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IRS Nails CPA For Copying Steve Jobs, Google Execs
theodp writes "It seems $1 salaries are only for super-wealthy tech execs. The WSJ reports that CPA David Watson incurred the wrath of the IRS by only paying himself $24,000 a year and declaring the rest of his take profit. It's a common tax-cutting maneuver that most computer consultants working through an S Corporation have probably considered. Unlike profit distributions, all salary is subject to a 2.9% Medicare tax and the first $106,800 is subject to a 12.4% Social Security tax (FICA). By reducing his salary, Watson didn't save any income taxes on the $379k in profit distributions he received in 2002 and 2003, but he did save nearly $20,000 in payroll taxes for the two years, the IRS argued, pegging Watson's true pay at $91,044 for each year. Judge Robert W. Pratt agreed that Watson's salary was too low, ruling that the CPA owed the extra tax plus interest and penalties. So why, you ask, don't members of the much-ballyhooed $1 Executive club like Steve Jobs, Larry Ellison, Sergey Brin, Larry Page, and Eric Schmidt get in hot water for their low-ball salaries? After all, how inequitable would it be if billionaires working full-time didn't have to kick in more than 15 cents into the Medicare and Social Security kitty? Sorry kids, the rich are different, and the New Global Elite have much better tax advisors than you!"
Remember all, when you are an employee, the government always has the first share of your pay-pie.... if the cpa was smart, he'd have set up a proper LLC shell, and worked through it. I'm sure he has the skills to do so. and the appeals verdict on this should be interesting...... Also, yaaahooo, my first first-post!!!
if the cpa was smart
CPA's aren't very smart, that's what CA's are for.
But in all seriousness, CPA is a really easy designation to get. I've got friends who have done both (due to working in firms who were CPA, and CA only), and the CPA is a piece of cake compared to the CA. So, the CPA is far less a symbol of being good at accounting than the CA is. Though I hear it's a little different in the US.
Anyone care to shed some light? Particularly if you're originally from a commonwealth country.
This is my footer. There are many like it, but this one is mine.
Damn it, your ruining a great story summary by bringing logic into it.
STOP NOW!
...
At the end of the day the super wealthy can only protect their position by sharing their wealth or suppressing dissent. In an age when everyone on the wage spectrum can dial up stories on how much the super-wealthy earn and how much they give back dissent is likely to grow in times of hardship. While some might argue we need these innovators, innovation is not strictly related to wealth but is very much reliant on the resources and infrastructure funded by tax payers. It's not therefore how good their tax advisors are, it is more what people think. And in the fickle tech world empires could crumble if figure-heads fall foul of public opinion. I would say being a good citizen and being seen to share, to pay a fair contribution, is increasingly the only realistic option.
It's because this guy paid himself the same amount, he just funneled a lot of it through his corporation, of which he owned the dominant share (if he was going through an S-Corp, he only needs at least one other shareholder, I believe). S-Corps don't pay corporate taxes either. Google, Apple, et al are public corporations which pay corporate taxes (though not much, usually, by taking advantage of various loopholes). Most of them don't even pay a dividend, so even if Steve Jobs does have a significant number of Apple shares, he's not getting any direct payment of the company profits.
Because the value those shares should reach is your pay, if they don't reach that, you worked for less money.
...
The distinction between Mr. Watson and Mssrs. Jobs, Ellison, Brin, et al, is that the salaries of the latter are set by independent boards of directors of public companies. Mr. Watson set his own salary, which the court found was not commensurate with the market rate for that sort of work.
The SCO lawsuit makes me wish my company were in Utah. We need a new building.
will tell you that the company in question falls under different tax law than Google or Apple. Apparently, companies with more than 100 shareholders are subject to an additional level of taxation on profits. I don't know any details, but I think that it would be worth looking into before crying foul. At the very least, one would expect the submitter to have read the article, which doesn't seem to be the case.
So if this is the future...where's my jet pack?
Just what the hell did you smoke that created this fairy land?
Tunesia recently revolted after DECADES of abuse by the superrich where they did no longer bother with tax evasion but just stole gold and killed those that protested. Oh and don't forget decades of poverty and a hopeless future for the majority.
If it takes that much negative karma, Bill Gates and Steve Jobs and the likes have NOTHING to worry about. The average voter ain't even smart enough to realize that their tax avoidance schemes ultimately cause the non-super rich to pay higher taxes. They just blame Obama and vote in the tea-party. Extended tax-cuts for everyone who has more then a billion folks!
Bread and circusses. The only risk the super-rich face is if the American Dream dies, and that dream is not about actually being able to afford a car, a house and a huge tv, but about being able to work very very hard to get a loan that always puts you one pay check away from loosing it all. Keeps the folks on their toes, unwilling to do anything to risk upsetting the status quo lest they miss a credit card payment and loose it all.
Why do you think ALL the elite were HORRIFIED over the housing crisis? Because poor people lost their home? Yeah right. No, because poor people found out that they aren't all that tied down to their debt. Default and walk away and start over new, maybe somewhere different with a different kind of politician. Don't let the poor money to get themselves in debt and they just might not be in debt anymore and then how do you control them?
But that is not the worry of the super-rich. They are a few hours away from leaving the country anyway. It is the layer below that should be worried but the situation in the west is still far to tempting for the ones to get screwed to ask themselves, is it worth getting it up the ass so hard for the tiniest impossible change to one day strike it rich and screw every one else? 99% of voters in the US? Yes, yes it is.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
Don't let reality stand in the way of your snark, but a major portion of Steve Jobs' reward is later granted by the board as stock options.
Options awarded in this way are a very different topic than hiding income as Sub S profit.
Publishing this article this way is as stupid as publishing Paris Hilton whining about network protocols would be.
"It is our blasphemy which has made us great, and will sustain us, and which the gods secretly admire in us." - Zelazny
I wish a judge would rule that I don't make enough commensurate with the market. Maybe this tax season the IRS will see that I don't make enough.
Custom electronics and digital signage for your business: www.evcircuits.com
Half the world lives on less than $2.50 a day.
80% lives on less than $10 a day.
We are the super wealthy.
Believing something doesn't make it true. Not believing something doesn't make it false.
http://www.bls.gov/bls/blswage.htm
The SCO lawsuit makes me wish my company were in Utah. We need a new building.
The rich aren't different from us. They just have more cents than we do.
Care killed the cat, but satisfaction brought it back.
If you are on a fixed salary, you get paid no matter how hard you work (assuming you don't do so little you get fired). If you get paid a $1 salary and your actual income is from stock in the company that you run, then your earnings are directly tied to how hard you work to make the company earn money. Or, to put it another way, you're not earning money unless *everyone* is earning money. It's actually a bit big-S Socialist ;-)
If he gets sick he'll just pay out of pocket. So if he's taxed for it, it's not like insurance - it's just paying other people's Medicare or Social Security.
Actually, $1.00 salaries are very common. Very often, you need to be an employee for various insurance to apply. Paying somebody a $1 salary qualifies them for workmans comp, health insurance, all sorts of liability insurance, etc. It is a way of showing an employer/employee relationship.
