It's already been tested in court - in several jurisdictions. It's fine for your (or any) corporation to house you, but you can't get a material impact from it. Either you have to pay market rent, or claim the taxable benefit.
You jest, but as an unincorporated sole proprietorship (aka if you do random freelance work on the internet without making a company) you can deduct all your business expenses (including the part of your apt rent that you used for doing the profit making activity) just as a normal individual.
This is obviously not tax advice, but I think the earlier poster is referring to reductions to AGI that are on "schedule C" titled "profit or loss from business". Some tax language seems to refer to these as "deductions", but they are distinct from the "itemized" or "standard" deduction. Schedule C goes to Schedule 1 goes to 1040 line 7a. The standard or itemized deduction is on line 9. The Qualified Business Income Deduction on line 10 is another AGI-reducing gimme for people who get 1099-income distinct from the standard or itemized deduction. And don't forget, your eligibility for Marketplace plans including subsidies is based on your (Modified)AGI, not your gross income, which can be a costly mistake (Based on what I understand now, in 2020 my household would have been able to get a marketplace plan with subsidy but we didn't due to not understanding the income guidelines).
(note: I may have mixed referring to 2019 and 2020 tax forms here, particularly wher I cited line numbers)
I think in canada (where i live), you can just deduct all the business expenses (things that are part personal like rent have to be the reasonable porportion related to the business). You can't deduct more than the income from the business in a year, but you can carry over your expenses to the next year if you have more expenses than income.
you declare your daughter a consultant and deduct all the money you pay to her as consulting fees. She uses the money to get haircut, lunch, dresses, etc. and deducts it from her consulting income as business expenses.
In the UK, had an accountant who did something similar for us. Want to avoid a bunch of taxes on large landscaped property? Get a few cows and goats and classify it as a "farm" property. Transportation charges and date-night dinners? Business expense.
Western tax laws were a joke to me as an outsider, heavily geared towards the haves. But hey, I was contributing to the economy too.
Gotta be careful with that sort of thing these days, HMRC has pretty strict rules on stuff like dinners and entertainment expenses. One of the rare positives of a decade of Tory rule is that they know all the tricks their chums are using, so they know how to close a few loopholes whenever they need more pennies in their coffers. But yes, some dodging is still fairly trivial.
From what I know of the Tories (since I've attended quite a few B&Ws) and even Labour (whose conventions are such a mind-numbing affair in comparison), they never touch donors. I found it quite funny that I could buy access to UK ministers for a pittance, while if I had to do the same in India, I would have had to consistently fork over a lot more and sell my kidney along with it. It's funny how you could get access to the PM for just 50k GBP a year, even less if it's a Labour PM, or how you can get access to Rishi for 25k GBP a year. It's also the reason why a lot of donors are Russian or Arab.
> It's funny how you could get access to the PM for just 50k GBP a year, even less if it's a Labour PM, or how you can get access to Rishi for 25k GBP a year. It's also the reason why a lot of donors are Russian or Arab.
If you could actually buy anything but an ear for your complaints access would be a great deal more expensive. That’s not to say this petty corruption of the democratic process is right but it’s like how a Russian would burst out laughing at the idea of a politician with bricks of cash in the freezer. In Russia the Chief of Police lives in a palace he obviously can’t afford on his salary and it’s very public, not something he tries to hide. In the US or UK if you have a freezer full of cash the police are going to get you eventually.
Does move mountains mean something illegal or does it mean you can get a minister to get a civil servant to look at something? Because £50K a year will pay for a journalist/PR person who can also eventually get a civil servant to look at a thing. Access isn’t corruption, even if it is unfair.
If you mean form a cohort with other like-minded donors to influence policy, yes. Does it mean tiny favors here and there from time to time? Yes. Does it mean you can expedite yourself into a citizenship? No.
Easily did for 4 years. A lot of it was perfectly legal as long as it wasn't overboard (funding grocery shopping as business expenses for example), wasn't recurring and wasn't too high without reason (funding your wedding as a business expense for instance).
