USA Individuals determining the use of their tax dollars over Gov't determination

Sep 29, 2016
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United States
Client who is 33 to 35% tax bracket individual earning with his wife over $300,000 per year seeks to make more intelligent use of his tax situation.

Since his high tech employer takes taxes straight out of his biweekly paycheck and forwards to the treasury immediately, he must recoup at annual tax filing - - or, can he (based on future tax filings showing Gov't owes them refund) file a document with employer to stop taking taxes out, and settle the issue after his annual filing ?

It is well known in his industry that high tech industry looks to retire or fire employees after say 45 years of age since they tend to be less productive and younger hires are allegedly "smarter".

His strategy: Approx. 1/3rd of his and wifes salaries are being taken away promptly each paycheck. What if he and his spouse started their own small business enterprise as "security" or additional "nest egg" going in to the future that they possibly could build something to either retire into or sell the business for a nice additional profit.

1/3 of salary taxed means approx. 2/3rds remain. Cutting their expenditures, they decide to file an LLC for a business and start buying products and services preparing to market. Whether they fail or not - - - they should be allowed to file tax returns with a schedule C that typically shows losses for the starting of the new business - - - and counter these losses against their tax liability from their on going high tech employment - - - essentially clawing back a refund - - - for all the investments in products and services for the new business venture - - so, all the financial risk in obtaining these new products and services is really no risk at all - - - what would have been gov't taxes they have no control over now has become "seed capital" they get to spend at their discretion - - - rather than the typical scenario where the Gov't takes their tax portion and spends it as the Gov't sees fit.

If the new venture is not favorable they risk no money only their time and effort. The IRS allows what, 5 years till they tend to determine that you have a "hobby business" that is not going to fly with them ? If the business is mildly successful or better, rather than the new venture show break even or even a profit - - -whereby they would then loose their ability to offset their high tech employment taxes, they carefully strategize the purchasing of goods and services to always show a loss, hopefully a loss to completely offset their high tech employment taxes (at least while they are high tech employed) - - under the principle that they are "building and growing" their business.

In fact, it is not unheard of for the losses to be much higher than the tax liability of the high tech employment taxes . . . where the Gov't. is actually refunding you for your "investments" in the new business.

Upon being laid off or retiring they can then switch strategy and tighten down on purchasing and run the new venture as a normal business (which if successful, will then pay taxes).

Any suggestions/ comments ?


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