Tag Archives: small business tax plan

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.



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

President John Kennedy – Our Obligation to Avoid Taxes and to Use Our Talents for the Benefit of Society

Just a short blog post that I hope we provide what I call “staple news”.   The chaos not only between the two parties but in the two parties can cause us to forget the tried and true course.   I picked President John F. Kennedy because he is the darling of the Democrats and those that call themselves liberals.

small business tax planning,

President John Kennedy (Democratic) is the most important president of last century. The President and Supreme Court Justice Holmes agreed… it is your duty to pay the least amount of taxes.

Yet, many of those same people have hatred towards independent voters that support the dreams and economic policies of this great President.

The photograph on the left says it all. While a government job is better than no job, it requires the Government to take (also known as steal) money from a non-government worker. A government job does not create a car, food or exports. The ideal job for a country is one that makes the country wealthier.

If you have a small business, this link has five sophisticated tax plans that your CPA may not have explained to you.  They are used the wealthy and the rich to avoid taxes so that they can create more jobs.

And there is more. Those the have the advantage of a higher education have an obligation to protect the Country by helping the population become educated. I have heard complaints about those that voted for President Trump. If you do feel that way, then please listen to JFK in this video below.

The Nevada or Delaware Limited Liability Company (LLC) for International Business

The domestic LLC is the worst entity for the small business owner with a foreign operation.  Doing business in countries that have a tax treaty, with the U.S. requires the use of a corporation or a partnership.

The limited liability company is an American tax entity.  Other countries do not have the U.S. tax concept of the LLC.    For example,  you are planning to operate in Europe.  While the Dutch has a fantastic tax treaty with the United States, the American small business owner can fail to get all of the intended tax benefits.   The major tax treaty benefit is avoidance of paying tax in the foreign country and not filing a tax return with the foreign government.

Here is the international tax problem with the LLC

The permanent establish article does not reference a limited liability company.   The small business owner is in a risky position.   If the/she can lose the U.S. foreign tax credit if they fail to pay the foreign country’s tax when the tax is due.   For example, you are based in the Netherlands and you decide not to file a dutch income tax return for the LLC for year 2017,

In 2021, the Dutch audit you.  Since you never filed a return, they can charge you the tax.   In 2023, you make the decision that the legal fees of fighting the tax are too expensive.  So, you pay the tax.   Since the U.S. taxable year was 2017, you are six years late in claiming the foreign tax credit.

You end up paying tax twice.  First, to the IRS in 2017 on the Dutch income.  Then in 2023, you pay the tax a second time to the Dutch government.

The Best Small Business International Tax Structure and Entity

The United States Department of Treasury decided to help the small business owner obtain the maximum tax benefits by allowing you to treat your foreign corporation as a domestic corporation.  This process is known as a domestication.    As a domestic corporation, the American can elect taxation as a subchapter S corporation.

Tax treaties give corporations permament establishment protection.  If you do pay a foreign income tax, the IRS foreign tax credit rules apply to a subchapter S corporation.  The foreign tax credit allows you to offset your IRS taxes with the tax you pay to a foreign government.

Below is a short video on the domesticated foreign corporation.  While the video is about Mexico, the same rules apply to Europe.

How Do You Know If You Have the Best International Tax CPA

With a million pages of tax law, you want the best tax accountant.  However, the question is do you want to pay for the best.    Is a tax accountant like a car?  Are they all the same.  Do you feel that all cars are the same as far as safety and comfort?  

Is an international tax accountant the same as an international CPA? 

If you want the best, it cost more.   But can the best CPA save you money?  

Senator Bernie Sanders think they can.  During the campaign, he had the U.S. Senate investigate big businesses that hired the best CPAs for tax planning.   The businesses average tax rate was 14%.    Most small businesses are taxed at 35% and up to 54% if you include the Self-employment tax.   Here is more on Senator Sanders report.

 If you are looking for international tax planning, here is a link to the U.S. Government secret report on legitimate offshore tax planning that they can’t stop.  It is detailed and if you want something that is an easy two-hour read, then get my book, on this link.

What to look for in the “best tax accountant.”

  1. A CPA certificate
  2. A masters degree in taxation
  3. 2018 tax planning started in  2016 and
  4. He saves you ten times the amount you pay him or her.  For example,  a tax accountant may look at your expenses.  The tax law is will establish on what can be deducted and he or she only needs a few minutes on tax planning on this topic.   Income and cash receipts have more tax strategies.  Not all cash receipts are taxable when received.  Avoiding state income taxes is done by looking at the type of activities that can be earned by a Nevada trust or a Nevada corporation.

What you need to do for tax planning.

You are the leader of your tax team.  As such, you take the lead in scheduling quarterly meetings. Yes, this will cost some money and money you pay is deductible.  Meanwhile, the amount you pay in taxes is not.  For example, if your quarterly meetings cost you $20,000 a year, then your after-tax cost is about $10,000.    I would expect you would save $50,000 in U.S. and state income taxes.

Want some tax ideas to brainstorm with your tax team?   Then please look at the topics of our blog talk network, Tax Talk, on this link.





By far the best international tax CPA in the country. 

Small Business Best Tax Plan

tax planning, avoid taxes, small tax business,

President John Kennedy (Democrat) is the most respected president of last century. The President and Supreme Court Justice Hand agreed that patriotism does not mean paying more than your legal share.
Supreme Court Justice Holmes said tax planning means you get as close to that legal line as possible

The best Democrat President was John F Kennedy.  He was liberal to the core.  Jobs for the middle class and the working class was his economic mission.  

Yet, he lowered taxes and encouraged business to legitimately avoid taxes.

I want to encourage each of you to do the same.   Creating jobs is a fantastic humanitarian act.  But, you have to work hard to avoid taxes.  

Great tax planning looks at each aspect of your business.  Each part of your business may have different tax laws. 

By the way, a recent Congressional study showed that businesses that plan their taxes have an average tax rate of 14%.  If you are paying than 14%,  then you are paying more than your fair share.

The good news is that you have new opportunities to have more money. Here is what you can do.
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