Wow. Just like Dick Cheney

When I worked as a film extra (long ago), I once was told not to make eye-contact with a film’s star, and another time I was chewed-out publicly by a rottweiler of a P.A for daring to stand near the actors in the lunch line… rather than the back of the line.

So I just have to laugh at all their concern for the “little people.”

First paragraph sounds like avoiding the Social Security bite by converting wages to investment income. I stand corrected to a point. As I understand it, that could lessen the medicare taxes, and I guess some Social Security as long as you keep your salary under $90K although the requirement of a reasonable wage as an officer/employee would make that trick here, but it would not touch income tax.

Is that the deal here or is there more to it? Now that you describe it, I seem to remember John Edwards getting some attention for that. Fine enough and I don’t grudge anyone minimizing their liability, but I don’t see yet how such people’s income tax liability wouldn’t be affected by raising the rates.

Like the previous poster said, however, if you’re audited you very well may be screwed. Most of the advantages are more theoretical than practical, and probably wouldn’t pass the scrutiny of an auditor.

First I’m not sure how most actors get paid. If they get a gross wage, with no taxes taken out, then they can incorporate and put the money in the corp as income. If they receive a paycheck like everyone else then incorporation does nothing for them for those paychecks. Also any extra money made from speaking engagement or anything like that could also be put in the corp.

As for the person who’s in-laws deduct everything, good luck with that strategy. Because of the amount of money they’re likely hiding from the government the statue of limitations for tax evasion won’t run out and they’ll spend the rest of their life looking over their shoulder for IRS agents.

Business deductions need a business person. A husband and wife going out to dinner isn’t a business deduction, even if they’re both officers of the corp and they discuss business. There is no business purpose in the dinner. If they go out to dinner and take their friends with them who are sometimes customers, then you get a 50% deduction.

Some people play fast and loss with deductions but they have to realize that if they get audited they’re likely screwed. You can claim that all meals are business related however the IRS will ask the business purpose of each one and who was there, no business purpose, no deduction. Same with car mileage, you better be ready to produce a mileage log for the entire year showing where you went, who you saw, and about what. Gym memberships… not deductible… ever…. quit trying… Any article of clothing that can be worn during non-business hours, non-deductible. So that means business people can’t deduct their suits and fitness instructors can’t deduct their workout clothes. However, mechanics would be able to deduct coveralls (though, possibly not steel toe’d boots) and any article of clothing you buy that has your company’s logo on it could be deductible as a uniform as long as it was required to be worn during business hours.

If you have money and an unremarkable IQ (third-generation money in New York, an actor who drank the Global Warming koolaid, etc) you’d love nothing more than to close off the rich kids club to include nobody who reminds you that you’re not very smart. In other words, old money/dummies with money would love to turn America into Europe. Meritocracy is like Kryptonite to a rich liberal.

If they are writing off things for their S corp they couldn’t take off from a straight Schedule C, they are going to have some very bad days when the audit comes. If they gross $360K and take all of it home for personal use, that does sound like tax evasion and it is not at all legal. For their sake I hope there is more to the story.

Brandon,

Please describe these benefits. Yes, anyone can incorporate. It would just be stupid for most people to do so. A number of us are very curious how, best case, an individual’s pass through entity improves his personal tax situation.