These taxes and compulsory schemes were poorly designed and now the judicial system is being asked to make sense of the mess.
Most economists agree that a consumption tax combined with some state sponsored welfare system is far, far better.
You forgot about the mind control part!
{tin foil hats for all!}
Have you spent any time in a poorer country? If so you'll know what a precarious living a lot of people have, and how many literally die on the streets from starvation or disease. 2.50 might get you more, but not a lot more.
People rioted this year in India over the price of onions rising. People have rioted in Tunisia and Algeria over the prices of cooking oil and flour. These are not wealthy people. These are not people rioting over not being able to put enough gas in their 8 litre SUV, or not being able to upgrade to the latest games console.
These are people rioting over not being able to eat enough to live. Onions, cooking oil, flour.
You should be ashamed of yourself. Or at least offer to live on the equivalent salary in your own country, a living so close to starvation that if the price of onions goes up you might die.
it said "your taking a big risk" instead of "you're taking a big risk". It can be ignored because of the typo.
rewriting history since 2109
Tell that to Mr Snipes.
Chuck
How may I ask are you taking a risk if your given shares.
Because most companies don't give straight shares, they give options.
If the stock price goes up, the owner of those options can exercise them, but actually has to pay for the underlying stock. If the stock price goes down, their owner lets them expire, giving them zero value.
So rather than "free money under a different name", stock options as a form of executive compensation more closely resemble a one-sided bet... If he wins, he wins. If he loses, he doesn't really lose anything.
Tying that all back to the situation in TFA, however, it gets a whole lot shadier when you have a one-person corporation - The owner of the company usually already owns 100% of the stock so can't pay himself with more of it (not can he issue options to himself on it).
More practically, he should have done what most sole proprietorships do to hide money - Pay himself as much as he really needs to live, and use the remaining profits on "capital improvements" that he just happens to personally benefit from, ("company" car, new computer(s), perhaps an "office" (aka "place to spend the night for free") in a remote location that he often visits, if that applies). That way, he also gets the perk of claiming depreciation on those assets over time, which we mere humans don't get to do.
This can also reduce your eventual social security benefits
Social security benefits are capped at relatively low levels, he wouldn't get but a small part of those $379k/year after he retired.
According to this link he would get about $11k if he paid taxes on $24k/year and about $26k if he paid taxes on $379k.
So rather than "free money under a different name", stock options as a form of executive compensation more closely resemble a one-sided bet... If he wins, he wins. If he loses, he doesn't really lose anything.
Exactly. Options mean that he can buy n shares for $m per share. If the current share price is greater than $m, then the options are worth $n*m. He doesn't pay tax on the shares unless he sells them. He can exchange them for other shares, including diversified funds that are very low risk. There are also other tricks possible, like taking out a loan (doesn't count as income) with some shares as collateral, not repaying the loan, and having the shares seized by the lender - effectively, he's sold the shares, but the whole thing is actually written off as a loss and so can be used to offset even more tax...
I am TheRaven on Soylent News
You only get taxed on SS and Medicade up to a tiny portion of what somebody like Jobs makes. And yet who will argue that what Jobs has done hasn't employed thousands of people at Apple, all of which who pay taxes? Who would argue that there is not a thriving business for iPhone accessories and "app for that" apps again putting food on many, many people's plates? How many people does that CPA employ? Is it really that unfair? One could argue that people like Jobs produce so much more for the economy and many, many people than that lowly CPA does. Now is that fair?!? We need Jobs - many, many more jobs!
That's the point of the article. They get $1 salaries and are compensated in other ways. As a result, they get out of paying Medicare and Social Security taxes. This accountant got in trouble for doing the same thing, why not Jobs?
Give me Classic Slashdot or give me death!
A simple consumption tax system would rid us of these problems, but Congress would lose their power to grant favors and impose penalties on entities of their choosing.
An income based tax system with this many different requirements and exceptions is designed to be abused. A consumption system is not because what good is their wealth if they don't spend it. If you want to soak the rich you simply implement a consumption tax and void all taxes paid up to a specified amount. As in, you determine the amount of spending required to keep people happy and whole and refund it, all beyond that goes into the coffers. This includes taxing services as consumption as well so that getting around the system becomes less likely.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
The rules for an S-Corp and much more have changed in the past year. He should have done his homework.
The rich got wealthy off the backs of the middle class, you ass clown. Without a 290 million person pool of consumers to sell shit to, just within the Continental US, the Rich are Poor. Keep thinking that a wealthy person doesn't owe their entire wealth to the fact the consumers redistributed part of their wealth to them for a good or service. Then bitch when the well dries up and your good or service is no longer worth squat and the principle value of the currency is worthless. All that wealth becomes pennies on the dollar.
Why isn't "profit" considered "income"?
Obvious. Because corporations aren't peo....
Err... Can I get back to you on that?
There's a difference between owning/doing business as an S Corp like he does (and I do, as do a lot of independent professionals) and being the CEO of a conventional C Corp. As CEO of a C Corp, you're not the owner, you work for the company. Steve Jobs and other people who get $1 in compensation get paid primarily in stock grants. If the stock rises, they cash it in and get money out when they want to. If the company doesn't do well, worst case is they get nothing - for practical purposes most boards will re-price or reissue options so they get some pay out of it. Lower level execs are usually paid with a combination of more cash pay and fewer options, but current thinking seems to be that a CEO is most directly tied to stock value.
Also, in many cases with "rock star" CEOs like the ones in tech, they have som much stock from taking the company public in the first place that they don't need much cash compensation, and it doesn't look as cool if they take it.
In the S Corp world, I think most of us do it for the liability protection. At least at mine, I pay myself a pretty good salary. I take out occasional payments that I pay taxes on - it's usually easier to do it as a bonus in my payroll and have taxes dealt with, especially because I pay bonuses to my employees. The flip side is that owning an S Corp does let you expense things that ordinarily might not be deductible as a regular company employee, like cars and at least part of your housing (as a previous poster mentioned). I keep things very above board - pretty much the only things that the company expenses in my life are my car and its related costs, my cell phone, and any tech I buy that isn't specifically for the house. I could push more stuff on the company if I wanted to be really aggressive, but it's not worth the potential hassle to me.
The one place where I get hit in return as an S Corp owner is in health insurance - I don't get as much of a tax benefit for my own insurance as I do for that of my employees.
What this CPA did was pay himself a token paycheck and then push a lot more off as profits. Had he paid himself a higher base - say, $50-$60k he likely wouldn't have had a problem with it and still would have had a nice profit distribution.
-- Josh Turiel
"2. Do not eat iPod Shuffle."
The rich got wealthy off the backs of the middle class, you ass clown.
- please, provide your definition of the middle class. Because the middle class was created in USA in 19 century - it was small business owners, professionals and such.
The 'middle class' you are thinking of is no such thing. After WWII the 'middle class' of America was actually the working class, which didn't have competition from outside countries, because most countries outside of USA didn't have any capital and infrastructure left after the war.
