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Small Business Tax Savings with Gift Cards and other types of Private Money

Banknotes can be payable in gold, any currency (such as the Swiss Franc) or product. They have been used for centuries by the wealthy to create wealth.

This morning I was annoyed as a Starbucks patron had his iPhone loaded with pre-paid Starbucks.   Then,  I was reminded of last century’s use of private money.  For centuries, banknotes have been used in the UK and Europe as “private money.”  

Now,  innovative taxpayers are using their private money to create wealth and to save taxes.  

The Starbuck’s virtual prepaid card and gift cards are types of private money.  The IRS allows you to not pay tax when you get paid for the  card.

The deferral ends when the card is used to pay for your product or services.

Here is the amazing news!  About one third of gift cards and prepaid cards are never used -giving you an very long tax deferral. 
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By Far, the Best International Tax Planning Book on the Planet

Here are the first few chapter of my easy to read book International Tax Planning in America for the Entrepreneur.   The book is a quick two-hour read with little tax jargon.  You will quickly learn the fundamentals of international taxation.

The book explains the unique tax savings for the web based business, tax planning for importers and exporters and the best tax structure for the foreign investor coming to the U.S. 

You can get the book on Amazon on this link.  The Kindle is only $9.50  (get the Kindle App for the PC on this link).  The book is also available in paper and audiobook. 

International Taxation in America for the Entrepreneur is the fastest tax answering publication in America. Both the  Kindle and PDF edition have our exclusive quick search function. Just type your topic and find the answer to any international tax planning question.  The audiobook is perfect for those on the road and traveling. 

No other foreign tax book is updated via the internet. You can be assured that you have the best foreign tax planning book on the market.

Cross Border families have special needs because America’s laws differ from every other country. The multi-national family risks paying taxes in more than one country.  

 A cross-border business has a similar problem.  Multi-national businesses often experience double taxation on one item.  American tax laws are different from the rest of the World.    

Using  “plain English” my book provides solutions to issues regarding cross border taxation.  For those looking for advance tax planning, the hundreds of footnotes and hyperlinks to court cases and tax planning articles are just a mouse click away.

Small Business Tax Planning Strategy Using the Trump Tax Laws

The Trump Tax reform lowers the corporate tax rate to 20%.

This blog discusses a second corporate tax that applies to a corporation that keeps money just to avoid paying a dividend.

If you want to brainstorm your tax planning using the Trump tax law, then give me, Brian Dooley, CPA, MBT a call at 949-939-3414.   If your international tax accountant or CPA, needs help, have him or her call me. 

Because corporate earnings are taxed a second time when they are distributed to shareholders (as a dividend), the small businesses may retain the profits to avoid this tax.   

The tax law deals with this bias through the imposition of a tax on unnecessary accumulations of earnings.[1]   This tax is in addition to the regular corporate income tax.

 “Unnecessary” is the key.  This tax only applies if it is unnecessary for the business to retain the profits that it is accumulating.

The differential also induced shareholders to cause their companies to keep earnings as long as possible so that further earnings on those earnings would be taxed at the lower corporate rates.

To force a corporation to pay a dividend, the tax is charged on the accumulated taxable income at the top rate of tax on individuals.  

In theory, the section 531 accumulated earnings tax is assessed if a company has allowed earnings to accumulate beyond its reasonable needs, the determination of the reasonable requirements of business.

The courts and the IRS have developed a variety of approaches to determining reasonable needs..

Despite this, the decision remains highly factual, subjective, and uncertain in the result.  

 Once accumulations are established beyond the reasonable requirements of the business, however, the issues become quite technical in computing the corporation’s accumulated taxable income and the accumulated earnings credit.

Although the tax law does not exempt publicly held companies from the tax, the legislative history expressly limits the application of this tax to privately owned corporations.

What You Can Do and Should Not Do

  1. Do not pay yourself a large salary.  The new low 20% tax rate does not apply to wages, interest or rents.
  2. Do have a written plan on why you are not paying a dividend.   To create this plan have a meeting of the corporate Board of Directors.  Place in the  plan in the minutes of the meeting.
  3. Do hire an attorney to draft the minutes.
  4. Do include a financial forecasts of the use of the accumulated profits.
  5. Do update this every six months.  I understand that you will be paying your attorney.  Remember, his fee is a tax deduction while paying tax on the dividend is not.
  6. Do hire your CPA to help draft the financial forecast.  Update the forecast every six months.

 

Footnote

[1] Section 531 called the accumulated earnings and profits tax

How to Know if You Have the Best International Attorney or International Accountant

International taxation accountants must know both the 1,000,000 pages domestic tax laws, the “common laws” from court cases and international tax law.   

The best international tax attorneys and accountants use the tax pyramid.

The best international tax attorney and tax accountant have an advance degree in taxation.

The best international tax attorney and tax accountant have an advance degree in taxation.

The best tax attorneys and best tax accountants are experts in both the common law and the tax code before they learn international tax law.

The best tax accountants and best tax attorneys have an advance degree in taxation.  Law schools and accounting schools do not teach tax law.  Up tp two additional years of schooling is required to be a tax expert.

The international tax adviser studies the “character of your income.  Each type of income has its own tax laws.

 The tax law for consulting income is different than the tax law for importing income.  The best international tax CPA looks at your business’s operations and dissects each step.

Here is an example:  A U.S.  website designer has employees in India.  After dissecting his activities, he decided to incorporate in a tax-free country.  The tax haven corporation files an IRS Form 1120F (F is for Foreign).  Only half of his net income is U.S. taxable. The other half is not taxable.  His business operates the same.

At International Tax Counselors, our international taxation experts have more than 30 years of experience.  Each expert has an advance degree in taxation.

If you need planning, consulting, or compliance, your team at International Tax Counselors has the needed international accounting and legal expertise and skills.

We have unique expertise in:

1. Foreign tax planning regarding reporting of foreign assets and foreign source income,
2. International tax strategy services with respect to ownership of foreign entities, including foreign corporations, foreign LLC’s, foreign partnerships, or foreign foundations,
3. Analysis of income tax returns filed with foreign governments in connection with the foreign tax credit planning and calculations,
4. International estate and gift tax planning for U.S. citizens living and/or working in foreign jurisdictions and nonresident aliens with U.S. property,
5. Immigration tax strategies for respect to non-resident individuals,
6. Assistance with IRS Tax Amnesty “Streamlined Filing Compliance Procedures,” because of non-reporting of foreign financial accounts and companies,
7. International tax plans relating to compensation structures for U.S. individuals on foreign assignment
8. Handling IRS an  international tax audit and IRS tax amnesty. 

America, the Tax Haven for the U.K. Entrepreneur

One thing is clear for the American tax reform debates.  The U.S. wants jobs and more jobs. Nowhere is this clearer than in the U.K -U.S. income tax treaty. Continue reading