So Amazon pays $0 income tax. Why? Because they know how income taxes work. They make decisions based on the choice to pay lower taxes and they keep up with the changes.
The Bloomberg article tells how Amazon is able to pay no federal income tax, through tax deductions. They receive deductions for paying their employees in stock and building new warehouses. That’s it, nice and simple. The article sums it up quite nicely with a quote from Brian Yarbrough, a senior equities analyst from Edward Jones. He basically said, don’t hate the player, hate the people who make the rules.
Find Good Sources of Information
Don’t listen or trust the newsmatainment industry or politicians, when it comes to learning about taxes. These sources have a clear bias one way or another, and do not care about speaking otherwise. Learn from the source IRS.gov or a Certified Public Accountant. These sources have no bias, or at least they shouldn’t. One is a government agency and the other is a certified professional, with ethics training in the certification. These are better choices for seeking information. Business income tax is different than individual income tax, but more or less the same. We earn money and we pay tax on that income. Businesses usually have better resources to understand the rules and plan to reduce their tax owed. That’s what Amazon does, you should do the same. Plan and make better decisions about YOUR money, because it is YOUR money.
Did I mention it’s YOUR money? Good, remember it’s YOUR money.
First, learn the income tax laws at the Federal and State level. Seek out information from unbiased sources like government agencies, tax professionals, and consultants. The internet is a wonderful place to find these sources, but don’t trust all of the garbage put out on the internet these days. Everyone seems to be an expert.
Irony noted.
Find Out How it Applies to You
Learn about the tax rules that apply to your situation. Do you work for a company that has a 401K available? If not, change that soon. Make sure you are taking advantage of reducing your taxable income by contributing to your 401K with pre-tax dollars. Your company should also be kicking in a contribution match. If not, change companies. Also, paying for benefits, health savings accounts, and other benefits offered by your employer helps to reduce the amount of income that can be taxed.
Next, find all the ways to reduce the amount of tax you owe by applying tax breaks. Do you rent or own your home? If you rent, you are missing out on the insane amount of interest you can deduct if you have a mortgage. Do you live in a state the has income tax? If so, the recent tax law changes only allow you to deduct $10K on your federal return. That is going to piss off many New Yorkers and Californians. Did you make home improvements? Sell stocks for losses? Make charitable monetary donations? There are many other ways to reduce the amount you owe, so make sure you are finding out what applies to you.
Plan Accordingly
Finally, you have to plan out the tax year in order to not make any mistakes at the end of the year. Do you know how much you pay to FICA? Who the hell is FICA? FICA stands for Federal Insurance Contributions Act. This is how the Federal Government funds Social Security and Medicare. Look at your paycheck next time and see how much is taken out for FICA. YOUR money is taken from you and held elsewhere, until it’s time to pay your tax bill in April. Remember again, this is YOUR money. It does not belong to the government until you file your taxes and either owe them a check because you didn’t contribute enough or you get a refund OF YOUR OWN MONEY because you contributed too much.
This part is crucial to understand and get right when planning your tax year. Did you know that you can change how much is deducted from your paycheck by adjusting your withholding? You do this with a W-4 form. This is the form you fill out when you get hired for a job. You can also change this at any time by filling out another one with your employer.
Living with Nerd Zest is about learning the rules, playing by the rules, but using them to your advantage. The government, fortunately, moves very slowly, so you have time to learn about the recent tax changes and be ready to adjust your personal tax strategy. The recent changes were made by a republican congress, which usually means you will get to keep more of your own money. Except for those in high tax states, like California and New York. When congress flips again, and there is a Democrat controlled congress, look for your taxes to get increased and plan accordingly. Learn how income taxes work. Use the rules and breaks to your advantage. Continuously monitor the tax changes at the Federal and State level. Plan, do, check, act. Make this a yearly routine, and you will be an income tax master after a few years.
If you think this was valuable and informative, check out some of my other posts about money.