Your 'middle class' idea is a fluke, caused by war and lack of competition.
Without a 290 million person pool of consumers to sell shit to, just within the Continental US
- but that 'SHIT' that people are buying, is what makes them wealthy. Not just silly pieces of paper with funny pictures on them. It's the stuff you buy that gives you quality of life. If just fiat currency itself was wealth, then Zimbabwe would have been the most prosperous country on earth, why anybody has hundreds of trillions of Zimbabwe dollars (and don't forget, before they did this to themselves, their dollar was at par with US dollar, so US dollar can also be there.)
Then bitch when the well dries up and your good or service is no longer worth squat and the principle value of the currency is worthless
- you are very confused. The GOOD and SERVICE is what WEALTH IS.
It's not the worthless currency.
Only goods and services improve quality of life, that's what rich people do - they come up with capital and labor organization to give you your quality of life.
The 290 million US consumers are a drop in a bucket at this point. Real consumers today are in Asia, because they are producers, and people who do not produce have nothing to exchange for, so they are no longer real consumers.
You can't handle the truth.
I love it how people just ohhh & ahhh and just go nuts when they see people like Jobs and company take one dollar salaries, and think how good they are, how wonderful it is that they take such a low salary. These executives are laughing all the way to the bank because they are SMART enough to AVOID the tax man.
You missed part of the equation. If he gets n options at a strike price ("current" price at time of grant, or sometimes less) of $m, and, at time of excersise, the shares are worth $s, then if s m, then the total "pay" is actually $n*(s-m). If the price per share has risen $10, then the holder of options gets $n*10. In good times, this can amount to a lot. Not-so-good times, not so much.
The theory is that, as CEO, he is being hired to directly impact the share price, since he's hired by the Board of Directors, and the BoD is hired (in theory) by the shareholders. Thus, to properly motivate the CEO, they tie his income directly to the delta of the stock price. Unfortunately, as pointed out above, if the CEO does poorly, he never ends up risking everything the way the company is, so it's a little lop-sided. On the other hand, these guys often live extravagantly, which leaves the $1 salary as seriously draining on their net worth. That's not very compelling to me, though. Also, as always, focus on short-term stock prices is generally bad for companies, even if (temporarily) good for shareholders. Then again, options usually have some sort of vesting period whereby the holder cannot access them for a minimum amount of time after the grant. If that's 2+ years out, that can mitigate short-term concerns. I honestly don't know what Jobs, Ellison, Palmissano, et al, get as riders on their options.
Well, keep in mind in government there are a fair few executives (like Mike Bloomberg) who take $1 salaries because, well, they're filthy rich and they figure it would either be wrong (or political suicide) to draw a salary from an already stretched budget.
I wonder how many other politicians get paid a buck a year?
Random Thoughts From A Diseased Mind (Not For Dummies)
Most options don't really work that way. Most simply have cash settlement. It makes it cheaper for everyone to exercise them.
I hate grammar Nazi's.
"...public corporate taxes (though not much, usually...") I believe one of Apple's current advantages is that its doing a good job of managing taxes globally. Good job meaning: 25% of earnings (not including payroll taxes). 30% would be more typical. Marginal US tax rates for families earning under $200K is currently around 28%. Additionally, corporate earnings (either distributed as dividends or recognized at the sale of shares) are subject to additional taxes (dividend and capital gains rates). Summary: ethical US corporations pay comparable taxes to typical earners.
The "S" Conundrum: Can Dividends be Wages or Vice Versa?: Any knowledgeable practitioner reading this newsletter will quickly realize that the potential IRS argument that wages are too low is the flip side of the question, when is compensation too high in order to eliminate income for a regular "C" corporation? In both "S" and "C" situations the issue is what is reasonable compensation.
Interesting... I didn't know Glenn Beck was a slashdot reader!
I didn't miss the point, the point is that just now you have commented with a flamebait but not moded accordingly, while my comments are marked as a 'troll' or 'flamebait' all over the last couple of stories, simply because my message is unpleasant to so many, but while it may be unpleasant, it is not a troll, it is an opinion based on reality.
Also you don't like to 'debate' me, nobody is forcing you.
You can't handle the truth.
Social security could close this loophole by taxing all income and capital gains the same as wage income up to the income limit. Then there would be no need to hide wage income as profits as the tax would be the same.
I am pretty sure he actually reads my posts, not the other way around. I prefer Jon Stewart's show and I do watch Maddow because I often need a real laugh.
You can't handle the truth.
In the sidebar of the WSJ CPA story - Google Gives $100 Million Award to Outgoing CEO: "Google Inc., fresh off announcing a management shake-up, will give a $100 million equity award to outgoing Chief Executive Eric Schmidt, who in April will be succeeded by company co-founder Larry Page. Poornima Gupta, a spokeswoman for Google, confirmed on Saturday that it was the first such award for Mr. Schmidt since he joined the company in 2001. It includes stock and options. She declined to comment further...On Thursday, Mr. Schmidt filed paperwork to sell company shares currently valued at $335 million this year, his first such sale in more than three years. He currently owns 9.2 million Google shares, which are valued at nearly $5.8 billion"
"rich is what keeps the elephants from murdering the grass ." --the world
Napoleon Bonaparte needs more most...
--
When poor fight it is the atheists under their feet that suffers the Religion.
(utilizing Wm. Burroughs cut up method of rearranging text to find the true meaning of communications we can extrapolate what you really are saying to the world from your heart. After all, "Language is a virus, from outer space and it's better to hear your name, than to see your face.)
*Repent!Quit Your Job!Slack Off!The World Ends Tomorrow and You May Die!
Jobs et al do not get in trouble with the IRS because they do not, after having paid themselves $1 salaries, turn around and distribute their companies' entire profits to themselves at the end of the year. Profits are retained by the corp and taxed at a pretty high rate, or distributed to shareholders and taxed. Whereas with an S corp, all profits flow through to the shareholders, and the corp itself pays no taxes.
And yes, they pay taxes on their stock options. In fact, gains from stock options at the moment they're exercised are treated as ordinary income and subject to normal income tax rates + FICA + Medicare. I don't know about the treatment of stock grants...
I don't want anybody to be responsible for anybody. I don't want anybody to make me responsible for anybody.
I also trust the 'rich' to be much more responsible with their own money, than the gov't ever could.
You are saying that the gov't is more responsible or something? Aren't you in the loop? The US gov't has 14Trillion dollars in debt. 50Billion/month trade imbalance. Over 60Trillion dollars in unfunded liabilities, most of which are various pension funds, secured only with gov't bonds.
Are you telling me that the gov't is BETTER at managing money than Jim Rogers?
If Jim Rogers becomes poor and cannot pay for his own retirement, that's Jim Rogers' problem. He'd have to find some way of getting out of that situation.
But I'll tell you something much MORE realistic: It's NOT going to be Jim Rogers, who will end up poor. It's the population of US of A and other Western nations, that are socialist/corporatist/not Free people who will be poor. They will not have their SS. They will not have their EI. They will not have their Medicare, etc.