The UK tax laws are a joke. As told to me by multiple HMRC auditors, and my accountant (who is funnily a former HMRC auditor). The US' laws are an even bigger joke. After incorporating on the mainland, I've found that Swiss/Liechtensteiner/Luxembourgian tax laws are actually pretty decent and exacting, in spite of them being criticized as a tax haven and all.
Also, was neighbours with a ton of Arab guys in Knightsbridge who used to offset the risk of being caught (since they were into active money laundering), by donating to the Tories. Disgusting, but it is what it is.
My dogs featured in a viral YouTube video and generated some income. I asked my CPA if I could deduct my dog food expenses. He said no. But I mean, if those dogs don't eat, they don't keep generating viral content!
huh! i'm in no way a CPA, yet my understanding from just occasional reading of the 1040 instructions is that in US you can deduct hobby expenses from that hobby income, it is just that the expenses can't be more than that income (for the expenses to be more than income it should be a "business", not a hobby. I personally find it pretty funny, something like a joke Q:"guess what is the difference between hobby and business?" A:"if you lose money than it is a business, if you make the money - it is a hobby!")
I'm honestly quite surprised that someone hasn't already set up to offer "Tax Havens As A Service" long ago. Click a button, pay $100, and you're incorporated in what's commonly known among the .01% as a "tax-proof structure". Why hasn't this been done yet?
Like most "exploits as a service", this only works if your volume is small enough to not make it worth shutting you down. The 0.1% get their privileges by being small in number and well-connected enough to deal with legislative retaliation. Once everyone starts bending the rules the rules bend back.
This happened in the UK: it was very common for IT contractors to set up companies to get preferential tax rates, until the "IR35" reforms targeted that. Lots of the Crown Dependencies and Overseas Territories make their livings from tax avoidance; the Paradise Papers caught out a lot of celebrities using their services. https://www.theguardian.com/news/2017/nov/14/after-successiv...
I don't think it's solely/mainly a question of volumes/numbers and being sufficiently well connected, though no doubt it is a factor. In my experience the 0.01% are privileged to play by the book, but have an advantage over the rest of us in having access to a whole library of books to choose from, and the money to hire experts in book-selection and lackeys to manage the whole affair on a day-to-day basis. That's the stuff a Tax-Haven-As-Service outfit would have to solve behind the scenes.
Most of these tricks involve entities-in-cahoots across multiple (usually at least three) jurisdictions, so I imagine it might take quite a LONG time before the various legal authorities in all relevant jurisdictions get sufficiently coordinated to have effective regulations in place. The evidence that this is the status-quo is that it exists, and has not, to date, been "solved" by any one government. Unfortunately it's just too expensive a solution to justify itself for us proles.
I have looked into what it might take to pull off some of these tax avoidence strategies for an average, upper middle income person. And the issue isn't just the knowledge, it's that you need a certain size before things actually start to meet the threshold of what the IRS and other foreign tax agencies consider legitimate.
One specific issue I remember running into was the strategy of offloading intellectual property to an offshore entity.
That entity needs to have staff and be at least doing something in regards to the business. I don't think you could get by just having an employee less or even shared entity holding the intellectual property. Because just an empty shell company is going to be seen purely as a tax avoidance play with no other purpose.
Yeah I'd love to know the experiences of anyone who has explored this.
Edit: Ah, one thing I didn't think of in my praise of the idea, is that this services doesn't give you a moat -- anyone can copy your forms, structures, etc. for getting the scheme set up.
As a writer I do too. There are many issues with the scheme, primarily around the elements of 'writing' which are technically essential to making a living (teaching, talks etc), but not covered in the requirement that income be primarily from writing. That said, it shouldn't be an excuse for very wealthy people to use Ireland as a tax haven. We already get enough of that with the corporate tax rate.
I'll take the asset of my house, without the liability of the outstanding mortgage balance.