| Does Tax Season get you down?Here are 4 | | | | income tax you paid for all of last year. |
| simple steps that any small business owner | | | | When it comes to |
| can | | | | |
| | | | reducing your taxes, it doesn't matter |
| take to lower your tax bill this year.STEP | | | | whether you got a |
| #1: Understand How Serious Your Tax Problem | | | | |
| IsAre you aware of just how much in taxes you | | | | refund or whether you had a balance due.What |
| are paying?Here's how much the average family | | | | matters most is: What was your total tax |
| spends on various | | | | liability |
| | | | |
| consumer categories -- as a percentage of | | | | for the |
| income.You must realize that it's not how | | | | |
| much you spend on taxes | | | | year. That's the "magic number" that should |
| | | | just make your |
| that is important, it's how much you spend | | | | |
| on taxes as | | | | blood boil and your heart beat so fast that |
| | | | you can hardly |
| compared to all other major categories of | | | | |
| spending.Consumer Spending: | | | | stand it.Now that I've got you all "riled |
| | | | up" about paying so much |
| How Do You Spend Your Hard-Earned | | | | |
| Dollars?Taxes ---------------------- 32.0% | | | | tax, let's move on to Step #3.STEP #3: |
| | | | Realize That Reducing Taxes Is The Easiest |
| Housing -------------------- 16.7% | | | | Path |
| | | | |
| Medical Care --------------- 11.5% | | | | Possible To Creating WealthConsider this |
| | | | simple fact: Reducing your taxes by just |
| Food ----------------------- 8.2% | | | | |
| | | | $4,000 per year is the easiest way possible |
| Transportation ------------- 7.9% | | | | to becoming a |
| | | | |
| Recreation ----------------- 5.7% | | | | millionaire.Let me elaborate.Let's say you |
| | | | implement some new tax-saving strategies that |
| Clothing ------------------- 4.1% | | | | |
| | | | reduce your taxes by $4,000 each year. Now, |
| Savings -------------------- 1.4% | | | | if you take |
| | | | |
| Other Miscellaneous -------- 12.5% | | | | that $4,000 per year in tax savings and |
| | | | invest it over the |
| TOTAL --------------------- 100.0%So, if you | | | | |
| think you are being "nailed" by the | | | | next 30 years, assuming you earn 11.5% on |
| government, | | | | your investment, |
| | | | |
| you are absolutely right. You spend more on | | | | you end up with $1,048,745.98 at the end of |
| taxes than any | | | | the 30 years.And here's the best part about |
| | | | this scenario: Where did you |
| other category of consumer spending.In fact, | | | | |
| you spend more on taxes than on food, | | | | get the $4,000/year to invest? Well, you |
| clothing, and | | | | got it from money |
| | | | |
| housing combined.And it's not just federal | | | | that would have gone to Uncle Sam. It's |
| income taxes we're talking about | | | | money that you |
| | | | |
| here. There's also state and local income | | | | used to spend on taxes, part of the 32% of |
| tax, payroll tax | | | | your income |
| | | | |
| (Social Security and Medicare), sales tax, | | | | that goes |
| excise tax and | | | | |
| | | | to taxes each year.In effect, it's free |
| property tax.Maybe you already knew | | | | money. It's money that was always |
| "intuitively" that your tax bill is | | | | |
| | | | there -- you just didn't realize it.Is this |
| outrageously high. If not, the picture I've | | | | a good deal or what? By simply reducing your |
| just painted | | | | taxes, |
| | | | |
| should thoroughly convince you that you pay | | | | the government will finance your |
| too much tax, | | | | million-dollar retirement.And let's say your |
| | | | tax situation is such that you save |
| period.STEP #2: Get The Right Attitude About | | | | |
| Your TaxesWhat do I mean by this? Well, you | | | | $2,000/year instead of $4,000/year. Same |
| simply must have a | | | | assumptions: you |
| | | | |
| certain "mental attitude" toward this whole | | | | invest the $2,000 each year at 11.5% for 30 |
| idea of paying | | | | years. End |
| | | | |
| taxes. I'll get right to the point -- you | | | | result: $524,372.99. Not too shabby, eh?So |
| must have an | | | | all you have to do is come up with the |
| | | | tax-saving |
| attitude about taxes that says, "Enough is | | | | |
| enough. I'm | | | | strategies that will put $2,000 or $4,000 in |
| | | | your pocket |
| paying way too much tax and I don't like it. | | | | |
| And it's about | | | | each and every year. Which brings us to |
| | | | Step #4.STEP #4: Get Hold Of The Tax-Saving |
| time I did something about it -- | | | | Strategies That Will |
| TODAY!"After reading those numbers above, how | | | | |
| do you feel? Doesn't | | | | Make You A MillionaireYou know, it doesn't |
| | | | really take much information to save a |
| that just make you furious? If so, great, | | | | |
| then you are on | | | | bundle in taxes. It is true: just a little |
| | | | bit of tax |
| your way to solving this problem. The old | | | | |
| cliche is true: | | | | knowledge goes a very long way.Useful tax |
| | | | information is freely available. On the |
| "You can't solve a problem until you admit | | | | Internet, |
| you have one.")If you saw those numbers above | | | | |
| and said, "Big deal. So I | | | | at your local library, and through your |
| | | | local tax |
| pay 32% in taxes. So what? So does | | | | |
| everybody else in this | | | | professional.The question is: Are you |
| | | | willing to spend some time this |
| country" -- well, I'm sorry, but you might | | | | |
| as well just stop | | | | year learning about effective tax strategies |
| | | | that can save |
| reading this article right now. You will | | | | |
| continue to pay | | | | you literally thousands of dollars?Here's a |
| | | | simple goal to set for yourself: Over the |
| too much tax because you really don't care | | | | next 10 |
| about it.To reduce your taxes, you must be | | | | |
| committed to the idea | | | | weeks, set aside just an hour a week to read |
| | | | up on tax- |
| of paying less taxes.Before today is over, | | | | |
| go get last year's personal income tax | | | | reduction strategies. That's all, just 10 |
| | | | hours.Chances are you'll find 2 or 3 |
| return (Form 1040) and look at how much tax | | | | strategies that reduce your |
| you paid.When you have Form 1040 in front of | | | | |
| you, do you realize | | | | tax bill by $1,000 this year.So you spend 10 |
| | | | hours and, in effect, pay yourself an extra |
| where the most important number is on this | | | | |
| form?No, it's not Line 71 -- the refund | | | | $1,000 for your time. Not a bad hourly |
| amount.No, it's not Line 74 -- the balance | | | | rate, eh?Many times, that's all it takes to |
| due amount.The most important number on Form | | | | pay less tax.Wayne M. Davies is author of 3 |
| 1040 is Line 62.It says: This is your TOTAL | | | | tax-slashing eBooks for small |
| TAX. That is how much federal | | | | |
| | | | business owners and the self-employed. |