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  1. #21
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    Question Taxes

    @NEALRM:
    Hmm.. ok.. thank you very much nealrm.. I appreciate it.. and I guess your comment was very clear. Even though, if it's kinda insane that even someone would give you something for free... it's not free... lol; I would says.. welcome to the US.

    I believe you what you are saying. However, could you refer to a specific law that would be falling into place .. it's made for that ?

    The 1099 from is clear for me. I get that. And the purpose of the 1099 form seems to be very simple. A Company just reports to the IRS that it was paying a Social Security Number Holder (Tax Person) some extra money, which the IRS doesn't want to forget to collect for taxes.

    Soo.. let me ask you then one more question.
    I do see your point.. that those hidden payments should be counted as personal income.

    But what, if the Corporation doesn't pay really anything. Nothing. And all the money the Corporation makes.. it simple stays inside the Corporation.

    And for the purpose of the retirement... the corporation will be the money in 20 years from now. And yes, in 20 years from now I will make sure I don't live in the US.... I will live in the country I incorporated the Corporation.

    Then... it should be fine !
    Correct ?

    Saying.... if I would start a corporation and I don't need any of that money now... I will not be taxed on it, because I simple don't get anything payed.



    @PZagotti:
    I am assuming that the corporation will take the expenses here in the US as company expenses for purposes of filing the foreign tax return?
    No. Not at all. If you chose a foreign country with zero taxes, there is no need to have expenses.


    About Theory and the actual rules.
    Fact is, as long as the company doesn't pay you... as long as there are no other payments, and as long you leave that money within the corporation, the LAW SAYS THERE IS NO TAX. PERIOD.
    OR IS THERE ANY LAW IN THE WORLD THAT SAYS THAT YOU HAVE TO PAY TAXES ON NOTHING ?


    Look.. for everyone. Conclusion. It's totally clear that you have to pay takex on all personal income you receive from anywhere in the world. As long as you live in the US, you have to pay income taxes on all your income.

    There is no doubt, and this was never to question.

    But it is a fact.. that you can own a company outside the US.
    And if that company doesn't pay you anything... there are no taxes to pay if you don't receive anything.

    And it's a possibility to build up this corporation outside the US. And that you leave one day the US, and that the Corporation (which is based in a corporate tax free and income tax free country) can pay you.

    And then... well.. then... tell me what can the IRS do ?
    If you are not even a citizen, if there are now taxes to pay by law in the US ?
    And if you don't live in the US ?


    @tallen:
    thank you for the info.... also highly appreciated !




    OVERALL:
    I know that everyone get's always super sensitive about paying taxes. Just asking possibilities, observing different options seems to be already criminal.
    In fact, it is not. It's quite the opposite. Not asking questions, not knowing your possibilities is actual criminal if you want to start a business.
    We have to realize that the tax burden in the US is really high. Yes, it's the law ... unfortunately. And I have to respect that and I have to play by the law.
    I always did, I always will. I will never trade a Dollar for my freedom and sitting in jail because of stupid money.

    But let's face it. I see myself as a world citizen. The money I make, is first of all my money. My earnings. I don't specifically care if IRAN, IRAK, FRANCE, CHINA, the US or any other country would take my money.

    Money I earned hard is first of all mine. And then, I can decide what government and what government should get it. How they tread me ? And yes, I have the option to leave the US and go somehwere else. I live over 30 years outside the US, and the main reason I am still here is because of my children and family - divorced.. but yes.. that has it's price. And I always payed a ton of taxes, and still do. But it's also a fact, that the world has changed. Business that can be created online and that doesn't require a physical location, etc. considering all these facts... why do you think it's criminal to consider ALL OPTIONS the world has to offer ?

    I get it. I do understand that lot's of people don't consider to move into any other country. Lot's of people just look inside their own country. And that is also fine.

    But there are other options out there. Other possibilities.
    For me.. I am dreaming about being one day my own boss.

    Do I have a big company ? No !
    Will I make Billions ? No.

    Let's face it. I'll be happy if I can make a low six figure income and live with that. Do I want to find loopholes to cheat the system ? No.
    I don't need to find loopholes. And if there are anywhere Loopholes, then it's the law, the system .. yes our law system creates those loopholes and then it's the law and we can't name that baby even criminal.
    I am also not ashamed of trying to consider all possibilities. I am not ashamed of telling the world that our capitalistic system is brutal and not really the best for all of us. In fact, it's eating us alive.
    I am not ashamed to say that I am trying to make a living. And I wish that all of us would have enough money to not worry so much about money. It's like a disease, like cancer that **** is eating all of us alive one day !

