The E-Commerce Tax Loophole

My accountant is a saint. [Altucher Confidential] March 31, 2023 [WEBSITE]( | [UNSUBSCRIBE]( By opting for cash based accounting for inventory, businesses can strategically reduce their taxable income by investing profits in inventory. [Hero_Image] The E-Commerce Tax Loophole James Altucher Patent #11,219,620: The Most Valuable Patent In History? I believe this could over time become the single most valuable patent in history. [That’s because this patent is just some of the exciting work being done by a company which is developing treatments for one of the biggest and most common diseases in America…]( A disease which impacts 54 million people, or about 26% of the adult population in America. Whatever you do, do not let this opportunity pass you by. [Click here now for the details.]( [James Altucher] JAMES ALTUCHER I want to start by saying that my accountant is a saint. Every year, around tax time, I get a dozen calls a week from him. It's always the same thing with him. He wants my documents and receipts. He’s never calling to ask me about my writing or chess or comedy. Just boring stuff. I let his calls go to voicemail. Then I delete them. More than once over the years, he’s threatened to fire me. I didn’t realize my accountant could fire me until one year he sent me a letter. To be honest, it made me feel sorry for the guy. But it's not my fault that he's more boring than a bag of potatoes. And then last year, he sent me an email that caught my interest… Subject: “How to Substantially Reduce Your Taxes”. Finally, he was talking in my language. The email described changes to IRS rules that would substantially lower my tax bill. He said I needed to open an e-commerce store. Huh? I’d seen a lot online about how entrepreneurs could make money selling on Amazon, eBay, Etsy, etc. But no one told me that it could also save me money. Now the next part gets a bit technical. I’m not an accountant, so you’ll want to confirm with your accountant, lawyer, or tax professional, whether it can work for you. But essentially, in 2017, Congress passed a law called the Tax Cuts and Jobs Act (TCJA). Among other things, TCJA allows retailers to use the “cash basis” of accounting for inventory. Before TCJA, businesses had to account for inventory using an accrual basis. Accrual accounting basically means you recognize both income and expenses when the service is performed. So, for example, let's say I got into the business of wholesaling notepads for waiters. Let's say I bought 500 notepads in 2022 for $1 each, and then in 2023, I sold all 500 notepads for $2 each. With accrual accounting, my costs and expenses would both take place in 2023. I’d get $1,000 in cash for the notepads, report the cost of the notepads as $500, and have a profit of $500. Accrual accounting makes tracking profits easy in this way. This is why it's really the only option for big businesses or businesses with complex operations. But there is also another method of accounting called cash based accounting. Attention! Before You Read Any Further… [Click here for more...]( Hey, it’s James. Before you read any further in today’s issue, an urgent situation needs your immediate attention. If you don’t plan on claiming this upgrade to your Altucher’s Investment Network subscription, you’re missing out on a huge opportunity. Right now is your chance to grab one of the biggest (and most valuable) upgrades our company has ever made to a newsletter. I’m taking Altucher’s Investment Network to an entirely new level and I’d hate to see you left behind. [To see how to claim your upgrade, just click here now.]( As I mentioned earlier, TCJA lets businesses opt to use cash based accounting for inventory. In cash based accounting, expenses and revenue occur when cash changes hands. So since I spent $500 on waiter notepads in 2022, I would report a $500 loss. Then when I sold the waiter notepads for $2 each in 2023, I would experience a $1,000 gain. Since cash based accounting lets you report a loss as soon as you buy inventory, in theory, freelancers and small businesses could use this technique to postpone paying taxes forever. The way it works is as follows... At the end of the year, the small business takes all their profit for the year and uses it to buy inventory. This wipes out any profit for the year, reducing their taxes. The idea is to store value in inventory rather than cash, stock, or bonds. If the business ever needs cash or wants to diversify, they can sell the inventory, but they’ll have to pay taxes on the proceeds. There are other tax-efficient ways to get cash out of inventory, but I won’t go into that now. Of course, there are some obvious downsides to this strategy, namely, your assets need to be tied up in inventory. There are risks associated with that, such as theft, not being able to sell the asset, and also not being able to invest it elsewhere. Of course, there are lots of rules that need to be carefully followed in order to qualify. The accounting system and records must be set up in a certain way. For some people, the benefits may outweigh the drawbacks. By opting for cash based accounting for inventory, businesses can strategically reduce their taxable income by investing profits in inventory. It's essential to consult with a tax professional, lawyer, or accountant before implementing this strategy to ensure compliance with all applicable rules and regulations. Remember, the goal is to be smart about your taxes, not to end up in trouble with the IRS. So, arm yourself with knowledge and seek professional guidance to make the most of this intriguing tax loophole. If nothing else, it could give you a reason to answer the phone when your accountant calls. Best, James Altucher For Altucher Confidential --------------------------------------------------------------- [The Daily FWD] URGENT! FREE Report: 6 Ways to Beat a Financial Disaster Another financial crisis could be just DAYS away! That’s why world-renowned macroeconomist Jim Rickards released this brand-new FREE report revealing the 6 most important things you NEED to do right now to protect yourself. Simply click below to sign up for the elite new research letter The Daily FWD – which will give you honest, unfiltered news on EVERY important issue impacting your wealth and security… The moment you do, we’ll rush you this exclusive new report straight to your inbox. [Click here to sign up to The Daily FWD – 100% FREE.]( By clicking the link above you agree to receive email updates and special offers from The Daily FWD. We will not share your email address with anyone. And you can opt out at any time. [Privacy Policy](. Biden’s Plan to Confiscate Your Cash? 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