Reality check: Small businesses can use "creative" accounting to avoid taxes.

[El Fuego]

Everyone knows that the income a small business reports to the IRS isn’t what they actually made. I mean, get real!

As Obama said, only a small percentage of small businesses earn over $250,000 a year. But when they say "earn" they really mean "the nominal amount we reported to the government as income because our accountant said we had to." If these businesses are actually reporting income of $250,000 a year, they’re probably clearing over $1,000,000 a year! At least! The $250,000 is what their accountant told them was a good figure to keep them from getting red-flagged by the IRS.

So you say you have a small business and, poor you, you’re making over $250,000 in income? Just skim some off the top, make some deductions, write some stuff off as a loss, and before you know it, you’re only making $30,000. Problem solved. You don’t need a McCain, you only need a good accountant.

The dilemma of the mythical too-successful-for-their-own-good small business owner is just such a NON-ISSUE. :eyes:

[Oregone]

1. Small businesses can also become S-Corporations, and owe no taxes...

The earnings will pass through as personal income to shareholders and skirt around FICA taxes. I used to save a fortune like this.

[El Fuego]

6. Exactly. If Joe the Plumber pays the taxes on his $250,000, it's just Darwinism.

He has to pay stupidity taxes, because he's in that bracket.

[FSogol]

2. There are legal ways to do what you call "skim off the top"

Such as giving the excess profits that would drive the company into a higher tax bracket to the employees in the form of bonuses and by purchasing new equipment, furnishings, etc.

Joe Samuel the Plumber seems to know little about running a small business

[kestrel91316]

3. Creative accounting is how some of us manage to eat in bad years, lol.

[Taxmyth]

4. It is perfectly legal

to avoid paying taxes. It is strictly illegal to evade paying taxes. Good accountants know the difference.

[msallied]

5. Exactly. I wonder how businesses EVER survived under Bill Clinton...

:eyes: