Comment by roflmao123
6 months ago
> Post Section 174, the profit is now $160,000 each year. Now they pay taxes on $160,000, even though they literally have no money left over because revenues equaled expenditures.
They have the $200k they pulled from their startup, far more than what most people earn. If you make enough to pay yourself $100k then you make enough to pay taxes.
The amounts are irrelevant. It would be the exact same situation if all amounts were divided by e.g. 10: paying taxes on non-existent profits.
They do pay taxes. They each pay personal income tax on their $100k.
Still plenty left to pay their business taxes.
And if it’s employees? Do you ask them to contribute to the company’s taxes as well? After they’ve paid their own?
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So on the $200,000 it’s reasonable to you that they have to pay $120,000 ($80k income+$40k business) in taxes?
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The company doesn’t have any money to pay those taxes with.
If you give the company more money to use to cover its tax bill, then that further increases the company’s taxable income.
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