    We all participate in a system, that we all know, is everything then perfect. And then, a minority of a group creates laws - and the majority doesn't even like it.
    I don't know any of you. And like always, I appreciate every single comment in this post. It helps me to understand more the world of taxes. But the most important. It helps me to think more about my future and considering all possible options.

    And what is right, and what is wrong.
    And that is very important.

    I also like this "LIVING" discussion. 100times better then a dead post, right ?

    I also would love to propose a HANGOUT MEETING, in which we all could talk about that wonderful topic. Hanging out over the internet, having coffee and an interesting discussion ... better than any Reality TV Show !
    Let me know what you think about the HANGOUT SESSION.
    I mean it, I think it would be a fantastic opportunity to go a bit beyond the blog posts.

    Till today, that's always been a point I regret with the internet. It's hard to build an active group, meeting people in person via skype or hangout.. it's just hard.
    But we are all here, because we share the same same interests, topics, etc.

    And let's face it.. we are all small business owners.. if you have your own CPA Business, if you are an accountant, a lawyer, a small shop owner, etc.
    And we all are here to learn more from each other.
    That's for sure my main purpose. To listen to everybody's opinions and of course valuable knowledge. And that's why I am truly thankful for any little comment.
    For some.. some comments might be not polite enough... or sound offensive.
    I see it professional.. and critic is something very valuable for me.
    Because only with critic, reflecting and listening.. you can learn and grow.
    And yes.. who knows it all ? Right ?

    I think.. it would be great to meet everyone from you one day even in person... I think that would be cool... might be just a dream.. but dreams might come true.
    I know that this was a MONSTER POST... and I apologize for that.
    I tried to give everyone a clear answer, and I tried to structure it as good as possible.

    That being said.. always good to hear back from all of you.
    And I always appreciate any other comment, opinions, suggestions, hints and tips !

    And last but not least.. again.. let me know who is interested in a HANGOUT MEETUP GROUP... where we could talk about things like that. And even more.

    To all of you.. the very best with your personal adventure and business !
    Sincerely appreciate it - cheers !

  2. #22
    hello world Array Harold Mansfield's Avatar
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    Dude, it's not going to work. You're not thinking up anything new that no one has ever tried, and if you try it you will get caught and likely go to jail.
    Other people aren't as dumb as you seem to think they are. And obviously you do think they are, or you wouldn't think that what you are saying sounds so original or clever.
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    Member Needs New Keyboard Array tallen's Avatar
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    So some foreign corporation owns a house, a car, maybe other assets, and lets you live in and use these assets for free, as their guest, charging you no rent....

    What about the operating costs of the house? Who is paying the utilities, the property tax, the insurance, the maintenance and upkeep?

    And for the car? who is paying for the registration, insurance, fuel, maintenance, etc...?

    I totally get the idea of staying in the foreign corporation's house as their guest rent free, but where is the line drawn between what the foreign corporation is paying for and what you are paying for yourself? What about your food, clothing, healthcare, entertainment, etc... is the foreign corporation paying for all of this, too?

    To the extent that the corporation is paying for the operating costs and management of their assets in this country, who is their agent here taking care of all that for them? I am not sure it can all be done remotely, they will likely have to engage a local property manager. (hint: It can't be you, because you are not an employee of the corporation; in fact, you cannot provide any valuable services to the corporation at all, otherwise the free rent etc... might be considered compensation for services provided....).

    As the owner of the corporation, I think it would be very tough to be providing no direction at all, being totally hands-off, totally entrusting your executives to run your company for you without any input at all from you...

    I think perhaps this is maybe where the scheme breaks down.

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    How does the foreign corporation even buy property, cars and pay for all of that other stuff without being in the U.S., having no U.S. presence, and no U.S. address or banking?
    Answer: They can't.

    </done>
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    I need to ask, have you read the US tax code? I have and had a hard time finishing it before changes were applied (also great to help cure insomnia). I'm not even from the US and did this.

    Semantics mean everything. You say foreign (different state/jurisdiction) owned, yet you mean alien (different country) owned. Did you know that each state can tax alien owned real estate at different rates than foreign owned and citizen owned? This may have changed since I read it last (been about 10 years) but something tells me it hasn't.

    If a company outside the US owns a property inside the US - and the landlord is granting you to live FREE inside that house. Why should the person, that lives for free in that house pay any income taxes ? And if he should pay income taxes, based on what income should he be taxed ?

