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Author Topic: [ok] Tax loss / credit calculation is still broken for years now  (Read 333 times)

Offline spiff23

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It wouldn’t be the 1970s in a game world (GW2) without my annual pointing out that the tax loss / credit system remains broken and seems to never be looked into despite comments that it will be.

For the past year I was working off about a $1B loss. Each quarter as I made profits I didnt pay taxes and the loss balance declined as expected. By the end of the year I was paying taxes again. Then like clockwork, the new year starts and I get hit with an extra $300k in taxes as the system just recognizes the full year profit and ignores the $1B tax credit for the previous year losses even though it was working as expected quarter to quarter

I have no idea how the formula is set up but it seems to be missing the key variable of adding in previous year tax credit / loss from the actual profits and is just calculating total profit * country tax rate.  It should be (past year profit + accrued losses start year^)*  country tax

^assumption being the accrued loss is a negative number hence “+”. So for example ($1.8B + -$1B)*.3 = $0.24B. NOT $1.8B*.3 = $.54B thereby triggering the added $300k tax payment by ignoring past losses


« Last Edit: August 15, 2019, 12:25:49 PM by Sami »

Offline Sami

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Re: Tax loss / credit calculation is still broken for years now
« Reply #1 on: August 14, 2019, 08:50:29 PM »
Which years in question? What sort of values did the income sheet show?

Offline spiff23

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Re: Tax loss / credit calculation is still broken for years now
« Reply #2 on: August 14, 2019, 09:12:42 PM »
It's for the tax year ended 1976...Extra $300K was paid in Jan 1977.  You can see in quarterly reports that I was working off the tax loss. 

My assumption is there is something wrong with the 3 year window vs what you see as you 3 year tax loss. To start 1976...it's working with your tax losses from 1975+1974+1973.  But then when it turns 1977 it ignores 1973.  So really you are only getting a 2 year credit + current year. Or the calculation need to recognize for any given tax year, your 3 year credit is actually based on the 3 preceding years thus the the starting tax credit (I.e., 15 Jan 1977 calc should be 1976 profit less ( combined profit for 1973+1974+1975)

Put another way, if the intent that the 3 year window includes, in this case only 1974-1976 then the tax loss calculation is broken because in the given year, in this case 1976, it is giving you a credit for 1973-1975 when it should only be giving you a credit for 2 years 1974-1975 because the annual calculation at 1977 will ignore 1973 (or whichever year the system was recognizing as the first year loss for the current year tax credit / loss)

As it stands something that is not logical is happening.  If you are intending the third paragraph to be accurate then you need to fix the tax loss/credit amount so you are actually paying taxes sooner vs thinking you are working off a loss all year and then being taxed on that amount in 1 lump sum when the new year starts.

PS. The amounts are equal to my example rounded to $B
« Last Edit: August 14, 2019, 10:47:30 PM by spiff23 »

Offline Sami

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Re: Tax loss / credit calculation is still broken for years now
« Reply #3 on: August 15, 2019, 11:40:54 AM »
First looking at situation at 1976-01-01 incomesheet:
Profit / loss in current year    143 833 USD
Taxable result (incl. previous losses)    -1 559 865 USD
Amount of taxes paid    0 USD


 => All correct.

---

1976-06-01 incomesheet:
Profit / loss in current year    525 084 USD
Taxable result (incl. previous losses)    -1 034 781 USD
Amount of taxes paid    0 USD


 => All correct. Thus during the year the losses are deducted correctly and no taxes are being paid.

---

1976-12-01 incomesheet:
Profit / loss in current year    2 038 268 USD
Taxable result (incl. previous losses)    478 403 USD
Amount of taxes paid    188 628 USD
Amount to be returned    45 107 USD


 => All correct still. You've made $2mil profit already at December, thus the previous losses from 1973-1974-1975 have been already used ($1.5mil), and you've started to pay some tax of it. [ 2 038 268 -1 559 865 => 478 403, of which 30% is 143 521. The system has taken 45k too much but is adjusting to that ("amount to be returned"). ]

---

1977-01-01 incomesheet (1976 figures):
Profit / loss in current year    1 876 844 USD
Taxable result (incl. previous losses)    1 790 010 USD
Amount of taxes paid    537 003 USD
Amount due    0 USD


 => Taxable result should be -1 559 865 + 1 876 844 => 316 979 and tax 95 094.



Code: [Select]
yr P/L Paid tax Taxes left Losses avail
1972 1 917 698 575 310 0 0
1973 -1 473 031 0 0 -1 473 031
1974 -230 667 0 0 -1 703 698
1975 143 833 0 0 -1 559 865
1976 1 876 844 537 003 0 316 979

Offline Sami

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Re: Tax loss / credit calculation is still broken for years now
« Reply #4 on: August 15, 2019, 12:25:39 PM »
Possibly leap year that confused the -3 yr calculation. (didn't happen always)

Should be fixed.

Offline spiff23

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Re: [ok] Tax loss / credit calculation is still broken for years now
« Reply #5 on: August 15, 2019, 04:24:26 PM »
Ok that’s what I would think...but my tax paid for 1976 was $537,000 vs $95,000 given the lump sum payment.


 

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