Jan 17, 2013

Using Expenses as a Tax Shield

Okay, this is definitely frowned upon, and most probably illegal but just out of curiosity.....has anyone ever used their expenses card as their daily card without the intention of claiming it back, leading to the cost being deducted from your paycheck (ie, pre tax) and thus reducing your tax outlay (or at least having a tax rebate down the line)?

For your edification, I have no intentions of doing so, just curious.

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18 Comments

Eddie Braverman

ST

11y

Pure genius.

CLICK HERE for The Best of Braverman

O

11y

haha Love it.

brandon st randy

Senior Neanderthal

PE

11y

I think this is a lot more feasible if you are classified as an independent contractor working with the firm as opposed to an employee on the payroll.

Too late for second-guessing Too late to go back to sleep.

PE

11y

Simply an awesome concept.

“The pleasure of rooting for Goliath is that you can expect to win. The pleasure of rooting for David is that, while you don’t know what to expect, you stand at least a chance of being inspired.” - Michael Lewis

O

11y

If you work for a firm and get caught, it would mean you'd get fired. If you claim it on your Schedule C, and get audited then you'd be in a hole after you get penalized up your ass. But yes, that is one of many ways to commit an illegal crime. It doesn't take a genius to commit a crime - just a lot of guts and a lack of ambitions.

HF

11y

wasvsdal:
If you work for a firm and get caught, it would mean you'd get fired. If you claim it on your Schedule C, and get audited then you'd be in a hole after you get penalized up your ass. But yes, that is one of many ways to commit an illegal crime. It doesn't take a genius to commit a crime - just a lot of guts and a lack of ambitions.

I'm British so have no idea what a Sched. C is but just humour me, why would your firm care? It's a pass through for them; admittedly it doesn't look great on their part. The tax loss is to the public purse. So, rightly, HMRC or IRS, would be pissed, and would, when/if they cottoned on, want "their" money. And I suppose, if convicted of a "crime," your firm would have grounds for dismissal.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper

O

11y

Oreos:
wasvsdal:
If you work for a firm and get caught, it would mean you'd get fired. If you claim it on your Schedule C, and get audited then you'd be in a hole after you get penalized up your ass. But yes, that is one of many ways to commit an illegal crime. It doesn't take a genius to commit a crime - just a lot of guts and a lack of ambitions.
I'm British so have no idea what a Sched. C is but just humour me, why would your firm care? It's a pass through for them; admittedly it doesn't look great on their part. The tax loss is to the public purse. So, rightly, HMRC or IRS, would be pissed, and would, when/if they cottoned on, want "their" money. And I suppose, if convicted of a "crime," your firm would have grounds for dismissal.

It would only get deducted from your paycheck if you expensed it through the firm, in which case the firm is paying for it.

HF

11y

Best Response

wasvsdal:
Oreos:
wasvsdal:
If you work for a firm and get caught, it would mean you'd get fired. If you claim it on your Schedule C, and get audited then you'd be in a hole after you get penalized up your ass. But yes, that is one of many ways to commit an illegal crime. It doesn't take a genius to commit a crime - just a lot of guts and a lack of ambitions.
I'm British so have no idea what a Sched. C is but just humour me, why would your firm care? It's a pass through for them; admittedly it doesn't look great on their part. The tax loss is to the public purse. So, rightly, HMRC or IRS, would be pissed, and would, when/if they cottoned on, want "their" money. And I suppose, if convicted of a "crime," your firm would have grounds for dismissal.

It would only get deducted from your paycheck if you expensed it through the firm, in which case the firm is paying for it.

I don't know how expenses work at your place but this is how it works here: I buy X on my Amex, if i do not claim the receipt of X back at the end of the month it comes out of my paycheck. If i do claim it, it doesn't. As i said, a pass through.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper

O

11y

In the USA you could swing it, but you'd need to be an independent contractor (as mentioned above) or have a consulting business where you essentially were the business. That way you could basically expense your day to day living, within reason.

Eddie Braverman

ST

11y

TNA:
In the USA you could swing it, but you'd need to be an independent contractor (as mentioned above) or have a consulting business where you essentially were the business. That way you could basically expense your day to day living, within reason.

This is absolutely true, but only to the extent that your accountant isn't a Boy Scout. Unfortunately mine is. I did something similar to what the OP is suggesting when I set up my yacht services company, and my accountant called bullshit on much of it before the IRS even got to see it.

Moral? If you're going to try it, use a shady accountant or do your own taxes.

CLICK HERE for The Best of Braverman

Senior Orangutan

CD

11y

Edmundo Braverman:
TNA:
In the USA you could swing it, but you'd need to be an independent contractor (as mentioned above) or have a consulting business where you essentially were the business. That way you could basically expense your day to day living, within reason.

This is absolutely true, but only to the extent that your accountant isn't a Boy Scout. Unfortunately mine is. I did something similar to what the OP is suggesting when I set up my yacht services company, and my accountant called bullshit on much of it before the IRS even got to see it.

Moral? If you're going to try it, use a shady accountant or do your own taxes.

Tax accountants aren't shady, they are cash optimization professionals.

- V

O

11y

Edmundo Braverman:
<span class=keyword_link><a href=/company/trilantic-north-america>TNA</a></span>:
In the USA you could swing it, but you'd need to be an independent contractor (as mentioned above) or have a consulting business where you essentially were the business. That way you could basically expense your day to day living, within reason.

This is absolutely true, but only to the extent that your accountant isn't a Boy Scout. Unfortunately mine is. I did something similar to what the OP is suggesting when I set up my yacht services company, and my accountant called bullshit on much of it before the IRS even got to see it.

Moral? If you're going to try it, use a shady accountant or do your own taxes.

Yeah I mean certain accountants are probably risk adverse to the point it hurts you.

Better to ask forgiveness than permission.

O

11y

Yeah Oreo, if you are in the system you are going to get robbed (aka taxed). You need a side business or something where you can control the expenses and income stream.

Senior Orangutan

CD

11y

There wouldn't be an impact on your taxes because your income is not necessarily the same as your take home pay.

Example: Expense of 10 Taxed at 100 income Your paycheck was 90 You are taxed at 100, not the 90

- V

HF

11y

Viktri:
There wouldn't be an impact on your taxes because your income is not necessarily the same as your take home pay.
Example: Expense of 10 Taxed at 100 income Your paycheck was 90 You are taxed at 100, not the 90

Okay. But then why do I have to ring up HMRC to ask for a rebate when my bonus comes and they raise my tax rate? It's not my salary, but still has a bearing on my tax rate.

God, I'm diving a little deep into this....starting to convince myself to have a go.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper

Senior Orangutan

CD

11y

Oreos:
Viktri:
There wouldn't be an impact on your taxes because your income is not necessarily the same as your take home pay.
Example: Expense of 10 Taxed at 100 income Your paycheck was 90 You are taxed at 100, not the 90
Okay. But then why do I have to ring up HMRC to ask for a rebate when my bonus comes and they raise my tax rate? It's not my salary, but still has a bearing on my tax rate.
God, I'm diving a little deep into this....starting to convince myself to have a go.

I'm not sure what you are exactly describing but my guess is that you mean that your bonus is overtaxed and you receive a rebate?

Bonus and salary are active income and taxed aggregately.

- V

PE

11y

Just watch out for this guy, Oreos!!

http://www.youtube.com/embed/VxenMLJ1tDs

O

11y

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