guy that posted like 3 months ago "I have all this money and i am canadian, what should i do, i have never paid taxes"

The corps have some advantages, that small business thing is pretty cool, say you make 500k, your corp will pay 300k (small business - 22%) and the 200k you can bonus yourself.

[WiredGuy]

Originally Posted by Pipecrew

i suspect you are the guy that posted like 3 months ago "I have all this money and i am canadian, what should i do, i have never paid taxes"

The corps have some advantages, that small business thing is pretty cool, say you make 500k, your corp will pay 300k (small business - 22%) and the 200k you can bonus yourself.

They raised the provincial limit (in Ontario) to 400k now. Federal its still 300k.
WG

[the content guy]

Originally Posted by WiredGuy

The idea behind having a corporation is to shelter everything under it and you basically just take out cash for things you need to buy. The car you buy, company car. The house you live in, you own it and rent it to the company, etc. You will save money in the long run once you shelter everything you would normally do under your personal name within the corporation. That's when the expenses really mount up and then that lowers your overall profit.

In the end of the day, if you keep taking money out of the corp into your own pockets, your in no different position than before. The key to the corporation is to expense everything and anything possible.

WG

WG is correct, and so is Bonga. The idea of the corp is to protect yourself, but there is no reason that it cannot own real estate, boats, cars or anything else you desire. If you aren't getting tax benefits through a corporation then you have a lousy fucking accountant. The best thing is to hire an accountant that used to work for the IRS in the USA, or whatever the tax dept is in Canada. They know every loophole there is and are worth there salary in gold. Still, if you are in Canada, you are fucked to a certain point, not even close to the tax benefits as in the USA, the corporate haven country. But hey, at least you have socialized medicine,. God shave the queen and good luck to you.

[IllTestYourGirls]

many will over look this post but if you are in the USA this is the only way it works for many reasons. I dont care if you believe me or not

when you cash/deposit a check sign the back this way:
"Redeemed in lawful money pursuant to Title 12 U.S.C. §411"
or

"Deposited for credit on account or exchanged for non-negotiable Federal Reserve Notes of face value"

it basically means you are depositing your check for credit thus depositing your check is not a taxable event. Or if you are cashing your check you are asking for public money and public money is not taxable.

I am not a lawyer and this is not legal advice in anyway. Ask your tax LAWYERS not CPA for further advice.

[the content guy]

Originally Posted by IllTestYourGirls

many will over look this post but if you are in the USA this is the only way it works for many reasons. I dont care if you believe me or not

when you cash/deposit a check sign the back this way:
"Redeemed in lawful money pursuant to Title 12 U.S.C. §411"
or

"Deposited for credit on account or exchanged for non-negotiable Federal Reserve Notes of face value"

it basically means you are depositing your check for credit thus depositing your check is not a taxable event. Or if you are cashing your check you are asking for public money and public money is not taxable.

I am not a lawyer and this is not legal advice in anyway. Ask your tax LAWYERS not CPA for further advice.

ROTFFLMFAO.......:1o rglaugh:1o rglaugh

[L-Pink]

Originally Posted by IllTestYourGirls

many will over look this post but if you are in the USA this is the only way it works for many reasons. I dont care if you believe me or not

when you cash/deposit a check sign the back this way:
"Redeemed in lawful money pursuant to Title 12 U.S.C. §411"
or

"Deposited for credit on account or exchanged for non-negotiable Federal Reserve Notes of face value"

it basically means you are depositing your check for credit thus depositing your check is not a taxable event. Or if you are cashing your check you are asking for public money and public money is not taxable.

I am not a lawyer and this is not legal advice in anyway. Ask your tax LAWYERS not CPA for further advice.

.

[bronco67]

So what you're trying to say is that you make over half a million bucks a year. I guess I'm impressed, that's for sure.

