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Author Topic: Income Taxes...Taxed over 7 mil, on less than 1 mil in profit?  (Read 585 times)

Pike

  • Former member
Income Taxes...Taxed over 7 mil, on less than 1 mil in profit?
« on: January 26, 2009, 06:57:10 PM »
Still trying to get my head around how the income tax system works....

At the moment I am averaging about 3 million in profit per day.  Overnight, I let my cash build up to about $30 mil before ordering about that much in aircraft.  I wasn't taxed in the weeks that went by during that period.  So then, after reinvesting the money into more aircraft, leaving me about $1 mil.....I get a tax bill for over $7 mil. 

I really don't see why I'm being taxed, when for the year I won't likely show a profit (because of reinvestment)?  Is the tax system based on a certain country's way of doing things?  What I mean is....here in the US, a business would pay its taxes on profits once per year, if there are any.  Of course, the idea for the business is to show as little as possible to lessen the bill as much as legally possible.  Here it seems that taxes are willy-nilly.....

Basically, I just don't understand the system.  I'm sure I am missing something here.....any explanation is welcome!  :)

EDIT

I found the other post on income taxes.....that helped a bit, as far as the date the taxes come out goes.  So basically, you are taxed on whatever cash you have on hand on the 10th? 
« Last Edit: January 26, 2009, 07:03:11 PM by Pike »

Offline JonesyUK

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Re: Income Taxes...Taxed over 7 mil, on less than 1 mil in profit?
« Reply #1 on: January 26, 2009, 07:06:35 PM »
I think you get a rebate at the end of the year if your proftis are low enough

Shimo

  • Former member
Re: Income Taxes...Taxed over 7 mil, on less than 1 mil in profit?
« Reply #2 on: January 26, 2009, 07:32:32 PM »
If I have understood correctly (I'm almost certain I haven't, but one's got to try...) taxation goes as follows:

On monthly basis you pay taxes on the income of previous month. Ie. if your profits from may are 100M, on 10th of june you pay 30M.
On yearly basis you get reassessed. Your profits from previous year get compared to the amount of taxes already paid, and you get a refund (or get stuck with a bill, although I can't really see this happening). I think this happens every january.

I can very well understand the reasoning behind the monthly "prepaid" taxes. If they weren't there every january we'd see a lot of companies going bust since the CEOs failed to plan ahead. But every now and then you get a situation like yours where the month-to-month tax system makes for a royal pain in the behind. Happened to me a couple of times before I learned to anticipate the situation and started placing those AC orders at the end of a profitable month and not in the beginning of next month.

If you take a look at your monthly income statement every now and then it's easy work with the system once you get the hang of it.

Offline Sami

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Re: Income Taxes...Taxed over 7 mil, on less than 1 mil in profit?
« Reply #3 on: January 26, 2009, 08:33:47 PM »
Simple:

Your profit in january was XX million
You pay taxes of that profit on Feb 10th
etcetc throughout the year

.. and in next january 10th, you pay the taxes for last december
.. and on jan 15th you get the overall calculation from whole last year and either a refund or a big bill...

Pike

  • Former member
Re: Income Taxes...Taxed over 7 mil, on less than 1 mil in profit?
« Reply #4 on: January 26, 2009, 11:36:57 PM »
OK, simple enough--as I figured it was!

Thanks!

 

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