SAN JOSE (KPIX) — While many Bay Area residents may be paying more to the federal government this year, several big corporations based here – including Netflix, Salesforce and Chevron — aren’t paying a dime in federal income tax.
Scott Shaffer waited a few hours before the midnight deadline to mail his taxes Monday.
“I’m not going to pay them early if I’m going to be paying at all, so yeah, I waited until the last minute,” he said.
Like many others this year, Shaffer owes the federal government this year instead of getting a refund.
“I guess it was a shock,” he said. “I mean last year I got a refund, this year I’m paying back more than what I got refunded last year.”
But San Jose State University Assistant Professor of Tax Caroline Chen said there’s a reason why so many are surprised.
“At the end of the day they didn’t withhold enough,” Chen said. “The Tax Cuts and Jobs Act of 2017 really had a lot of changes to it to people like you and I, which most people may have not noticed.”
The Tax Cuts and Jobs Act took out fewer taxes every paycheck. But if you didn’t notice the slight bump in pay, then you likely didn’t change your withholding. Hence, many people like Shaffer owed more this year.
Meanwhile, several Fortune 500 companies, including Amazon, Netflix, Chevron and Salesforce are making headlines for paying paying zero in federal income tax.
But Professor Chen said the headlines aren’t entirely what they seem.
“It’s really hard to say and it’s complex, but at minimum they did get a tax break by of course just decreasing the corporate tax rate,” she said.
It’s true that companies experienced a 14 percent decrease in taxes under the act, but Professor Chen said the companies could also be benefiting from foreign tax credits and net operating losses that have carried over even as they make a profit.
“Those net operating losses are able to be carried forward and used to offset taxable income year after year up until they’re fully utilized,” Chen said.
Two of those corporations responded to KPIX requests for comment Monday night. A Netflix spokesperson told KPIX 5 in statement, “It is not accurate to say that we paid nothing in the U.S. in 2018.”
Meanwhile, Chevron also said in a statement, “Chevron complies with all applicable tax law.”
Professor Chen said the credits and tax incentives that the companies could be using to give them a zero in federal income tax are all legal.
As for individuals like Shaffer who owe taxes this year, Chen said it’s a good idea to look at your withholding and change it in time for next year.
“I don’t know anybody that is getting a refund,” Shaffer said.