Comment by chatmasta
2 years ago
> So if I went the S Corp route, I'd actually have to pay taxes on 0 revenue
You'd only pay taxes if your revenue were more than your deductible payroll expenses (which as you say, you estimate to be 20% of your salary, which in an s-corp must be a "reasonable salary" for work performed).
There's no case where this law causes you pay tax on zero revenue. The problems require some revenue before they affect you, which might actually be another argument against it - you're disincentivized to create revenue from your early product if it's not going to be enough to cover your tax obligations.
Well, I would hope you are right, but that's not what the accountants were saying.
No accountant is saying you'd have to pay at literally zero revenue, unless they're very badly misinformed.
The absolute worst case scenario would be having to pay taxes as if your revenue was nearly all profit - as if you had no expenses (or very few). As always, you only pay taxes on 'net income' - revenue minus expenses - this whole mess comes about by tweaking how expenses are calculated.
> The absolute worst case scenario would be having to pay taxes as if your revenue was nearly all profit - as if you had no expenses (or very few).
And that will be the case for me next year, so yes, this matters to me.
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I know several people who are being advised by accountants that they have to pay for startups with net zero profit.
It is literally backbreaking for a friend who is self funding a team of engineers. The money to pay taxes literally doesnt exist. It was paid as salary.
I told him to ignore the accountants and simply not pay. Let the IRS come after him
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This is what the parent means by "batshit crazy".
What parent?