However you make a living...or whatever you do as
a sideline hobby...make a business of it. Say you're a
computer technician. You work for a company that
maintains computers. It sends you out on calls. You
get a salary. You drive a company car.
Go to your employer and arrange to get off the
payroll. Instead, you set up a company, Computer
Maintenance, Inc. You become a subcontractor to your
former employer. The former employer figures out how
much it actually cost to employ you...health insurance,
holidays, car, etc....and pays you the total. You now
deduct the business car, the phone, the office in the
home. What's more, you hire your family to help.
Everyone goes on the payroll. Your teenaged daughter
becomes the receptionist. Your son becomes accounts
payable clerk, and so forth. Everyone gets a
salary...all deductible.
The kids get paid little...but enough to pay for
their own clothes and build up enough money to pay
their own college expenses. They are in very low or
negligible tax brackets...so the money is all but tax-
free. Everything gets deducted.
Don't take any more vacations... instead, find a
place where the company could learn something...like
Hawaii. Go and take the rest of the employees with
you...they could probably learn to do a better job,
improve productivity, and bring more to the bottom
line.
Don't buy any more food for the family. Instead,
set up a cafeteria near the office...say in the
kitchen. This would be for the employer's convenience,
of course. This might not only make meals deductible
expenses...but it might also make the kitchen a
deductible portion of your house, including the
refrigerator, stove, etc.
Even the bathroom. The employees need a place to
go to the bathroom while at work, don't they?
And probably some could stand to upgrade their
skills. The company might have to fork over some money
in tuition.
What about day care? Your company is responsive
to employees' needs. So if your employees have small
children, the company could set up an on-site day care
center as an employee benefit. Hire a care-provider,
deduct the expense, and deduct another room in the
house -- along with day care supplies, diapers, and so
forth.
Our tax advisor is getting nervous. But you get
the idea. The family corporation is a gold mine, if
you can make it work for you. Some of the ideas we
present in this example, as far as we know, have never
been tested in the courts. They are logical extensions
of the principles of U.S. taxation as we understand
them.
But that doesn't mean they will work for you.
These cases tend to depend on the individual
circumstances. If you are operating an ambulance
service out of your home, for example...and your son
drives the ambulance and your daughter takes the
calls...and your wife does the books...the
possibilities are enormous. If you try to employ your
three-year-old as a business consultant, however, the
courts might find that so imprudent as to give rise to
a suspicion of tax evasion. Be sure to seek competent
advice, geared to your own individual situation.
