Tax Peculiarities Mean Facebook Paid No Net Taxes For 2012

Frosty Piss writes "Despite earning more than $1 billion in profits last year, social media juggernaut Facebook paid zilch when it came to federal and state taxes in 2012. In fact, the website will actually be getting a refund totaling $429 million thanks to a tax reduction for executive stock options. In the coming years, Facebook will continue to get monster tax breaks, totaling about $3 billion. 'The employees cash in stock options, and at that point there is tax deduction for the company,' Robert McIntyre, of watchdog group Citizens for Tax Justice, said. 'Because even though it doesn't cost Facebook a nickel, the government treats it as wages and they get a deduction for it.'" (That's not to say that Facebook employees' salaries didn't get taxed.)

Comments

Peculiarities?

[biodata]

This is normal - the rich don't pay tax.

Re:Peculiarities?

[Runaway1956]

This is normal - the tax code is broken.

The tax system should have deductions available to small and/or struggling businesses. But, the system is broken, and obviously so, when the most successful businesses routinely pay zero taxes.

The system is so very broken, that I'm willing to see all deductions killed off, and every person, every business in the United States charged a flat rate on income. No more special rates for stocks, bonds, etc. Income is income, no matter the source. Tax it all, with no deduction, no deferrals, nothing.

The ONLY concession I'm willing to make, is to tax net profit, rather than gross profit. But, I want a damned strict accounting of those gross and net profits. Very damned strict. To hell with those licensing schemes mentioned in other posts. And, no, we will not allow any foreign taxes paid to be deducted from taxes due in the US. If you have an office in Ireland, or wherever, you pay your taxes there - and you ALSO pay your taxes here. The offices in Ireland suddenly seem to be cost-ineffective? That's your problem - get rid of the office. That's up to you, though. We have no objections if you continue to piss your money away on some office that never served any purpose other than to cheat us out of taxes.

Re:Peculiarities?

[Let's All Be Chinese]

Apparently companies don't pay taxes (ref) in the sense that anything they do pay someone else gets to pay -- the employees, the customers, the shareholders, you name it.

Even without that caveat I'd be strongly in favour of a simple tax code, one that simply isn't complicated enough to have much in the way of loopholes. Perhaps a flat-fee on income, or a VAT if that really is a cheaper* tax overall to levy, tied to the yearly budget in a straight-forward way so that politician stupidity gives fairly direct feedback in your wallet, and then hopefully influences your voting.

Assuming that indeed, companies would shove off any taxes paid anyway, well, let them not pay taxes, let the people who receive income from the company do. The upside of that is that since more tax is coming from employees, it's now harder to hide taxables on other sides of borders.

The problem with that sort of thing, though, is that simplicity is a two-edged sword: The politicians no longer can hide their shenanigans either. Look at the debt rate. Eventually that's going to have to be paid back from taxes. And suddenly you're keenly aware of that fact.

* Where "cheaper" means less inefficiencies due to collecting and side effects.

Re:Peculiarities?

[Dcnjoe60]

To deduct medical expenses, they have to be in excess of 7.5% of your AGI. In 2012, that would mean you would need an AGI below $26,667 to be able to deduct any of your medical expense. Even with an AGI of $26,667, it is very unusaul for your itemized deductions to exceed the standard deduction, not impossible, but unusual, so if you did deduct $2,000 in medical expenses on your itemized deductions, you might want to check your tax return before the IRS does.

Re:Peculiarities?

[ShanghaiBill]

Try doing what the rich do to pay zero tax and you end up in jail.

Not true. If you work for a paycheck, and receive a W-2, you are screwed. But if you run your own business, or work as a contractor, most taxes are avoidable even for a "little guy."

I pay very little tax. My income is above the median, but I don't think many people would consider me rich. I own three domestic corporations (a Delaware C-corp, a California S-corp, and a Nevada S-corp), and an overseas Cayman Islands corporation. These cost just a few hundred bucks each to set up. Any middle class person could afford to do the same. I can report income through whichever jurisdiction and type of corp offers the best deductions for that particular type of income. I can move income between corps by selling "services" or paying license fees. I avoid paying personal taxes by living off non-taxable loans, rather than taxable income, from the corporations.

All of this is perfectly legal. I was audited by the IRS once, and had to pay a fine of $420 for a bookkeeping error, but otherwise they said everything was fine.

