tax shelter

Examples of tax shelter in the following topics:

• Fringe Benefits

  • Some fringe benefits (for example, accident and health plans, and group-term life insurance coverage up to US $50,000) may be excluded from the employee's gross income and are therefore not subject to federal income tax in the United States.
  • Some function as tax shelters (for example, flexible spending accounts, 401(k),and 403 (b)).

• The State of Global Business

  • They are also increasingly coming to use the internet to conduct many more basic business processes such as filing taxes and regulatory compliance forms, locating and initiating key business connections, coordinating work teams, and telecommuting.
  • This has placed every key material resource – energy, food, water, shelter, and the regenerative ecosystem itself – under rapidly increasing supply pressure.

• Tax Accounting

  • Tax accounting couples legal obligations with financial accounting to ensure adherence to current tax laws.
  • As a result, the primary role of a tax accountant is to understand the business' current operating status, distill profitability before tax, and report earnings.
  • On the strategic side of this, tax accountants can consider any tax implications as it pertains to certain strategic decisions or tactics.
  • More tangibly, tax accounts will focus on the preparation, analysis, and presentation of tax payments and tax returns at all times.
  • Non-profits have unique tax preparation requirements due to their no-tax status.

• Introduction to Taxes and Legislation

  • When setting a tax, the idea is to match price with cost.
  • Unfortunately, the cost of what's heavily taxed, what's minimally taxed, and what's not taxed sometimes doesn't square up.
  • Taxes also carry the potential to discourage the sale of the items or activities being taxed (which is why high taxes are often placed on alcohol and tobacco).
  • Therefore, the more people a business hires the more taxes it has to pay.
  • Equally as mind-boggling is the fact that the more a person works the more taxes he or she pays (in the USA alone, two-thirds of personal income tax – which constitutes 80% of the tax funds raised by the US government – is derived from the sale of labour).

• Disadvantages of Corporations

  • In many countries, corporate profits are taxed at a corporate tax rate, and dividends paid to shareholders are taxed at a separate rate -- double taxation.
  • Suppose the government taxes corporate profits at 30%, then the corporation has to pay $300,000 in taxes.
  • This is the concept of double taxation: first the company was taxed for its profits, and later shareholders were taxed for their dividends.
  • In many countries, corporate profits are taxed at a corporate tax rate, and dividends paid to shareholders are taxed at a separate rate.
  • In other systems, dividends are taxed at a lower rate than other income (for example, in the US) or shareholders are taxed directly on the corporation's profits and dividends are not taxed.

• S-Corporations (S-Corps)

  • S corporations elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes.
  • Employee salaries are subject to FICA tax (Social Security & Medicare tax) --currently 13.3 percent--(4.2% Social Security paid by the employee; 6.2% Social Security paid by the employer; 1.45% employee medicare and 1.45% employer medicare).
  • Quarterly estimated taxes must be paid by the individual to avoid tax penalties, even if this income is "phantom income".
  • Thus, income is taxed at the shareholder level and not at the corporate level, and payments are distributed to S shareholders tax-free to the extent that the distributed earnings were not previously taxed.
  • Certain corporate penalty taxes (e.g., accumulated earnings tax, personal holding company tax) and the alternative minimum tax do not apply to an S corporation.

• Making taxes pull double duty

  • The idea is simple: to tax what society wants less of (e.g. pollution and waste) and to reduce or eliminate taxes on what it wants more of (employment and income).
  • How much tax would have to be imposed?
  • In the United States, this would, in part, mean imposing a tax on gasoline, diesel fuel and motor oil of around 6% and a coal-produced electricity tax of about 14%.
  • Corporate taxes could be reduced or eliminated, employment taxes could end, and personal income tax could be greatly lowered.
  • Businesses endeavouring to become more efficient would have more control over their tax burdens.

• Partnerships and Taxes

  • Various partnerships need to file different tax forms; it is important to understand the IRS codes before embarking on a partnership.
  • Different types of partnerships have different tax requirements, and partners will need to fill out different forms depending on the type.
  • Subchapter S Corporations have a tax election only; this election enables the shareholder to treat the earnings and profits as distributions and have them pass through directly to their personal tax return.
  • It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
  • Discuss the general tax requirements for subchapter S corporations and limited liability companies

• Types of Corporations

  • C corporation refers to any corporation that, under United States federal income tax law, is taxed separately from its owners .
  • A C corporation is distinguished from an S corporation, which generally is not taxed separately.
  • Thus, income is taxed at the shareholder level and not at the corporate level.
  • Payments to S shareholders by the corporation are distributed tax-free to the extent that the distributed earnings were not previously taxed.
  • Also, certain corporate penalty taxes (e.g., accumulated earnings tax, personal holding company tax) and the alternative minimum tax do not apply to an S corporation.

• Legislative involvement

  • For over 12 years it and several other organizations have been studying the effects of taxing waste.
  • The conclusion is that a quarter or more of all American public revenues could be replaced if the government started taxing waste and natural resource consumption instead of revenues and income.
  • A modest introductory tax placed on the burning of fossil fuels, for example, coupled with a reduction in payroll taxes, could boost America's GDP and create 1.4 million new jobs while cutting climate change pollutants by 50%.
  • (Hoerner, Andrew, ‘Tax Waste not Work') The nation's economy would thus be put on a sounder footing because growth would be more sustainable, less costly, and less dependent on foreign commodities.
  • Historically, businesses have always fought against most forms of legislation, but the costs associated with climate change are causing many CEOs to think twice about how laws that promote higher taxes and carbon caps can be used to help industry.