Business taxes and expenses?

Question

Hypothetical Situation here

Let’s say I start a business and have it formed as corporation or Limited Liability Corporation. and I was pulling in 100k a year in revenue before any deductions. How much tax would I need to pay from that?

Now using that same information what if I were to make donations to charitable organizations in the same amount I owe in taxes. Would this automatically offset causing me to pay nothing to the IRS because I am donating this money?

I am just trying to figure out how to legally beat the system and to pay the IRS the least amount possible. I figure if I have to give up my money it mind as well be to some organization that actually needs it right?

This is part of a school project and your input is appreciated.

Answer 1

Revenue doesn't have much of anything to do with taxes, it's your net, after allowable expenses are deducted, that is taxed.

And an amount donated to an eligible charity reduces your taxable income, not your tax, by that amount.  The amount that reduces your tax depends on your tax bracket, but no matter what, your tax is only reducted by a portion of the contribution, most of it still comes out of your pocket.

Answer 2

there are several ways to reduce your current taxable income. a huge tool is retirement funds. a SEP-IRA usually lets you stash away the most amount of money. the catch is that it reduces your current years' income but when you use it at retirement, it is all taxable. after retirement plans, then donations and other business expenses will also come into play.

the only way to not owe anything to the government is to take a loss, but then what is the point of running a business that's not profitable

Answer 3

You don't pay income tax on gross income.  That is your first logical mistake.  The second one is thinking a "deduction" is the same as a tax "credit".  They are different.  A deduction just reduces your taxable income (which is then applied to a tax table to find actual tax liability).  A credit is a dollar for dollar offset of your final tax liability.  So, short answer, a deduction will not reduce your tax liability to zero.  You need to study tax law or get a tax lawyer to teach you.

Answer 4

It doesn't work like that.

You pay taxes on profit, there is only a certain amount of charitable donations allowed to be exempted from taxes. You need multiple offshore accounts and some very good accountants to "beat the system."

Answer 5

You dont pay taxes on revenue. It is revenue minus expenses. You cannot donate more than 50% of your income to charity in one year. What you owe depends on your agi or adjusted gross income. Take your revenue minus expenses minus charity then you figure taxes. Depending on the final number you look on the chart and see what the taxes are. If you have 1k in taxes  a 1k donation wont offset them.