    He does NOT receive any money. He just lives for free in the house, because the owner of the house granted this person to stay with no costs
    Did you just ask why a government does something? To answer the questions - because they can and they have the authority exact whatever punishment they deem proper for those who violate their whims. We may live in a "democracy" yet government does what it wants and not what the majority of people want. The city of Vancouver, British Columbia instituted a foreign buyers tax equal to 15% of the purchase price and made it retroactive to all transactions waiting to close (all conditions waived and just waiting on the closing date).

    Governments across the world are broke and are looking to grab whatever cash they can. I'm still waiting for them to tax cash in corporate bank accounts that sits idle long after the initial taxes have been paid.

    As for income, the IRS has a term I call "benefit-in-lieu of cash". Free rent? It's not free since the IRS will apply a dollar value to that rent and consider it income. Same thing with vehicles, non-cash gifts, food, etc. Shoot, here in Canada, I need to declare that I supply employees with a $3 per 5 gallon jug of water so Canada Revenue (our IRS) can tax my employees for how much water they drink.

    Quote Originally Posted by remozseo
    It's an online business that does NOT require any specific local position. And it's an online business I do have already a lot of experience.
    Still didn't answer my question. What, exactly, does this business do?
    Brad Miedema
    Fulcrum Saw & Tool

  7. #26
    Member With Stressed Keyboard Array PZagotti@ZnBcpa.com's Avatar
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    Quote Originally Posted by remozseo View Post
    And then... well.. then... tell me what can the IRS do ?
    If you are not even a citizen, if there are now taxes to pay by law in the US ?
    And if you don't live in the US ?
    Well that depends.
    The IRS has tax treats with about 64 different countries, (actually more then that now) and some of those treaties allow the IRS to go after people who owe the IRS in foreign jurisdiction.
    Even if your county is not current involved in that program it is growing as business becomes more global and boarders become less of an issues.
    Alternatively lets say the IRS decides that you knowingly defrauded the government and decides to press criminal charges, then its simply a matter of criminal extradition treaties and if the US has one with your country then you could receive a one way ticket back to the states to spend some time at "club fed".
    Also note that the IRS recently started taking passports of those who are in trouble with the IRS.
    I believe the IRS is also working with other agencies to disallow boarder crossing of those who are in trouble with the IRS.

    By the way, not sure what state you live in but some states are now suspending drivers licenses of those people who owe back taxes.
    Many states have information sharing agreements with the IRS so if you get a visit from the IRS would could have another visitor from the state shortly thereafter.

    Quote Originally Posted by remozseo View Post
    But it is a fact.. that you can own a company outside the US.
    And if that company doesn't pay you anything... there are no taxes to pay if you don't receive anything.
    In theory that is correct but again you have issues here.
    1. The IRS will look at the money being paid and characterize as either earnings that you are receiving or dividend.
    2. Now you can say that the expenses are corporate expenses and not your income but this will have to fall within the reasonable and necessary rule and in your case it probably will not.
    3. If you are doing work for the foreign company while here in the states the IRS can decide to attribute profits from the foreign country to the US and decide to tax you on them.
    4. Now you can ague that you are just a shareholder in the company but you obviously have the power to decide if the entity is going pay these expenses and how to paper the transactions up, (otherwise we would not be having this conversation). That seems to put you into more of a management function as shareholders don't get to make these kinds of decisions.
    5. As stated before even though your company is in a foreign country the IRS can decided that it has enough connections with the US to exercise jurisdiction, (weather you agree with it or not).
    6. The IRS looks at this stuff based on fact and circumstances and questions the underlying economics of the transaction. The IRS sees people "paper-up" transaction to avoid taxes all the time and they are very wise to it. They will characterized as they see fit and charge taxes and penalties accordingly.
    7. It does not matter at the end of the day what you believe will work or if the letter of the law supports your position only what the IRS decides / the courts decide if you take the case that far.

    And I could keep going but....

    By the way when people walk into my office with issues like the one you may have in the future my retainer is normally 5 to10K and I bill at $250 an hour.
    If it goes to court you are probably looking at a minimum of $30K and if the case does not go in your favor then you also get to pay the taxes.
    Not bragging, just giving you some numbers so you can do the math and decide if its really worth it.

    There are far better ways to do what you are trying to do but based on the plan as submitted is not appropriate and could result in costly legal troubles.

