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cyanrarroll t1_j2dkhz2 wrote

All comments forget the most important aspect: Any unspent dollar at the end of the year is profit, and profits are taxed

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Potato_Octopi t1_j2dr8sk wrote

What difference does that make?

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cyanrarroll t1_j2e94xr wrote

This is fundamentally incorrect for taxes in the US. The IRS only cares (on a very simple level) about your earnings minus your expenses only for the specific financial year. A budget is only for internal use and providing information to investors. The IRS doesn't care that my lemonade stand was budgeted to profit $50 million, if I only profit 10 cents then that's all I get taxed for

Edit: responded to wrong comment but the info is still relevant

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Potato_Octopi t1_j2eashg wrote

Yes, but spending $100 to save $20 in taxes still nets you down $80.

That said, sure, if you're having a good year letting everyone spend every dollar in their budget makes sense. You'd reduce taxable income and leave some meat on the bone for next year in case budgets need to be slashed.

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cyanrarroll t1_j2ebwaf wrote

If you believe that the tools, equipment, and people you need next year will be cheaper, then saving money makes sense. But as things are consistently getting more expensive with inflation, it has almost always made sense to keep employees well paid and lots of equipment ready in order to turn money (always losing value) into other assets like people, tools, and land (typically gaining value) while also reducing taxes paid.

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Potato_Octopi t1_j2egrn6 wrote

It's more of a matter of if the thing is really needed or just a 'nice to have' while budget dollars are still available.

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angrybird7677 OP t1_j2dr94j wrote

I don't think so.... How can unspent dollar from budgeting be treated as this year's profits? Profit is the amount gained from gross revenue less expenses. If I did not sell an item, how can the saved amount from expenditure be treated as profit? And doesn't this budgeted fund come from previous years earnings? So those would have been taxed before previously. If they taxed it again wouldn't it be double taxing?

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cyanrarroll t1_j2ea5en wrote

A budget is arbitrary. We aren't talking about less goods sold in this situation, but adjusting expenses. If we can raise expenses we lower profits. Lower profits are lower taxes.

The previous years earnings are not double taxed, they are capital to use on expenses for the next year. The IRS only cares about the changes in assets from beginning of year to end of year

Edit: additionally, a project started but not completed, such as building and selling a house, or individual good sales, can be delayed until the next financial year if it is not sold or the project is completed.

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stiveooo t1_j2dwoyc wrote

you are right, the budget comes from prev year so it was already taxed, so saving money is good, thats why the stock goes up when a company decides to fire people=saving money.

But the company wants to save money but the departments want to spend it all so they dont receive less next year.

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FireWireBestWire t1_j2e58wo wrote

The budget is derived from the previous year, but the money itself is not. It's not like they set up a savings account that ended on Dec 31 that they begin drawing from on Jan 1. Tracking cash flow is a job, and it goes from month to month and week to week. And business expenses count against your income in the current fiscal year, not the previous. Depreciation is also a thing, and it's why certain items would be paid for from different funds.

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