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Business Tax Laws

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Beverly Said:

Why do there seem to be no laws governing wage tax in America ?

We Answered:

There is no special law called a "wage tax." There is an income tax, and specifically within that law, "compensation for services" is defined as one type of income (among many others). Wages are one type of "compensation for services."

The law that requires you to pay income tax, including tax on wages, is found in sections 1, 61, and 63 of the Internal Revenue Code.

Section 1 says, "A tax shall be imposed on taxable income" and then it mentions married inviduals, single individuals, married filing at higher single rate, and all the other categories of taxable individuals.

Section 63 defines taxable income as "gross income minus the deductions allowed by this chapter. "This chapter" is Chapter 1 of Subtitle A of Title 26, which contains among other things a list of deductions.

Section 61 defines gross income "all income from whatever source derived, including (but not limited to) the following items..." And then it enumerates a list of items. The very first item on the list is "COMPENSATION FOR SERVICES." That means wages.

Notice that the law does not say that you will be taxed on someone else's labor. It says that if you are compensated for services, you have earned income that is subject to tax. Clearly, if Congress meant only to tax someone else's labor for which you receive income, they wouldn't have said that income includes "compensation for services" in such a general way. To interpret the statute passed by Congress as referring to someone else's wages is to read something into the law that just isn't there.

There is also nothing in Section 61 that refers only to "profit." Instead, it says income means accession to wealth "from whatever source derived." That last phrase--"from whatever source derived"--makes it pretty clear that Congress did not mean to include only what people typically call "profit."

Moreover, Section 61 also lists a number of other items that will be taxable income even though they are not profit. For example, it lists alimony as a type of income. No one would consider alimony to be profit from a business.

The law says "compensation for services" will be taxed. There are two reasons it doesn't say "wages":

(1) It's obvious that when people are paid wages, they are being compensated for services, usually on the basis of the time they put in performing the service. Wages are simply one very obvious type of compensation for services.

(2) Congress meant to tax other types of compensation for services besides wages, so they chose a broader term than "wages." If I pay someone $300 to paint my kitchen, I'm not paying wages because I am not compensating according to time--by the hour, by the day, or whatever. But I am still compensating the painter for services, and this compensation would still be taxable income.

To say that the law does not tax wages is to deliberately misinterpret the plain meaning of the laws I just quoted. No court has ever bought into that kind of semantic chicanery; neither should you.

Alicia Said:

Is there a legit Oz online business that abides by Oz tax laws and that is free to join and make good money?

We Answered:

You can get a lot of good info with a free C.D.

Shawn Said:

Mortgaging to start a business / Tax deductible interest in Canada?

We Answered:

There is also another option. Some banks will give you a business loan "with a personal guarantee" So you can get your business loan with all of the taxation benefits of the loan, while you put your personal home up as collateral on the loan.

The more important thing this type of loan does is creates a separate paper trail for tax and business purposes. For example interest paid on the loan would be directly attributable to the business, therefore if you ever got audited by the CRA its much less likely that interest could be attributed to your person.

Jane Said:

I'm planning to start a business selling sports backpack in Cali, what r the tax laws I should be aware of?

We Answered:

I suppose you've got partners in the US who will sell these backpacks for you?

California has a business permitting database, that includes what each business needs in terms of permits, licenses and taxes and who to contact

http://www.calgold.ca.gov/

They don't have a sports backpack, but they have sporting goods store. Choose the area in CA you want to start the business and check the contact information for each regulatory requirement

Jessie Said:

Can an individual use their business tax number to work for a company?

We Answered:

I have never heard of this. Every company is required to have a new employee fill out an I-9 form. With this identification is to be verified by the employer. The back of the I-9 list documents that are acceptable. No where on there does it list anything about business tax ID. A person MUST have either 1 form of ID from list A or 1 form each from BOTH list B and C.

That is how I understand it.

Unless you are talking about work overseas, I am not familiar with the laws that govern that.

Glenn Said:

Can I apply for a sales tax registration for a business I run out of my apartment, or is that illegal?

We Answered:

You have two separate issues here.

1. Yes, you must get a sales tax ID number and collect and remit sales taxes.

2. You may or may not be able to operate your business out of your apartment. Your lease may prohibit it and the local zoning laws may prohibit it. Your Ad Here

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