Can You REALLY Find a Way to Pay ZERO in Taxes?
CapForge knows a thing or two about taxes and so does Matt. In this video, he explains why some tax advice should be left on the internet and not taken too seriously.
There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!
Video Transcript:
Business Advice Video:
Owning a small business is the best way to pay zero dollars in taxes. And also keep more of your hard-earned money. Even if it’s a simple ten thousand dollar side hustle or one million dollar business. Here’s why. So as an employee making $100,000 per year, you’re gonna be paying about $14,322 in federal income tax. If you purchase a car worth $50,000 you’ll be paying $900 a month as your car payment and unfortunately, we can’t deduct this as a cost. You still have to pay your mortgage, phone bills, utilities, etc. And that comes up to $48,000 for the year. So total income after paying for taxes, car payments, bills, etc. comes up to $26,870.
Now let’s take a look at a small business owner. so we have $100,000 in income but unlike a W2 earner, you can use deductions like your home office deduction, phone bills, travel, meals, etc. to reduce our income even more. But we’re not done. We’re gonna use Section 179 plus bonus depreciation to write off your vehicle that weighs over 6,000 pounds. We purchase it with $0 down but we’re still able to take a massive write-off of $40,000 and bring our taxable income down to $23,000. Now last but not least we’re gonna be paying our kids $11,500 a year each. They don’t have to pay any income taxes on that because it’s below $12,000 and we get to use it as a write-off for our business. So after all these deductions and tax savings the small business owner ends up paying zero dollars in taxes, keeps their money, and also gets to help other family along the way.
Matt’s Review:
Great well, TikTok is always where I go for tax advice because definitely there’s nothing wrong with what he’s saying here at all. Unless you stop and consider that you can’t just write off a car because you had your business buy it. It has to actually have a business use and you have to be using it 100% for the business. And if you do that by the way, when you have your business buy a vehicle instead of you personally, your insurance rates can be up to triple what they were for you personally. Because your business has a different perceived use and a different risk profile than you driving a personal car for personal reasons. So yes, if you meet all the criteria you can write the car off as a business expense and take that deduction but then you have to only be using the car for business and you have to pay two or three times more in insurance than if you bought the car personally. So there are other ways to do it you can own the car personally, track your miles that are business miles, and deduct that. Yes, you can do that or track actual expenses paid for the business; gas, insurance, repairs, maintenance, etc. and deduct that. But it’s not an automatic write-off the way he’s suggesting.
The other thing is you can pay your kids, but they have to actually be doing something for the business, you don’t just give them the money. And then if you’re paying your kids the money then you’re supposed to have the kids get the money, not just put their names on the checks and then you take all the money back. So these are not ideal tax strategies and that there there’s a lot more hoops to jump through than he’s implying. And if you’re not doing it right then it becomes tax fraud and that’s problematic. So yes, there are definite ways to save money on taxes as a business owner but these are aggressive borderline shady tactics that he’s promoting here. And he’s leaving out a ton of information about who and where it applies. So I would say rather than getting some tax advice that you may or may not believe from TikTok, I would suggest talking to an actual tax person who can give you legitimate tax advice and help you find legitimate tax saving. So you don’t have to lose sleep at night worrying about whether or not you’re gonna get nailed in an audit.