And you know what, if the gov't didn't actually ROB those people all those years through taxes and inflation, those same people would have had an opportunity to save the money they paid in taxes and inflation and they could have invested it themselves, into their own ideas and businesses, and society would have been wealthier.
And you know what, wealthy societies do not allow poor and sick people just to drop dead, there are enough charitable people in the world, who donate the money they made and time and help those in need, this is not something new and it never required gov't to force this charity to happen.
What gov't did end up doing, is turning many generations of people into dependent people, who are not self reliant, who do not think for themselves, who hope that somebody else will take care of them. Too bad. The times are coming when this will stop, and it's because of the gov't and it's because the gov't caused the society to be poor.
Poor societies do NOT help anybody through charity, because poor societies do not have resources for charities, and gov'ts turn rich societies into poor societies.
You can't handle the truth.
Ah yes, the argument from ignorance. If I've never heard about Title 26 of the United States Code, it doesn't exist!
directly tied to how hard you work to make the company earn money
Or at least how hard you make the balance sheet look good in the short term so you can sell your shares for a lot, step away and watch the business collapse like a house of cards. Or stay on and get a bonus when the government bails you out.
Tip: When Apple gave Steve Jobs a $100 million dollar jet, it appeared on his W2 form.
Do you even lift?
These aren't the 'roids you're looking for.
Your did not capitalize the first word in the sentence. You should be ignored for it.
You are entitled to your own opinions, not your own facts.
So? There is apparently no other issue with David Watson's tax returns, as the IRS probably reviewed his taxes with a fine tooth comb (I'm sure the IRS would have nailed him for more if they could have). Therefore his taxes can be reasonably assumed as correctly done.
Once again, why does Steve Jobs get to do it while this guy doesn't? There could be up to 100 shareholders in his little S-Corp too, so the argument that the low salary helps all the shareholders is bogus.
No, I don't trust in god. He'll have to pay up front, like everybody else.
None of the people mentioned in the summary are sole owners and sole shareholders of the companies for which they work.
Soulskill and theop should stop sucking each other off long enough to grow some brains and learn the difference between the two situations.
I'll be frank and quote my business law professor from years back:
A sole proprietorship has unlimited liability, and so if your business is sued, the plaintiff can come after your personal assets like your house.
But I'm willing to guess by "sole proprietorship" you meant "corporation with one shareholder or LLC with one shareholder."
Options often also have a minimum share price before they can be exercised.
I.e stocks are $40 each right now, and the company gives him options that can be exercised at $50 after two years. That gives the CEO an incentive to both focus beyond next quarter's earnings and ensure the company is as profitable as possible after two years.
They keep giving the CEO these things though, so it's like dangling a carrot in front of him.
That and bonuses are how the $1 club makes its money, and it's usually a pretty good arrangement for the company. It really can't backfire any worse than a fixed salary (if the company goes under it's not like the salaried CEO pays anything either), and if done right it can provide a huge boost in morale and CEO effectiveness.
Why do you think the top companies out there do it? The CEOs of these companies are clearly personally invested in the company's success, and while stock options are probably not the cause of that personal investment they certainly reflect it.
Security is mostly a superstition... Avoiding danger is no safer in the long run than outright exposure. - Helen Keller
If one is paid with stock there is essentially no risk (stock is unlikely to fall too dramatically, it's a similar risk to getting paid in a foreign currency)
If one is paid in back dated stock options there is a risk, but it is reduced by the back dating.
If one is paid in stock options with a strike price that assumes growth there is real chance of getting 0
A real ballsey exec would be paid in future purchase at a price contracts, allowing them to lose their shirt if they bring the company down.
Wow, sent an e-mail as suggested when clicking on "use classic" banner, and got a fast response that addressed my msg
This is just plain wrong: "Unlike profit distributions, all salary is subject to a 2.9% Medicare tax and the first $106,800 is subject to a 12.4% Social Security tax (FICA)."
Not only FICA applies to all your income regardless if it is W2 or 1099 income, you actually pay self-employment tax on 1099 portion.
Unlike this dimwit CPA Jobs at all do not actually get any taxable distributions: they receive stock option grants that will be taxable at exercise.
There are other ways to lower your tax exposure but switching your W2 income to 1099 only increases it.
You believe that Glenn Beck reads your Slashdot posts? Alright, I can now write you off as delusional with a clear and calm conscience.
Those who can, do. Those who can't, sue.
It's the stuff you buy that gives you quality of life.
Correction. You seem to not only be delusional about how important you are, but are also sadly misguided about what quality of life is. I normally don' reply to the same person in different threads, but your posts were such a rare combination of sad, misguided and fantastic that I had to. I actually feel sorry for you.
Those who can, do. Those who can't, sue.
/.? The world is not centered around /. you know, maybe you should get out more.
You can't handle the truth.
Correction. You seem to not only be delusional about how important you are,
- random.
but are also sadly misguided about what quality of life is.
- quality of life is everything that you get. Did you have to hunt a bird or a pig or harvest your own crops to eat? No? You bought food at a store, right? That's quality of life.
Did you have to go harvest your own coffee beans when you visited that coffee shop to get a cup? No. That's quality of life.
When your head hurt, did you bash it against the wall? I hope not. There are pills for that. That's quality of life.
When you got all lonely, did you dial '1-800-get-a-whore' or whatever, or maybey you turned on TV or phone or your computer or maybe you drove your car to see some friends? That's quality of life.
Did you go to a vacation? Did you have to build your own airplane to fly there? That's quality of life.
Being able to use the goods and services provides you with quality of life. If you think you can have wonderful quality of life while living a 'simple life' at the 'edge of earth', picking food, using roots and leaves and dead mice to sooth your pain.... you are going to be surprised once you get into that situation. You will quickly find just how important all those things are, that you are dismissing so easily here.
I normally don' reply to the same person in different threads, but your posts were such a rare combination of sad, misguided and fantastic that I had to.
- what, no noun, just a bunch of adjectives?
that I had to. I actually feel sorry for you.
- oh, thank you, would you also make me a sandwich while you are at it? Vegetarian please.
You can't handle the truth.
Correction. You seem to not only be delusional about how important you are, but are also sadly misguided about what quality of life is.
So how do you define 'quality of life'?
But I'm willing to guess by "sole proprietorship" you meant "corporation with one shareholder or LLC with one shareholder."
:)
Ah, my bad, I did indeed mean the latter. Thank you for clarifying that, I always interpreted the former as merely descriptive, such as for an LLC with only one actual owner. Evidently not.
it won't be the poor and revolutionaries who'll be rebuilding it
what utter rubbish, you're telling me no poor or middle class person earned and built up their own wealth? You're telling me a banker or typical financier knows how to design or build anything other than debt and debt-notes? You're telling me the only way to build or run a business is by going into debt and being in debt? Most of the oligarchs in our current system with its mega-corporations have only made laws and procedures to shut out the small guy from becoming successful or participating in markets (for one example, the "food safety bill") and to lock us into buying their products while quashing alternatives. we don't need those uber-rich parasites, we've already had to prop up, are continuing to prop up, their failed business models with debt laid upon us. Those who can invent, design, build don't need those people.
