Monday, April 4, 2011

Why G.E. Made Billions, Yet Paid NOTHING to the IRS (and How You Can, Too)

Why G.E. Made Billions, Yet Paid NOTHING to the IRS (and How You Can, Too)

One of the huge stories of late has to do with the fact that General Electric (G.E.), America’s largest corporation, paid nothing – as in zip, nada, nil – in taxes to the IRS, in spite of raking in $14.2 billion (with a “B”) in profits last year. What’s more, according to The New York Times, G.E. claimed $3.2 billion (again with a “B”) in tax benefits

Bet you’re wondering, “What in the world is going on here?” This news story sounds great as a sound bite because of the emotional twists associated with it.

First and foremost G.E.’s CEO, Jeffrey R. Immelt, is the Chairman of President Obama’s Council on Jobs and Competiveness. And as if that were not enough, from the look of things, they seem to be very close buddies.

Secondly, companies and individuals who made much, much, much less money last year mailed tax checks up the wazoo to the IRS.

Inasmuch as this may seem unfair (or whatever other adjective you choose to apply), the reality is that, as far as we know, G.E. hasn’t done anything illegal! The completely-legal-nothing-wrong situation here is that G.E.’s profits/income/revenue are NOT taxable under American tax laws. I think this statement by John Krenicki, one of G.E.’s Vice Presidents, sums it up pretty well: “We pay what we owe.” The thing is, they owe nothing by law, and I’m not aware of anyone or any corporation who’d pay taxes they didn’t have to.

All that aside, what everyone needs to fully understand – and I mean fully – is that when it comes to taxes in America, “total income” (or the amount of money one makes), is irrelevant, so to speak. Instead, the magic number is “taxable income” (or the portion of that total income that is considered taxable). If you haven’t already done so, you’ve got to read Mistake #1 in my book, 5 Mistakes Your Financial Advisor Is Making – which, by the way, is available to you as a free resource. 

I’ve said this several times in the past, but it’s worth noting again: just because someone makes more money than you do doesn’t imply that they’ll pay more taxes than you. Over the years, I’ve witnessed so many folks – including some so-called financial experts – make the rather sad and completely avoidable mistake of thinking that paying taxes is and/or has to be logical. News flash: it’s not! And GET THIS, once and for all: tax obligation depends on which portion of one’s income is considered taxable (or non-taxable) under IRS rules, period!

Here’s a Suggestion for YOU!

Why don’t you structure your affairs so that your retirement income is deemed non-taxable by the IRS to the largest extent possible, instead of simply employing the traditional 401(k)s, 403(b)s, and IRAs which just defer/delay/postpone your taxes? That way, regardless of how large or small your income may be, your tax bill would legally be zero – just like G.E., in this instance.

Then, you can decide to donate whatever YOU wish to the IRS – they’ll never turn that down, I guarantee it! Or you might decide not to do that, and there will be nothing illegal, unethical, or even unpatriotic about it. That’s what we help our clients achieve (minus the donation part). We let them decide that on their own.

A Judge named Learned Hand (1872-1961) served more than 50 years on the federal bench, many of those years as the Chief Judge of the U.S. Court of Appeals, Second Circuit. He wrote something I would like you to consider very carefully:

“There are two systems of taxation in our country: one for the informed and one for the uninformed.”

Are you informed – or dealing with financial professionals who are informed? If not, isn’t it time you start?
For your complimentary session to explore your options regarding a tax-free life and/or retirement income, please contact Laser Financial Group today at 301.949.4449 or visit us on the Web at

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