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upaloopa

(11,417 posts)

5. Here's what most often happens.

Reply to yurbud (Original post)

Fri Oct 5, 2012, 12:33 PM

Oct 2012

If you have a sole proprietor business, when taxes are high you want more expense given a certain level of revenue to offset the taxes due on net income.
To do that you can pay yourself salary though you still have to pay tax on it. You can increase your companies contribution to a retirement plan. You could hire more workers or any number of new expenses. You could buy depreciable equipment.

When taxes are low, there is not the need to increase expenses to protect net income. This could mean you don't need to ad to the work force also.

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to business people: what do you do with a tax cut when you don't have customers? [View all] yurbud Oct 2012 OP

Well if you have less customers and less revenue then you use it to keep paying your workers. dkf Oct 2012 #1

you are a very conscientious employer. yurbud Oct 2012 #2

Actually that's what my boss does for me. dkf Oct 2012 #4

if he didn't pay himself he is a moral miracle. yurbud Oct 2012 #13

So where is the requirement you have to retain workers to get the tax break? JHB Oct 2012 #8

It's not a requirement but it preserves options. dkf Oct 2012 #9

Then it might be a smart idea to make it a little more mandatory than merely "preserving options"... JHB Oct 2012 #11

You sell to customers in other parts of the world. QC Oct 2012 #3

Here's what most often happens. upaloopa Oct 2012 #5

that took me a minute to unpack in my head but it makes sense. yurbud Oct 2012 #6

But what do you do with the extra net income in the low tax scenario? yurbud Oct 2012 #7

You leave it as cash in the business upaloopa Oct 2012 #12

Show the numbers that illustrate a higher tax rate lands up with more take home pay please. dkf Oct 2012 #10

OK, you are a sole proprietor. You do some tax planning for this year before Dec 31. upaloopa Oct 2012 #14