The half dozen Revenue Acts (a new one being signed into law just a few years ago) and the Internal Revenue Code (codified statutory tax law) beg to differ.
The video seems to suggest income tax was illegal before the 16th amendment. This is clearly not the case, since income tax has been around since 1861, and the only time it ran afoul of the constitution was when a direct tax on property was not apportioned among the states by population. The 16th amendment removed that need and allowed all income tax from all sources to be unapportioned. It had nothing to do with the legality of the tax, only the way in which the federal government spent the tax dollars.
You do realize that the principle argument of "The Law That Never Was" is that the punctuation in the ratified 16th amendment documents was cleaned up, and therefore the ratification is invalid, right? In the US v. Thomas, the Supreme Court ruled on exactly the matter brought up in the video. Guess what they ruled? That the amendment is legitimate!
Slight differences in text and punctuation happen in pretty much every amendment to the constitution. So long as they are not egregious, they are authorized and the amendment goes into effect. I'm sure the same thing happened with the constitution itself. I'm sorry, but forgetting to capitalize the word "States" does not change the law.
It's probably the dumbest argument I've ever heard, and the amendment doesn't even deal with Congress's power to tax income (the constitution already gave it that power), making the point moot from the tax payer's perspective. It only deals with Congress's power to use that taxed income. If this argument were valid (it's not, Benson was convicted of fraud by a jury of his peers for perpetrating it) then a State could sue the federal government, but not an individual.
Seriously, you have to be an idiot to believe this load of crock. And I mean that in the traditional "can't possibly get any dumber than this" sense of the word, not the modern, friendly "you idiot" sense. Rocks would beat you in a battle of wits.
Security is mostly a superstition... Avoiding danger is no safer in the long run than outright exposure. - Helen Keller
He has refused his Assent to Laws, the most wholesome and necessary for the public good.
- random stuff, there are too many laws on the books now, instead laws need to be abolished.
He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.
- same.
He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.
- same
He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.
- I wouldn't say Washington DC is that terrible of a place...
He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.
- the representative houses today need to be dissolved, how many of the representatives are in their double digit re-elections? Professional politicians need to go home.
He has refused for a long time, after such disolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.
- the current problem is that the same people are there for decades.
He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.
- yeah, that seems to be the same problem now. But it's even worse, do people actually OWN their property today or is it all property of the state and banks?
He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.
- appointed Judges.
He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.
- activist / party Judges
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass [sic] our people, and eat out their substance.
- income taxes, payroll taxes, inflation through printing and borrowing, future taxes based on debt
He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.
- aside from the fact that physically the military is not sharing your quarters, the military is always there, with all that spending. You might as well say they are living in your house and you are paying their rent and everything.
He has affected to render the Military independent of and superior to the Civil power.
- and today military is in the pocket of politicians, who use it for their own gain to keep being re-elected, because the military industrial complex never sees any spending cuts and military is always in a war of some sort
He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:
- UN, NAFTA
For Quartering large bodies of armed troops among us:
- or just spending obscene amounts of money, printed, borrowed and taxed
For protecting them, by a
You can't handle the truth.
what utter rubbish, you're telling me no poor or middle class person earned and built up their own wealth?
- I am saying that once society is ruined, you need capital to start new businesses, and capital comes from savings.
Sure, a person with no savings CAN save something over time and start a business, I am not denying that it is one of the ways to do so, but it takes so much more time to do it that way, that in an impoverished society it is even harder.
You're telling me a banker or typical financier knows how to design or build anything other than debt and debt-notes?
- I am telling you, that if some 'financier' or a 'banker' survives this with some capital saved, then he will be able to invest that capital, and if not himself, somebody else may use that capital, but he will have to be organizing it.
You're telling me the only way to build or run a business is by going into debt and being in debt?
- I am saying the opposite, that capital is savings. So you need savings to be able to invest that saved capital and organize labor around it to produce anything, is that some surprise?
Most of the oligarchs in our current system with its mega-corporations have only made laws and procedures to shut out the small guy from becoming successful or participating in markets (for one example, the "food safety bill") and to lock us into buying their products while quashing alternatives
- correct.
we don't need those uber-rich parasites, we've already had to prop up, are continuing to prop up, their failed business models with debt laid upon us. Those who can invent, design, build don't need those people.
- unfortunately you will need those people. You can be as inventive as you like, but if all of your time is spent gathering food, you won't have any time at all to exercise your ingenuity.
It's hard TODAY to become a self-made entrepreneur, because you have to fee yourself while working on your own projects. Imagine a destroyed society, where stores have nothing, you can't exchange money because it's worthless, you need actual commodities to survive and you need to find those commodities.
In that situation your best bet is somebody with a lot of savings to restart businesses.
You can't handle the truth.
As far as I can tell, Snipes was charged and convicted of failure to file, not of not paying some amount of income tax.
Learn about Photography Basics.
bad, bad assumption you're making. What form does the "wealth" of all these uber-rich take? It's mostly pieces of paper and blips of information on disk arrays attached to IBM Z and Unisys Clearpath mainframes. Please tell me what the FUCK any use that will be after collapse, and why I need either those fiat chits or the two-legged parasites that hold them, other than as fuel or chum. We won't need them, and whatever physical wealth they have as small percentage of the total they have now (land, gold, etc.) should be taken after their trial for treason and crimes against humanity
The reason $1 execs don't have to deal with this is simple. Their salary is $1 and they don't make money off of company 'profits.'
But, you might say, they own stock! In fact, the only reason these folks might agree to such a compensation scheme is the stock!
And you'd be right, partly. They agree to this for two reasons: 1.) Stock options and 2.) they're already wealthy.
But this doesn't matter for income purposes. Why? These $1 executives aren't getting profit disbursements or dividends on their stocks. Therefore, they can only make money on the stock options if they sell the stock. (Which, by the way, they're often prevented from doing for a number of years.)
In contrast, this CPA had a small corporation where he was likely the sole stockholder. (I say likely because I didn't read the link. I'm lazy. Besides, I wanted to show off this knowledge. Oh, and another reason it's likely he's a sole stockholder is because it's likely a professional corporation where only other CPAs can be shareholders. Lawyers, doctors, and other professional get these restraints, too.)
Trying to 'trick' the IRS by paying yourself a meager salary and then taking the rest in profits won't fly. The IRS can, at their option, treat solely owned corporations like this as sole proprietorships under the tax code. Corporations and LLCs aren't tax vehicles per se; they're liability reduction vehicles under state law. The tax code has simply been designed to allow for tax benefits in certain circumstances, but these are not dependent upon 'structure' as much as it is 'actual use.'
Basically it comes down to if it looks like a duck, quacks like a duck, and walks like a duck, then the IRS will call it a duck even if the duck calls itself a goose. Similarly, if a CPA tries to avoid tax liabilities by calling himself a corporation, setting himself a salary, and then giving himself a dividend on the rest of the profits then the IRS will call that not a 'profit' but, rather, an 'income.'
