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.
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
Accounting (and taxes) does not match one-to-one with cash flow. It is very critical for any business to understand this. This bites many businesses, sometimes very badly. It's especially difficult when the rules change, as they have in this case with R&D/software expenses.
But there's a very critical misunderstanding happening in a lot of comments here -the IRS taxes profit (net income), not revenue. Anyone with zero revenue is safe. Anyone with SOME revenue will potentially owe some taxes, and potentially in a very surprising (and unfair, I think) way. The basic example in the submission is quite correct.
>>>I told him to ignore the accountants and simply not pay. Let the IRS come after him.
This is a great way to end up both out of business AND in jail. It is not the smart play.
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.
Sure, it's reasonable to worry about that. But it's still not the case that you'd need to pay taxes on 0 revenue.
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
Accounting (and taxes) does not match one-to-one with cash flow. It is very critical for any business to understand this. This bites many businesses, sometimes very badly. It's especially difficult when the rules change, as they have in this case with R&D/software expenses.
But there's a very critical misunderstanding happening in a lot of comments here -the IRS taxes profit (net income), not revenue. Anyone with zero revenue is safe. Anyone with SOME revenue will potentially owe some taxes, and potentially in a very surprising (and unfair, I think) way. The basic example in the submission is quite correct.
>>>I told him to ignore the accountants and simply not pay. Let the IRS come after him.
This is a great way to end up both out of business AND in jail. It is not the smart play.
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This is what the parent means by "batshit crazy".
What parent?