I'm curious how taxes work for corporate companies. e.g., if some tech company or hedge fund makes $X amount of money in revenue in 2024, and $Y amount of that money is the base pay and bonus for employees, is that $Y amount subject to taxation by the feds?
Wages and taxes paid are deductions
How did you get job in meta if you don't know the basic of taxes
yes because it is critical to understand how corporate taxing works prior to building distributed deep learning training. thanks for this riveting discovery
No, they actually have to pay an additional tax called a payroll tax lmao
They didn’t cover corporate tax structure in your interview bro 🤣
I heard meta only employs tax accountants
Wages are part of cost of doing business. If wages contribute directly to building your product or service they are classified as direct costs . The remaining bucket is sales and general administration. Do some reading on how an income statement is constructed. A company pays taxes on net income. The net income after paying taxes is called NOPAT.
"So basically the government taxes 2x on the same money" - yes, that's true in all cases, money is taxed whenever changing hands - you are taxed for income, and when you spend income, you are taxed sales tax, and when the seller gets it, they get taxed income, and when they spend, it get sales taxes again. - so it's normal for the "same money" get taxed N times.
I see. I had thought corporates get some kind of deduction proportional to wages paid. I guess this makes sense though. The same money is taxed definitively, whenever it changes hands as you said
Aside from payroll taxes, corporations are taxed on their total income minus deductions. For a while, employee payroll was a valid deduction. R&D credits are also available. But from what I’ve read online, employee pay for tech companies is no longer fully deductible in the same tax year - it’s amortized over 5-10 years because the Feds categorize tech salaries as capital investments now. So for your example - the hedge fund’s taxable income for the latest tax year is $X minus 10% of $Y - just putting it in a very simple way. It’s def more complicated than that. They get to deduct the next 10% of $Y in the next tax year.
I see. I think hedge fund is a bit different. Their revenues probably fall under short term capital gain tax (though for individuals that’s the same as federal income tax but not sure how that works for corporates)
Oh true - hedge funds might be different. But if they have devs building infrastructure that could still be R&D,ie, capital investment.
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Yes. But stock based compensation is different
So basically the government taxes 2x on the same money, once on the employer and another time on the employee?
Sorry not exactly. The company is taxed on their profits. No profit no tax. Plus there are things like R&D research credits which tech companies use a lot where none of the salary is taxed for some employees because it is for "research". Meta probably avoids something like 50% of SWE pay from taxation that way.