This is totally different from a $1 executive who only gets $1, gets stock options he can't use for 3-10 years, and 'realizes' no income because all he's gotten are stock interests that can't be sold and picture of Georgia Washington.
The Slashdot contributor is right about one thing -- rich folks do have better tax advisers. Then again, going to bloody H&R Block or simply spending 30 minutes reading the IRS website can give you this information, too.
It's not rocket science.
This happened in 2002-2003.
This is a very different scenario than a 1$ CEO. The 1$ CEO actually takes a real pay cut and banks it all on their stock options. They are not trying to cheat on their taxes, though if their gamble pays off they do end up paying fewer taxes as a side benefit. They still pay all the taxes they are required to.
The CPA in the story was trying to cheat on his taxes. He took a salary that was far below the average compensation of a green CPA, let alone a CPA with 20 years experience. He then took an extra $380k in profit distributions over the course of two years. He did this specifically to avoid payroll taxes.
He might have gotten away with it if he payed himself $50k a year, but $24k was just too obvious. Why not just go for broke and pay yourself $1?
Security is mostly a superstition... Avoiding danger is no safer in the long run than outright exposure. - Helen Keller
The Oracle CEO makes $85 million per year.
What's your point, exactly?
Security is mostly a superstition... Avoiding danger is no safer in the long run than outright exposure. - Helen Keller
I am talking of-course about those, who hold real currencies, real money (gold), real wealth (equities in companies that actually produce things people use in other countries.)
Wealth is saved. Saved wealth is capital that can be invested.
I'll answer your question like this:
You will need those people because once you have nothing, you'll need something to start with, even tools and raw materials. Tools and raw materials. If somebody can provide you with tools and raw materials and food and energy, then that's an investment. If you CAN provide yourself with those things, then you are one of those who can do it yourself.
Most people won't be able to.
You can't handle the truth.
Except that the filing fees in some states can be extortionistic. My business hasn't really grown to where I have enough stable clients to gain a livable income; I'm still in the "side-job for beer money" phase while finishing my degree... I don't have the $600+ lying around to file as a corporation. After web-hosting and paying for the latest industry tools, I'll be lucky if I make $600.
Admittedly I don't think we know enough about his case to say. I know that when I make 1099 income from rentals and royalties, and when I receive income for contract work, at the end of the year I have to pay self-employement tax on the income, which covers the SSI and Medicare that wasn't withheld, and both sides of it too. This cat probably structured the bulk of his income, the bit over $20k, in such a way that it wasn't liable to SEP like it's supposed to be -- instead of paying it to himself as 1099 or W2 income (or benefits like a jet), he probably structured his income distributions as dividends, which are liable to normal income tax when they pass to the individual but not FICA.
The whole point is that the profit distributions weren't profit, in the sense that they were revenues minus expenses, because he was using the fact that his time is his number one corporate expense to game his corporate profits up. If he had to pay an accountant an actual non-phony salary to do the work he did the excess profits he skimmed wouldn't exist.
Don't blame me, I voted for Baltar.
Schwarzenegger did, it doesn't happen very often. The hazard with paying politicians a $1 is that if they aren't billionaires who could care less, or their income from outside government becomes disturbed, they can become highly receptive to bribery.
Don't blame me, I voted for Baltar.
Geez I thought it was bad in Canada where the first (about) $40,000 of income has a social security tax of (about) 10% - half from the employee and half from the employer... but 12.4% on the entire income? Yikes!!!
The Medicare tax seems to work out to be about the same as the average person pays here on the first $30,000 of income.
The tyrant will always find a pretext for his tyranny - Aesop
That is to insure adequate "earned income" taxes on which social security and medicare are based. At this point in time earned income is higher than capital gains too.
The IRS frequently audits small corporations if they think the executives are evading taxes taking too low a salary.
The IRS expects you, in an S corp to pay yourself a "reasonable" salary. There is NO actual guidelines, and many accountants are now advising clients (in the absence of a real guideline) to pay themselves 60% of the draw as salary (get hammered on SS taxes, etc - and not that I'll ever see anything back) and the other 40% as dividend. There were folks who on a 150k income paid themselves 10k and then took the rest as dividends, free of SS tax (15%). Guess "wrong" as a small businessman and get hammered for back "salary" with interest and penalty on the tax. You accountant is navigating for you in the dark and fog. There was a bill in the last Congress to require SS taxes on 100% of draw. It died but only after a huge upset for small businesses and accountants. Meanwhile, hedge fund guys pay 15% on that, but they are rich so they are more important. I'm still an S corp but the benefits are way less than, say, ten years ago. As my CPA recently informed me "State and Federal Governments need the money, so they are taking a harder line on everything". Nothing like uncertainty in paying taxes.
There's a Big Lever in D.C. It has two positions: 'invest' and 'consume'. The Big Lever is connected to a lot of things, but the tax code is a major one. "Profit" and "income" are separate concepts in the tax code, even though this is obviously nonsense. In the tax 'code', "profit" means "investment"; and "income" means "consumption". They have different definitions and different tax rates so that they can be connected to different ends of the Big Lever.
Regardless of the party in charge, the Big Lever is operated with one overriding goal: centralize control of everything. Maintain the status quo. Maximize profit at big corporations. Maximize individual consumption. Make as many people dependent on government and big business as possible. Depending on the state of the economy, the Big Lever is put into whichever position will effectuate this goal.
For instance, when productivity is rising or new technologies are being invented, the Big Lever is thrown into the "consume" position, in order to prevent them. Or, at least, in order to steer that productive effort into less disruptive, pointless consumerism. It might seem rational for individuals to want to invest in new technologies or to benefit from productivity gains. But this goes against the overriding goal of maintaining a centralized economy and a dependent populace. So the Big Lever is used to discourage individuals from making individually rational decisions that could upset the status quo. Talking heads on television spout doublethink nonsense like "macroeconomics is counter-intuitive" and "it's bad when everyone saves" in order to convince people that dependence and consumption are good even when they're obviously not.
Normally, when something bad like a natural disaster or national tragedy happens, what's the rational reaction? Stop consuming as much, start investing more? Arrange your assets to become a bit more independent, and more resilient to future disasters? But that means less centralization. So investment is bad in this instance. It upsets the status quo. It's not efficient. It cuts into corporate profits. It reduces the size of government. Government has a better plan that doesn't upset the status quo. They put the Big Lever in the 'consume' position. When a natural tragedy happens, they just cull the flock. Send some of them off to war. That keeps production up! It's good for the economy!
But when the economy is really doing poorly, when inflation is rising, when there's nothing left to consume, when people might want to take advantage of that "social safety net" they've been paying taxes for, that's when it's time to throw the lever into the 'invest' position. That's when we see the talking heads telling us to "roll up our sleeves" and "sacrifice". That's when it's time to cut benefits and wages and workers. Because that's the time when the workers have absolutely no other choice. They have become completely dependent on over-consumption and big business and big government. They were told to consume when they should have invested. Now they have no choice but to invest.
