Facebook has been able to boast about many accomplishments, from their acquisition of virtual reality technology company Oculus VR, Inc., to the first time they hosted over one billion users in one day. For the company, it’s likely none of these accomplishments will be as well regarded as one related to their finances. In 2016 Facebook anticipated that their effective tax rate would fall from 40 percent to about 27 percent for the year. With the federal corporate tax rate at 35 percent at the time, this rate would have been considerably lower. Facebook serves as just one example of how large corporations use a strategic tax plan to lower their taxes, saving thousands of dollars every year. How did Facebook, along with other major companies, pay a tax rate lower than your business? The answer is strategic tax planning.
How Do They Do It? Facebook Paid a Lower Tax Rate Than Your Business
Effective Tax Rates
It’s natural that as companies begin to make more money they start thinking more carefully about their taxes. It’s one reason why major corporations employ teams of experts that work together to take advantage of every tax-reduction strategy allowed by the tax code.
While Facebook has declined to comment on the exact strategies used to lower its tax rate, the effective tax rate reported by companies to the SEC is often higher than what the company actually pays. This means, of course, that the 27 percent effective tax rate Facebook expected to pay might be higher than what they actually paid. Some tax experts have estimated that when Facebook was reporting a 40 percent tax rate, they were likely playing closer to 13 percent.
Strategic Tax Planning
Facebook is hardly the only major U.S. company that works to find ways to lower its tax rate. A vast number of companies on the S&P 500 had an effective tax rate of 20 percent or lower, and at least a few of the companies paid essentially zero in taxes. In fact, many of the tax strategies that Facebook and other large companies used have become commonplace among corporations of their size. Just because the big companies use them, however, doesn’t mean these strategies aren’t available to smaller companies.
Facebook being able to lower their effective tax rate is impressive, but it’s not impossible for smaller companies to replicate. It all starts with a strategic tax reduction plan — the Tax Blueprint® from Financial Gravity.
Businesses of all sizes should think of a strategic tax plan as standard operating procedure. This is a business fundamental that far too many businesses are lacking. Businesses want to maximize money coming in, of course, as well as minimize money going out. The easiest way to increase profit is to cut unnecessary expenses, such as overpaying taxes. Strategic tax planning helps you keep more of the money you make.
Make The Tax Code Work For You
It might sound dramatic, but a Tax Blueprint® could change your life. Saving thousands of dollars in taxes every year means more capital that you can put back into growing your business. That additional business growth could be what you need to change the trajectory of your business. Every minute you wait to implement your strategic tax plan means more of your hard-earned money is draining away, being overpaid in taxes you don’t legally, ethically, or morally owe. A quick, free assessment is all it takes to start your Tax Blueprint® process.
Companies like Facebook know how to make the tax code work for them rather than against them. We use the IRS Tax Code comprehensively to ensure you pay only what you must. With your Tax Blueprint in hand, you’ll see exactly how the tax code can work for you and your specific business. Each and every tax-reduction strategy we employ in your Tax Blueprint is sourced and referenced directly by the IRS Tax Code. You’ll see firsthand that every strategy is legal, ethical, and moral. With your implementation plans highlighted and summarized, you can be confident that the savings are real.
Maintaining Your Strategic Tax Plan
Beyond your Tax Blueprint, Financial Gravity can help you implement and maintain your strategic tax plan through our Tax Operating System®. Designed to fit any budget and circumstance, our suite of solutions help you save money via strategic tax reduction. Additionally, you can count on access to our advisors, annual tax-planning assistance, ongoing newsletter, and educational materials.
The truth is that you are likely paying too much in taxes, perhaps thousands more than the law requires. Even if you employ a CPA, many do not know how to take advantage of this level of tax planning because they weren’t trained to do so. To leverage the benefits of the tax code, you need to be proactive and you need to have a plan. Through our Tax Blueprint®, Financial Gravity can provide you with a clear, proactive, strategic tax plan that is customized to your business. Contact us today to schedule your free assessment!