    One last thought, the IRS is responsible for putting away some of the most dangerous, notorious and sadistic criminals in history. They like to put famous Hollywood actors and artist in jail just to prove that they can. Be very careful with the IRS because it may not end will.
    Phillip Zagotti
    Partner - Zagotti & Burdette CPA, LLC
    http://znbcpa.com

  8. #27
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    Lightbulb Can we do this ? Taxes - playing 100% by the rules

    @PZagotti:
    Also.. thank you soo much.. appreciate all your input... I think you ABSOLUTELY HAVE TO WATCH THE VIDEO.. most of your comments are going towards a criminal direction and tax fraud... etc.
    pleae watch the video.. then, I am absolutely positive... you get a better picture... and yes.. of course.. what you mention makes all sense.. if that would be a plan I am talking about.. but that's misunderstood. I am not talking about what you mentioned.. also considering... my intention is not to stay in the US.. my intention is to work and live in a country that gives me the most benefits for starting a corporation... and as we can see.. the US is not really the best ground for planting your seed... and last but not least.. since I am not a US citizen, leaving the US.. starting somewhere else new... much easier for me then probably for many US citizens with strong roots !


    @Harold/Tallen/Fulcrum/turboguy/nealrm/Evan/etc.
    In general.. I had to put a VIDEO together.. with the AUDIO support it's so much better to give answers to your questions and to explain my perspective of view.
    I uploaded the VIDEO to youtube and vimeo... just to make sure you can watch it also on your mobile devices.

    Enjoy watching... and again, super exited to hear back from all of you !



    The link to the VIMEO Video: was not able to post 2 Videos in one post.
    https://vimeo.com/184160765

    ps: and let me know about a Hangout Session.. I think that would be really cool !
    Last edited by remozseo; 09-25-2016 at 05:31 PM.

  9. #28
    Member With Stressed Keyboard Array PZagotti@ZnBcpa.com's Avatar
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    So I watched the video and the theory falls apart at about 44 minutes into the video.

    If the foreign entity buys a house in the US and lets you stay their for free or even at below a market price then the government would either see it as a dividend or compensation.
    There are IRS cases related to this issues with domestic and foreign companies all the time where the CEO stayed in a company apartment for free or used the company jet for personal travel, etc.

    Your example where you personally let someone stay in your house because they are down on their luck does not really work and you asked at 47:55, (or around that time) to refer to a tax law that says it will not so here we go....
    If you are giving something of material value to another here in the US you could be triggering a gift tax.
    The IRS sometimes says that the gifts you are giving someone else is taxable.
    So the answer to the question you asked about going to the IRS to report the value of the gift, (free rent) is, believe it or not, Yes by law you have to report it.
    And by the way the donor, (you) pays the gift tax not the recipient.

    There is a whole wonderful set of rules regarding gift taxes and how to report it.
    This is a big issue that many tax payers do not know about and it is currently effecting people with elderly parents living with them or adult children moving back in.

    By the way a gift from the corporation to you will not work either.

    Thanks
    Phillip Zagotti
    Partner - Zagotti & Burdette CPA, LLC
    http://znbcpa.com

  10. #29
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    Exclamation Tax circle

    @PZagotti
    appreciate your post...

    the theory falls apart at about 44 minutes into the video.
    I see what you mean.. but the theory doesn't fall apart .. if it's the case that the foreign company provides an appartment.. and you call it compnesation.. so be it..
    for example. if the rent would be 2k.... then the individual who receives that incentive has to put it into his tax return as a personal income - compensations he received of annual 24k.
    And that's it. He only has to report that.. but there is nothing illegal.

    @gift tax:
    However... I do understand your thoughts about the gift tax. And it all makes sense.
    But I think you are calling out an extreme example. Let me explain why.

    The IRS sometimes says that the gifts you are giving someone else is taxable.
    It's good that you included in your comment the word "SOMETIMES".

    Here is another extreme example - just bringing up one to demonstrate that part could be extreme on both sides.

    Here we go:
    A family lives with their 3 children in a house. The three children are all over 21.
    And guess what. The kids are living for FREE in the house of their parents.

    According to your message... no matter if the house is owned by an individual or a corporation.
    The kids, plus the father, plus the mother... any person that lives in that house .. well.. according to your comment.. the government (IRS) would see it as a compensation each kid would receive.
    Well.. even the mother.. who lives in that home.... lol;

    As you can see... it's an extreme example... but following the tax law... in theory... that's what it's suppose to be.... sad but true.