So when terrorists crash planes into buildings, just keep calm and carry on consuming. But when the American central bank crashes the economy building unnecessary houses and shopping malls, that's when you have to invest in bailing them out.
You see, the problem isn't that you're being fleeced. The problem is that you might escape.
"I assumed blithely that there were no elves out there in the darkness"
I think the idea is that the law says you have to file, but not that you have to pay.
That said, the US tax code is so big, there is no way to make sense of it as an individual person. It's not possible. It all boils down to one thing: The IRS says this is what you need to pay, and if you don't, then they've got people with guns willing to force you to.
I have no idea if the law is internally consistent. The concept of fighting it based on technicalities is a losing one, though. Either try yo organize enough friends to be self-sufficient and hold off the power of the US government, or STFU and pay the tax. There really isn't much else you can do.
Learn about Photography Basics.
The 290 million US consumers are a drop in a bucket at this point. Real consumers today are in Asia, because they are producers, and people who do not produce have nothing to exchange for, so they are no longer real consumers.
First of all, it's entirely possible to consume assets without producing anything. Saying "all consumers must produce" is just a restatement of the broken window fallacy.
Secondly, the terms 'producer' and 'consumer' mean 'net producer' and 'net consumer'. You're using them interchangeably when they are in fact mutually exclusive.
"I assumed blithely that there were no elves out there in the darkness"
Because most companies don't give straight shares, they give options.
Actually, I think options are falling out of favor in a lot of companies, and are being replaced with RSUs (Restricted Stock Units). It's basically the same deal, but you don't have to buy the option - it's just free stock that you are granted, and vests some number of years later. From my understanding, it can be taxed at a lower rate, is never worth zero, is still tied to the success of the company, and less shares are typically involved, so the dilution of stock is less.
That way, if the economy tanks and the company's stock price is just along for the ride, people whose compensation is largely stock-based don't get shafted. Of course, they'll do better if the company does better. It's also good for the average peon in the company that gets some (but not most) of his compensation in the form of stock - especially since the individual contributor has much less ability to sway the stock price than a CEO or a director.
Some companies stopped giving options when their stock price stopped rising, and now give grants. They give out free stock, just a lot less of it (this way, they don't ever need to "re-price" the options). Microsoft is one of these companies.
I feel fantastic, and I'm still alive.
First of all, it's entirely possible to consume assets without producing anything.
- is that even a question?
Of-course you can consume without producing anything.
You can consume and consume and consume and keep consuming. The only question is this: who is giving you the stuff and why?
As long as you can somehow trick somebody or coerce somebody or do some Jedi mind control trick on somebody and keep them subsidizing your consumption, then yes, you can consume forever until they are dead or they snap out of it or you grow tired of eating.
I don't understand how that even made it into a point in your comment.
Saying "all consumers must produce" is just a restatement of the broken window fallacy.
- OK, I'll restate. All people who consume, must give something in return. Maybe they are not producing something specific, but maybe they are improving quality of life of someone else and that pays the bills.
Obviously there are charity cases, where people live just because somebody is taking care of all their needs. I don't disapprove, I don't argue, I don't envy at all, if those are healthy grown up people, then I am amused.
Secondly, the terms 'producer' and 'consumer' mean 'net producer' and 'net consumer'. You're using them interchangeably when they are in fact mutually exclusive.
- I don't even talk about any particular one individual, I am talking about the aggregate and the fact that USA has a trade deficit of 50Billion USD/month. I think that number speaks volumes.
You can't handle the truth.
But you just have to pay yourself a 'reasonable' salary. For instance, if you bill like $120K roughly...then pay yourself a salary of $40-$50K....pay employer taxes on that...and the rest can fall through.
Only declaring $24K salary on almost $400K is just asking for the IRS to kick you in the balls.
Of course, with the Feds spending the country into oblivion, they may start looking even at people paying reasonable (according to the vague rules that have worked for decades) and try to fsck with them. Sad...this was about the last and only way to keep a proper amount of one's earnings from Uncle Sam.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Capitalism is class warfare. I want to end class warfare.
Give me Classic Slashdot or give me death!
Google & Apple are C-Corps, which don't allow this tax loophole at all, so Steve Jobs can't save any money by pulling this trick. The comparison is not accurate.
He used his S-Corp to reclassify wages as investment income to avoid FICA taxes, paying himself $24,000 per year (i.e. factory worker wages) instead of a reasonable wage for a CPA. You can't do that in a C-Corp, because you'll have to pay the corporate taxes that S-Corps get to avoid.
He would have been fine if he'd paid himself even somewhat reasonable wages, but Google & Apple can't pull this particular trick at all. C-Corps use completely different tax loopholes.
they are constantly working, using their investments to hire people, to produce stuff.
"Using investments" is not equivalent to "working", sorry.
"Using investments" is not equivalent to "working", sorry
- sure it is, but don't be sorry for not understanding such a basic concept. If the kind of investment you are talking about is investment into other people's ideas, then in order to make a proper investment you have to do due diligence, you have to manage the risk, you have to actively participate in the business.
If the kind of investment is for example buying a bunch of land and organizing farming on it, hiring labor, buying tools, then again, it's about management of money and resources and business, etc.
If investment is even just spending time to build something, to invent/innovate and then to try and push the product to the market, then investment was your time and capital that you sunk while doing all of this, and managing the business.
What about this is NOT work? Is it like giving birth and then doing all the tasks associated with bringing up a baby not work?
You can't handle the truth.
Capitalism is saving money and then using the saved money to create some business by organizing resources and labor to bring products/services to the market.
If savings and business is class warfare in your vocabulary , then I want more of that kind of warfare, because that's what raises standard of living for everybody.
You can't handle the truth.
So, they're operating with no good guidelines in a system that makes it hard for S corporations with highly variable income to avoid burdening themselves with fixed salary costs -- and they like it that way, since they opposed the proper fix, which is to recognize that this is all ordinary income, and should be treated as such -- just as the profits of an unincorporated business would be.
Do you know what accountants use as contraceptives?
Their Personalities!
(:
Get rid of the payroll tax and implement a one percent surtax on all income. Earned via wages, interest, dividends, exercised stock options, carried interest and so on. We'd be able to reduce the rates on working people while making the rich pay their fair share.
It'll never happen though.
I don't understand how that even made it into a point in your comment.
All people who consume, must give something in return.
I mention it because your concept of consumerism seems off. Americans are typically consumers because a few hundred years ago they stumbled upon some of the largest stores of wealth in all of human history. No one gave it to them, at least not voluntarily.
But, more fundamentally, the modern global economy is not a system of balanced trade, even though it may seem to be. It is a one-way process of resource consumption. Those who control the resources are the 'consumers'. Those who do not, are the 'producers'.
The entire system is promulgated on the lie that consumerism is beneficial. And it *is* beneficial, of course, to the working classes who have no assets and are completely dependent upon consumer spending. It is also beneficial to the giant corporations who own the media and the factories and who use consumerism to consolidate wealth.
