I could reduce the amount of taxes

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My after-tax income from my small business is greatly reduced by the incomes taxes I pay each year. A friend of mine told me I owe by shifting my income elsewhere. Is that true?

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kkkrishnakk said:   My after-tax income from my small business is greatly reduced by the incomes taxes I pay each year. A friend of mine told me I owe by shifting my income elsewhere. Is that true?
I love the English language and I believe myself a master at grammar. But I cannot for the life of me figure out how one would go about dissecting this sentence. Can you translate what you mean into simplefolk talk?

Yes I am a little bit confuse here.
Your NI is decreased because you pay tax. Well everybody NI is decreased because of paying tax.
You should tell us what are you first. a c-corp, s-corp, llc, or etc... Without knowing what are you, PPL can't help you much.

No, you cannot shift your income to another company to avoid tax, and I don't know how you can do that. However, If you do that, IRS will raise a huge red flag because your company earns money but don't pay any tax.

I guess that your friend is talking about consolidated reporting. When one company has operating loss, can offset sub company with operating profit.

Yes

winter said:   Yes

I'd like to see the exact legal citation supporting your answer, if you please.

Please include both federal, state and, where applicable, local taxation codes.

Make sure your footnotes adhere to Strunk & White requirements.

bbmak said:   Yes I am a little bit confuse here.
Your NI is decreased because you pay tax. Well everybody NI is decreased because of paying tax.
You should tell us what are you first. a c-corp, s-corp, llc, or etc... Without knowing what are you, PPL can't help you much.

No, you cannot shift your income to another company to avoid tax, and I don't know how you can do that. However, If you do that, IRS will raise a huge red flag because your company earns money but don't pay any tax.

I guess that your friend is talking about consolidated reporting. When one company has operating loss, can offset sub company with operating profit.

I highly doubt it's that complex.

He likely has other non-business income that he reports separately; they're thinking that if run through the business, whatever that money is spent on can then be deducted. Like if he had $1k interest income that he uses to pay rent, he has $1k taxable income. But if 'the biz' earned that $1k interest then used it to pay rent, the biz could deduct the rent payment leaving him with $0 taxable income.

Sorry OP, but it doesn't work that way...

I thought he meant he could reduce taxes by shifting income offshore, and I don't mean buying a fishing boat.

I see too much of this "if I run personal expenses through a business entity I can claim these expenses as business deductions" nonsense here on FWF. Krishna, while English is my third language, I do make the effort to write coherently. I may not always succeed, especially when I'm really drunk, but at least I try. Dude, you're not even trying.

If his net income is reduced because of the taxes paid by the business, that's one thing. If it's because of the taxes he pays on the income he takes out of the business, that's another. There are lots of ways to pay yourself and avoid taxes.



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