If you own your own business (or are an individual consultant setting up their own business) you can implement this method to pay less in taxes.

First and foremost check my other thread to find out all the things you can write off on your tax expenses.

Then pay your self a horrible salary and take the money out of the business as a profit dividend. In most regions of the world you pay a lot less on a profit dividend than you do a wage. In fact some places you'll pay almost 20% less tax on the income plus the rebate from your tax write off.

By taking out the dividend and writing off the proper deductions you might manage to pay little to no tax on your income while being by the books.

Of course always check with a certified accountant (of which I am not) and remember that I am not liable for action taken on this advice.

You can and probably should do this, but you need to have a justifiable salary for the amount of work that you're putting in. If you go too low it can be an audit red flag. As to the proper amount, consult with a tax accountant.

Or you could go with a company in Seychelles and bank acc in Cyprus if you make enough to justify a few k in expenses. I takes some time to get the money out though, but if you make enough it's obviously worth it. Also, for liability and asset protection it beats any other options.

Originally Posted by Michaelf

Or you could go with a company in Seychelles and bank acc in Cyprus if you make enough to justify a few k in expenses. I takes some time to get the money out though, but if you make enough it's obviously worth it. Also, for liability and asset protection it beats any other options.

Mo Money Mo Problems

Who says you need a reasonable salary, Steve Jobs was getting $1 per year from Apple. It's not illegal to get dividends. Warren Buffet and all the rest of the billionaires pay less taxes than average people because they use the dividend trick, why shouldn't we? Who needs a "real" salary anyways.

Originally Posted by mark27

Mo Money Mo Problems

Who says you need a reasonable salary, Steve Jobs was getting $1 per year from Apple. It's not illegal to get dividends. Warren Buffet and all the rest of the billionaires pay less taxes than average people because they use the dividend trick, why shouldn't we? Who needs a "real" salary anyways.

"The short answer: Because the IRS is aware of this tactic and has prohibited it. Using this tactic, an employer has to take “reasonable compensation” as a wage. If this employer does not take reasonable compensation, the IRS may claim that some of the dividends were actually wages, and claim that the employer owes more taxes (which may include penalties for not paying payroll taxes)."

Just to be clear the dividend "trick" isn't even a damn trick at all.
You still have to pay the OUTRAGEOUS US corporate income tax rate before taking dividends and then be double taxed on it.

Originally Posted by Expertpeon

"The short answer: Because the IRS is aware of this tactic and has prohibited it. Using this tactic, an employer has to take “reasonable compensation” as a wage. If this employer does not take reasonable compensation, the IRS may claim that some of the dividends were actually wages, and claim that the employer owes more taxes (which may include penalties for not paying payroll taxes)."

Just to be clear the dividend "trick" isn't even a damn trick at all.
You still have to pay the OUTRAGEOUS US corporate income tax rate before taking dividends and then be double taxed on it.

I would just simply adore for you to point that out in the US Tax Code or any of its revisions.

Originally Posted by Winchester

I would just simply adore for you to point that out in the US Tax Code or any of its revisions.

Please refer to which part you mean.
Dividends are not a way around business taxes, actually, it's quite a good way of overpaying taxes if you make over about $50k/yr in profit (which is like nothing as far as profit goes).

The US corporate income tax rate is already the highest in the world by quite a large margin. There are much better, cheaper, and easier ways around paying domestic taxes... these are actually the tactics large companies use. If you are mostly involved in CPA/PPC type crap, it's even easier than tangible goods.

If you're referencing "reasonable compensation" as something you've never heard about, please fire your CPA immediately:
http://www.irs.gov/newsroom/article/...200293,00.html

Whenever your self employed its easier to fiddle it lol.

So whats the solution for canadians? for example if someone is making 100 grand a year. Is it best to take like a 30k salary, and 30k in dividends? or would it just be easier to take a 60k salary