> The best investment adivce I ever got was from my father. and I quote.... "Don't fuck around with your taxes any more than an H&R block adviser would let you. Getting a million dollar tax bills 7 years after you earned the money isn't worth it."
This depends on the situation. If you get a bill in Y7 that is not significantly higher than the bill in Y1, it in fact would be worth it, because that capital could have compounded for 7 years.
Focusing on optimising your taxes is actually often worth it. I would dare say not enough people do it. But the more you optimise, the higher the risk becomes you have to pay it back. As with anything, it's risk vs reward.
At the returns this guy was making, it actually makes sense to defer paying taxes as long as possible.
Don't forget to include the costs of creating dummy corps, the risk of the off shore owner of the dummy corp running away with your money, the lawyer fees to keep you out of jail, etc.
There are many legal ways to minimize taxes. I might go a step beyond run of the mill tax accountant advice, but if you're getting advice from a guy who changes his phone number every week, that could be a bad sign.
Of course. I'm not advocating that. But I do think most people assume there's not much you can do, aside from paying up. Getting a decent understanding of basic tax law pays itself back over the years.
I've met self employed people who don't even understand the difference between salary, corporate tax and dividends.
That's below the competence of an H&R block adviser. Having basic minimal competence is of course a good idea. But, the risk vs. reward from messing with your taxes is capped at a fraction of your income so there are generally far better risks to take.
> Focusing on optimising your taxes is actually often worth it. I would dare say not enough people do it.
I'd largely agree, people don't optimise their tax enough but large companies/corporations get away with it far too much.
It's a pretty big issue in the UK, the last figures I saw where Tax Evasion costs us 67bn a year (HMRC figures iirc) vs 1.8bn for all benefit errors (not fraud, that figure is errors and fraud).
We cracked down on benefit fraud massively... If I where a cynic.
It's important to draw a distinction between tax minimization (within the bounds of the law) and tax evasion (illegal minimization). I don't think anyone here is promoting illegal evasion.
Are there ways to optimize personal income taxes the same way corporations do? Can I create a shell person in the cayman islands and pay them the exact amount of my income and deduct my US income to $0?
This depends on the situation. If you get a bill in Y7 that is not significantly higher than the bill in Y1, it in fact would be worth it, because that capital could have compounded for 7 years.
Focusing on optimising your taxes is actually often worth it. I would dare say not enough people do it. But the more you optimise, the higher the risk becomes you have to pay it back. As with anything, it's risk vs reward.
At the returns this guy was making, it actually makes sense to defer paying taxes as long as possible.