LuthierJustin wrote:The tax is on personal income over $250,000 a year, small businesses income goes through the owner, the income tax for the business is then through the owner, so say the company makes $300,000 a year, it doesn't take into account the money it take to run the business, the government just sees that the owner made 300,000 grand and is taxed thusly
First of all, you're assuming the business is not a C corporation. Likely, but not necessarily. Secondly, both income AND expenses "pass through" the business to the owner's personal tax return, so he reports $300,000 in revenues but he also reports, say, $150K in wages and other employee expenses, $25K in rent, $25K in raw materials, $25K in sales and marketing and $10K in "other". So his adjusted gross income is $65K, and that's what he pays tax on. Oh, and btw, chances are he's also running his car and various other expenses thru the company so unlike u and me, he's paying those kinds of expenses w/ pre tax dollars.
