(04-30-2021, 05:47 PM)jagibelieve Wrote:

(04-30-2021, 08:21 AM)The Real Marty Wrote: I don't understand what you are saying there.  I have an accounting background, and an accounting degree, I spent time at a CPA firm doing taxes among other things, and a spent the majority of my time as a corporate CFO.  I've never seen income taxes assessed on anything but net income.  I've never seen earnings expressed as gross income.  Only net income.  

Maybe it's a semantical thing, but I don't understand your use of the term "gross income" or its relationship to the tax liability.

Perhaps we are getting confused here.

On my pay-stub that I get from my employer, there is a section for "earnings".  It adds up my hourly wage, overtime wage, etc.  The bottom total of that is my "gross pay".  When taxes and other deductions are made that becomes my "net pay" which is the amount of my paycheck.  My taxes are assessed on my "gross pay" not my "net pay".

My taxes are calculated off of my "gross pay" and after the government confiscates a portion of my "earnings" I'm left with my "net pay".

Many small businesses (the heart of our economy) operate basically the same way.  Their "income", "earnings" or however you want to express it is the same.  It's the amount of money that they took in or their "gross".  Subtract operating expenses which includes taxes and that is their "net gain".

If I own a small business that say delivers packages.  The money that I make delivering those packages is my "gross earnings".  After deducting the cost of running my business (maintenance on vehicles, insurance, TAXES) the result is the net income that I made.

I don't need to be a CPA to understand that.

Actually, you are wrong.   

No one is taxed on their gross pay, even though your paycheck shows gross pay and taxes withheld.  Taxes withheld are based on the exemptions you set on your W-4.  Your exemptions are a personal estimate of how much you will owe in taxes after you compute your taxable income on your tax return, which is basically your personal net income.   Gross pay minus deductions equals taxable income.  Your taxes are NOT based on your gross income.  

As for your business, you have gross income, which is all the money you took in, but your taxes are not based on that.  Your taxes are based on your net taxable income, which is your gross income minus expenses before taxes.  

So you are really wrong that taxes are assessed on gross income.  That is never true, whether we're talking about personal income tax or corporate income tax.  

In your penultimate sentence you say:

"If I own a small business that say delivers packages.  The money that I make delivering those packages is my "gross earnings".  After deducting the cost of running my business (maintenance on vehicles, insurance, TAXES) the result is the net income that I made." 

But the taxes are not calculated until AFTER deducting maintenance on vehicles, insurance, etc.  So the taxes you pay are not based on your gross income.  They are based on your NET income.

In a post above, you gave an example of a farmer who grosses $400,000, and you said he is taxed on that $400,000.  That is incorrect.  He is taxed on the $400,000 minus his expenses.  It's only AFTER deducting his expenses that his tax is calculated.

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