Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax

Tax Planning The focus of tax planning should start with you. How will the income from your business and investments impact the total amount of tax you pay? To start planning for the best tax plan for your business income, start by assessing your current taxable income, the type of this current income, the future projections of that income, what hi

Timing Payroll Withholding Wherever possible, pay your taxes through payroll withholding, not estimated tax withholding, and do it as late as possible. Estimated tax payments must pay your taxes ratably through the year. Let’s say you have tax due of $100,000. The estimated tax payments must be paid quarterly and equally, or you run the risk of pen

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High personal income, high business income. The best structure, based on this consideration alone, could be a C corporation that allows you to pay tax using a separate tax rate structure. You may also look for ways to form additional C corporations, being careful to avoid the controlled group status (discussed in Chapter 15). In this way, you can t

For example, if your business nets $350,000 and you run the entire business through a C corporation, you’ll need to pull out $300,000 in salary. That means that you have payroll taxes on $300,000 to pay. On the other hand, if you had been able to use an S corporation and a C corporation for the business, you could have had just the $50,000 go to th

Employee Stock Ownership Plan Another exit strategy can be to set up an employee stock ownership plan (ESOP), so that your employees buy the company from you. If this is your plan, you will again be selling stock, not assets, and most likely the employees will receive a loan from a financing institution in order to purchase the business. You will m

(Never put appreciating assets inside a C corporation.)