Of course these loopholes were set up for the rich, but there is nothing to stop the rest of us from using them too. If you think about it, we have a good system: people that don't mind paying taxes pay them, and those of us that prefer not to, don't.

Re:Peculiarities?

[Anonymous Coward]

If your loans are private, see if your lender (or the collection agency, if it's already gone to collections) can produce the original signed contract for the loan. If the loan has changed hands several times (typical these days) getting the contract is very hard if not outright impossible for them to do because those usually get destroyed every few years. If they have no contract you can beat them in court because nothing else proves that you owe the debt. I know this works on credit card debt b/c I used it to kick my creditors to the curb last year.

Re:Peculiarities?

[Anonymous Coward]

UK tax system has similar issues. I've recently moved from self employed to payroll; self employed as a subcontractor and making use of normal business expenses deductions, I paid approximately 4% total tax all in. That's so embarrassingly low, but I actually eased off on some deductions to inflate the figure to that level; I could have easily paid literally nothing, despite having higher than median income. Employed with approximately the same income I'm paying around 30%, and my employer is paying a further 7% in employer payroll tax contributions.

I went on the payroll to more easily get a mortgage (how you are a worse risk if you've got a 12 month contract as self employed contractor than a 30-day notice period employment, I have no idea); hopefully next year's contract renegotiation I'll be back to subcontracting, saving myself and my employer a tidy packet. The fact that house prices in the UK are something like 10x the annual median wage makes getting on the property ladder a real hassle even for those of us lucky enough to be relatively well paid, but that's a rant for another day :-)

Re:Peculiarities?

[Vitriol Angst]

So for people who can be clever and manipulate their tax nexus -- doing absolutely zilch for the common man. They get to "win."

Someone else works hard, isn't clever with tax manipulation, ends up being ridiculed as a "burden on society" by Libertarians when he gets to retirement and only Social Security is available because Merrill Lynch screwed him on returns.

So from a purely citizen--oriented, non-tax manipulating perspective of a person who is more and more convinced we need to become a Socialist Democracy; go fuck yourself.

If you need a working diagram on how to accomplish this particular manipulation of your non-taxed member, I'll be happy to provide one.

Re:Peculiarities?

[vux984]

It was put there on purpose, to encourage business and spur employment.

And it is working brilliantly too! He has 4 businesses -- so clearly the "encourage business" part is working. And he works for all of them, thus he has 4 jobs!! That just has to look good on employment figures!

How much does this cost?

[Anonymous Coward]

Whenever such stories pop up I wonder how much it would cost your average worker to get the same effect.

How big is the overhead for setting up a few shell companies to outsource your job to yourself and move your contracor fee (formally known as salary) to Ireland and back into a non-profit with the sole profit of providing for you?

Of course when you do it as an indivual, it's tax fraud, but where's the point where it turns into SOP? Can you get together with a thousand people, set up a bogus company, Random Stuff Inc., everybody still does their old job but you all pay zero taxes? Ten thousand?

Not exactly

[rsilvergun]

EIC isn't a tax benefit. It's a welfare program for people that make so little they would be homeless otherwise. Most EIC recipients are getting more than they're paying in. It's a counterweight for massive unemployment and wage suppression brought on by huge increases in productivity and lost manufacturing jobs.

Health care deductions are similar. The insane cost of health care necessitated massive subsidies in the form of tax subsidies. Companies benefit more from those subsidies then middle income earners ever will. But again, it's a form of indirect socialism meant to prevent large social upheavals.

Now take a billionaire. He's actually the poorest man on earth. That's because he claims virtually no income. Instead, he uses his connections with banks and the US Treasury (staffed almost exclusively by former employees of Goldman Sachs, google it) to get loans at below market rates (4, 3, even 2 %). He then lives off these loans until the day he dies and wills his estate out. This is how the 1% avoid taxes by and large. Everything else is nickle and dimes.

The money is moved overseas (cayman islands) not so much to avoid taxes (they've already done that), but to make sure American don't realize why the "Greatest Nation on Earth" is suddenly broke (hint: it's not welfare, food stamps 1/1000th of our deficit, let alone our budget. Again, google it). The money can't be left sitting in American Banks because it becomes too obvious where it went. Conservative estimates put the figure at 10 Trillion, could be as high as 30 Trillion. We could pay off our national debt with that, let alone our meager deficit.