But really, with that kind of money why don't you just buy a village in Romania? That's what I would do. I would also create a law which forces all families in said village to hand over their daughter(s) when they reach 18. I would keep them all in a stable made of 1000 dollar bills behind my mansion made out of gold bars. When I'm not getting gangbanged by 20 or so young Romanian slave girls, I would skeet shoot naked from my front porch while smoking a foot long joint rolled between the thighs of the most supple slave girl.

Cry me a river.

[GTS Mark]

I would suggest you contact a good accountant, BDO and Deloitte are some of the best I have found in Canada. They are pricey but well worth it!

They will find the best LEGAL option for you and your particular tax situation. I know plenty of guys that make over 250k a year and play the offshore company game. But honestly I would'nt be able to sleep at night, call me paranoid but the CRA are not stupid. If you're claiming 33k a year and living in a half million dollar house and have a porsche in the driveway it will raise some eyebrows LOL! ;)

Best of luck!

DH

[bauhaus]

Originally Posted by DrinkingHARDEST

I would suggest you contact a good accountant, BDO and Deloitte are some of the best I have found in Canada. They are pricey but well worth it!

They will find the best LEGAL option for you and your particular tax situation. I know plenty of guys that make over 250k a year and play the offshore company game. But honestly I would'nt be able to sleep at night, call me paranoid but the CRA are not stupid. If you're claiming 33k a year and living in a half million dollar house and have a porsche in the driveway it will raise some eyebrows LOL! ;)

Best of luck!

DH

This takes me back to chicken wings in a trunk. After hours madness

[Robbie]

I feel your pain. I paid 150K in federal taxes and another 40K in state and local taxes in 2007. Not to mention the fact that I pay tax everytime I buy anything. It's freakin' ridiculous. And "no", even though I paid all these taxes....I make too much money to get ANY back in this big "tax refund" gimmick that's coming...yet people who paid NO taxes are gonna get checks and they are calling them "rebates". How the HELL do you get a "rebate" check when you paid NOTHING? Fucking crazy.

[Evil E]

You need to surround yourself by a team of trusted and very pro efficient professionals(accountant, notary, lawyer), whatever you need for your situation and they will be able to point you to the correct direction.

The Canadian gov. is supposed to lower the corporation taxes to 15% btw. Anyways, like other said, you get a company car, so that expense is on your company. The company could also buy real estate that you rent from it. You put whatever expense you can with the company. You don't pay yourself a salary that is super big because the rule is the bigger your salary, the bigger your taxes are... That way you will pay less tax over the course of time.

Anyways, I'm in no mean a professional so you should seek help offline and not on GFY

[globofun]

Very interesting thread!

I have the same upcoming problem!

[Lamis]

Originally Posted by Myst

Im Canadian, and I am sick and fucking tired of losing close to half my income on taxes. I know that there are a lot of similarities between the Canadian and American system, so I think Americans are in the same boat.

how the fuck do you do 500,000 a year???????????????

thats just gross and you deserve to pay that much...

[WiredGuy]

Originally Posted by DrinkingHARDEST

I know plenty of guys that make over 250k a year and play the offshore company game. But honestly I would'nt be able to sleep at night, call me paranoid but the CRA are not stupid.

Same here...
WG

[hateman]

Declare $100k / year

Take the rest out through epassporte ATM

[Myst]

Originally Posted by bronco67

So what you're trying to say is that you make over half a million bucks a year. I guess I'm impressed, that's for sure.

But really, with that kind of money why don't you just buy a village in Romania? That's what I would do. I would also create a law which forces all families in said village to hand over their daughter(s) when they reach 18. I would keep them all in a stable made of 1000 dollar bills behind my mansion made out of gold bars. When I'm not getting gangbanged by 20 or so young Romanian slave girls, I would skeet shoot naked from my front porch while smoking a foot long joint rolled between the thighs of the most supple slave girl.

Cry me a river.

[jockboy60]

wish i had those problems....

[DaddyHalbucks]

Originally Posted by Myst

Im Canadian, and I am sick and fucking tired of losing close to half my income on taxes.

You're looking at it the wrong way.

Think about the wonderful "free health care" system you have up there in Canada !!