Filing Taxes and Taxing It Twice

Double taxation simply means you’re being taxed twice, which may be legal or illegal depending on what kind of taxes you owe. It has been the subject of court hearings and the like, primarily among business owners since they owe taxes both as an entrepreneur and an American citizen. It also applies to U.S. citizens living abroad, taxed by both the U.S. and their current residence.

 

One important thing to remember about double taxation is that it only applies when you’re being taxed for the same taxable asset. You can’t be asked to pay two taxes when buying a car or real estate property. You can, however, be taxed for sales and income because they’re two different taxable assets.

 

Corporations get around this by providing wages and benefits to their employees. By doing so, they categorize these as business expenses, thus sparing from corporate taxes. For larger firms, their methods are much wittier. Sometimes, they name their shareholders as “consultants” to justify a business expense for hiring one.

 

To summarize, double taxation is as complicated as the rest of the Tax Code. It pays well to stay alert for its signs, as this may be the reason for your slow growth.

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