Consumers are portrayed as precious snowflakes who must be nurtured and coddled. Everyone should aspire to be a lofty consumer. This is an easy sell, of course, since consumers are always relatively well-off pretty much by definition. It is not really beneficial, though, to the consumers themselves, in the long run. It is just "eating the seed corn".
After WWII the 'middle class' of America was actually the working class, which didn't have competition from outside countries, because most countries outside of USA didn't have any capital and infrastructure left after the war.
Your 'middle class' idea is a fluke, caused by war and lack of competition.
That's true, the post-WWII American middle class was a fluke.. a load of Platonic republican bullshit. But there has always been a middle class in America since day one. It has mostly been comprised of self-sufficient family farmers. And when all the jell-o factories close up and move to China, they will still be here.
The GOOD and SERVICE is what WEALTH IS.
Well, capital is what wealth is. Goods and services are things that wealthy people can afford.
It's not the worthless currency.
True.
"I assumed blithely that there were no elves out there in the darkness"
It has nothing to do with who has more wealth or better lawyers. An S-Corp is an easy way for a person making less than $106,800 to pay less in social security taxes. I have done it myself. In a C-Corp (Which what Apple is) you are double taxed on ALL of your distributions, even if they are higher than $106,800. In an S-Corp, you need to be sure that you are paying yourself enough to stay under the IRS radar.
There are in fact no Supreme Court cases backing up that claim. What there are, however, are Supreme Court cases where a brief filed by the losing side tried to make that claim and was thoroughly shot down. Lying assholes like yourself or the people you cite who are trying to rip people off by selling them the alleged secrets of how to pay no taxes quote those losing briefs, counting on the average person, if they go try to check the claims at all, failing to tell the difference between what the court said and what the lawyers argued.
Back when I was in law school, in order to practice legal research I made a hobby of investigating the so-called "tax protestor" or "patriot movement" claims. Every single one of them comes down to citing something like a losing brief, or quoting out of context, or citing quotes that don't exist (sometimes they cite a real case but the cited quote is not in it, and sometimes the case itself doesn't even exist), of blatant failure to comprehend English. (My favorite example of the later is there is some obscure provision in the tax code dealing with some weird thing like taxes on companies that invest in oil wells in the United States, or something like that, and the tax code says "For purposes of this section, 'United States' includes Puerto Rico and the District of Columbia". That "tax protestors" read that as saying that the United States is only Puerto Rico and DC, so if you live in one of the 50 states it does not apply. They also ignore the "for purposes of this section" part and take it to apply to every part of the tax code).
So how come, you might ask, do the people selling "pay no taxes" books and seminars manage to not go to jail for paying no taxes? Two ways. The first is that it can take a long time for the government to get around to nailing someone who simply stops paying taxes. The second is even simpler--how do you know they don't pay taxes? It's easy to claim you don't pay taxes, and a prudent thing to do when your business is convincing people they don't have to pay taxes.
C'mon, people, I know taxes are boring, but read the article.
Unlike Jobs or Schmidt, Watson was the sole shareholder and owner of the business in question. As a sole proprietor of his S corp, he was fully responsible for any profit or loss, as well as determining salary.
If this were organized as a sole proprietorship, there'd be no distinction whatsoever between his net profit and his income. Probably a bigger question here is why such organization is allowed.
At any rate, when Jobs gets $1 salary and then a profit bonus, it's because the board of directors approved that salary, and approved the bonus. No profit, no bonus. Since Watson's S corp has as its revenue stream steady income from the accounting firm and absolutely reliable expense forecasting, there was almost no chance of him posting a loss short of his arrangement with the firm being terminated, which is a far cry from Jobs being tasked with making sure Apple comes out with profitable products.
When used by an independent board of directors, representing shareholders, the low salary/profit bonus structure is a way of motivating executives.
When you are your own board, it's a tax dodge, and that's how the IRS saw it.
Why isn't "profit" considered "income"?
Obvious. Because corporations aren't peo....
Err... Can I get back to you on that?
If he were a sole proprietorship-- a company that is the same as the person who owns it-- it would be.
In this situation, he is the sole owner of an S corp that is a separate legal entity from him. However, since it has no other shareholders and no other directors, it's a sham. It has steady income and predictable expenses, and almost no risk. Why an S corp doesn't require more than one shareholder I can't fathom, although raising the requirement to 2 would just end up making a lot of spouses, children, relatives and friends into paper shareholders.
I mean, really, how stupid can you get? If the problem is 10+% unemployment, you can tax profit, sales, capital, energy usage etc. but the one and only thing you never want to tax in this situation is payroll, esp. as wages are already subject to individual income tax.
While not addressing your other points, in the case of the dentist business owning more than it can generate, can't (or won't) the note holders go after the dentist himself? They will attempt to show that the corporation was nothing more than a front for one man to do business, and as such, personal assets of the proprietor(s) should be on the able.
Whether that's a good thing is debatable, but isn't that what creditors would want to do?
And how successful would they be (anybody know)?
I'm not a lawyer, but I play one on the Internet. Blog
You seem to quite informed on the issues.
Check this out: http://www.apttax.com/
Automated Payment Tax of .3% on every bank/financial transaction. No other taxes.
I saw it originally on Slashdot, and it's an interesting concept.
I'm not a lawyer, but I play one on the Internet. Blog
Probably because of posts like this one!
But seriously, the problem with this post isn't that it highlights the craziness of the tax system. It's that it incorrectly tries to tie a tax dodger's attempt to hide income from the IRS to CEO attempts at major companies (Steve Jobs @ Apple, Vikram Pandit @ Citi) to boost company moral by taking $1 salaries and, instead, basing their pay on performance through stock options.
There may be valid arguments that this CPA should be allowed to do what he attempted to do. There are no valid arguments that this guy is getting nailed while rich executives are not. Even worse, painting this guy as the 'little guy' is disingenuous at best, and dishonest at worst, since he made almost half a million in the year in question.
Cry me a river for the $500k income taking a $20k hit for FICA. (Of which, only $106k of his income counted towards the Social Security percentage.)
> IRS Nails CPA For Copying Steve Jobs, Google Execs
So where can I get my chinese Sergey clone ?
What a depressingly stupid machine.
This summary is ridiculous. Can we get a little more fact and a little less whining please?
Yes the rich are different, they went and did something to earn their money instead of sitting and pouting about how the little man can't get ahead! In America, 80% of millionaires are first-generation rich. They are people from every walk of life who behaved rich instead of acting rich.
Its not taxes keeping the little man down, its attitude. Get up, leave the cave, find something and kill it! There is limitless opportunity, even in a bad economy.
Before any of you accuse me of being Bill Gates in disguise, I'm actually just a recent college graduate who's almost 50k in debt. I'm not gonna be here forever though, and I don't blame other people for my lack of wealth! I just can't stand the politics of envy.
Being a wage slave is just stupid under the current laws. Start your own business and be a contractor type. At least that way it's you who decides what it's important to spend the money on, not some HR jerk with a "policy". You might make more, or you might make less (though that probably means you were overpaid as a wage slave....and didn't deserve it). But either way it'll be on you -- no guts, no glory.
Why guess when you can know? Measure!