How do you defer payroll tax?

[ProfessorGAC]

17. Yes, I Explained That

Big companies manage cash with insurance company lines of credit.

Let's do an example:
Your company has 1,000 people. You do $1billion in sales, and all your expenses are $840 million.
That means $70 million goes out each month.

Your accounts receivables don't line up with the fact that 30% of total expenses hit on the 15th & last of every month. (Payroll). Neither do your accounts payable.

So, to maintain your cash & external investment position that analysts like, you come to my giant insurance company.
You borrow $10 million for 6 days, each month.
Once all your receivables hit, you give me the money back. No interest, but a 1/8th percent fee.
It's a good deal for me, because the risk is near zero, and I can lend out the same $10 million 5 times each month.

Now, instead of you sending that 9.5-10% to the government, you use it as cash flow. You don't come to me for those months. After a month you've got enough to just bank the excess.

At the end of the year, you send the excess in the bank to SocSec & HHS. Over that time, you didn't pay me that 1/8th percent 12 times. You make a free 1.5% of $10 million, or $150,000 for essentially doing nothing. You get to keep the fees you were paying me, without tampering with your overall cash position.

So, yes they send the money back. But, they make a profit on it. My scenario is effectively a $105,000 tax cut.

In many cases, the numbers are larger.