    There is a whole wonderful set of rules regarding gift taxes and how to report it.
    This is a big issue that many tax payers do not know about and it is currently effecting people with elderly parents living with them or adult children moving back in.
    I believe that... for sure... if someone inherits something.. a real estate property, etc. they want to avoid paying inherit tax.... so they say it's a gift... there are always special tax laws... each country is treading that different.

    and in the US you also have the accessions tax or gift tax how you called it... and I get it.. these are all valid points.

    Actually.. also very sad... considering that your father or mother was working hard, payed always all his taxes on time.. payed property tax.. and once you give it to your children.. boom.. they are going to be taxed again..
    In my opinion... in the US... nobody ever owns anything.. you always pay taxes on it... until you die.

    Maybe some folks of you have been following the presidential debate yesterday... and it's non of my business.. since I am not US citizen.
    But heck, Trump called out the fact that all companies are leaving the US for that reason.

    Every single small business Entrepreneur is better off starting his business somewhere else on this planet... when it comes to taxes.
    And I don't understand that the majority of the Small Business Entrepreneurs are cool with that ?

    If you generate revenue, if you work hard for your dollar... well... just saying.. then first of all it's your money.
    It's your success. And if the community of the US (Politicians) you vote for are ripping you off as crazy and using your money also on expenses the majority doesn't even agree on ... wow...
    I am impressed that the democratic party still gets votes - for business owners.. it's for sure a hard challenge (sorry for that side note).

    But... to keep a sense of proportion... let's focus on the main thing.
    For that reason, I created this GRAPHIC that shows THE FRAMEWORK OF THE TAX LAW.

    Please let me know if you find an error .. meaning.. if the FRAMEWORK OF THE TAX LAW as shown in the graphic below would NOT BE CORRECT.



    Let's focus on the Graphic - please let me know if the graphic reflects the correct tax law or not.
    Again.. appreciate all your comments.. and participation... it's a wonderful ride !

    tax-circle.jpg
    Attached Images
    Last edited by remozseo; 09-27-2016 at 04:19 PM.

  11. #30
    hello world Array Harold Mansfield's Avatar
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    I've never seen someone spend so much time trying to cheat the U.S. Government out of taxes, while at the same time trying to live here while doing nothing to support the country or contribute one dime. To be honest with you, your entire line of thinking...which is basically you asking us how you can cheat our country, is out of line.

    If you spent as much time and effort growing a business as you did trying to figure out how to dodge taxes, you'd be successful already and have a team of lawyers to guide you on the best way.

    No matter how many times we tell you that you're not the first, and nothing you're saying is new or clever you just seem intent on doing something that's going to land you in jail.

    If you've been listening at all to the Presidential race, you'll see that there's a new found resurgence of idiocy, bigotry, and nationalism against immigrants. Coming to America, sponging off the system, and corporations dodging taxes is exactly the kind of thing that makes many people in America very angry. It's one of the things about the very tax system that you're complaining about that we need to fix, and you're scheming to exploit it.

    This...
    Quote Originally Posted by remozseo View Post
    @PZagotti

    Every single small business Entrepreneur is better off starting his business somewhere else on this planet... when it comes to taxes.
    And I don't understand that the majority of the Small Business Entrepreneurs are cool with that ?

    If you generate revenue, if you work hard for your dollar... well... just saying.. then first of all it's your money.
    It's your success. And if the community of the US (Politicians) you vote for are ripping you off as crazy and using your money also on expenses the majority doesn't even agree on ... wow...
    I am impressed that the democratic party still gets votes - for business owners.. it's for sure a hard challenge (sorry for that side note).
    ..is where you are totally off the rails. If you have such disdain for this country and it's tax system, then open a business somewhere else and live somewhere else.

    You expect to have the services and infrastructure in this country that keeps your business flights safe and on time, that interstate highway system and the people who patrol them to get your goods to market, the customs agencies that get your imports through and exports out, the U.S. Navy who patrols international shipping lanes, the local police who protect you and your property, the plumbing, the electrical grid, internet, communications infrastructure, GPS to get where you're going. How about the State Department who makes the deals so that you have other markets to sell to? You expect that when you plug in your computer or coffee maker that it's not going to explode and so on and so on.

    You expect to have certain services and protections that make your life and business possible, but you have a problem paying to support them. Without the government and infrastructure, you don't have a business. All of the reasons why you want to live in America, cost money.

    Many people have been clear that your plan isn't new, or cleaver and it will not work, yet you refuse to believe it.

    Just do it the right way, or live somewhere else. You aren't owed residency here, and no one wants to hear a non citizen bad mouthing their country while coming up with schemes on how to cheat it.
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