Here are 4 simple steps that any tiny business owner can take to lower his or her tax bill this year.
STEP #1: Understand How Serious Your Tax Issue Is.
Here’s how much the average relatives spends on various consumer categories — as a percentage of income.
Are you aware of how much in taxes you are paying?
You must recognize that it is not how much you spend on taxes that is important, it is how much you spend on taxes as compared to all other major categories of spending.
Taxes ———————- 32.0%
Housing ——————– 16.7%
Medical Care ————— 11.5%
Food ———————– 8.2%
Transportation ————- 7.9%
Recreation —————– 5.7%
Clothing ——————- 4.1%
Savings ——————– 1.4%
Other Miscellaneous ——– 12.5%
TOTAL ——————— 100.0%
How Do You Spend Your Hard-Earned Dollars?
In fact, you spend more on taxes than on food, clothing, and housing combined.
So, in case you think you are being “nailed” by the government, you are absolutely right. You spend more on taxes than any other section of consumer spending.
And it is not federal income taxes we are speaking about here. There is also state and local income tax, payroll tax (Social Security and Medicare), sales tax, excise tax and property tax.
Possibly you already knew “intuitively” that your tax bill is outrageously high. If not, the picture I have painted ought to thoroughly persuade you that you pay much tax, period.
STEP #2: Get The Right Attitude About Your Taxes.
What do I mean by this? Well, you must have a positive “mental attitude” toward this whole idea of paying taxes. I’ll get right to the point — you must have an attitude about taxes that says, “Enough is enough. I am paying way much tax and I don’t like it. And it is about time I did something about it — TODAY!”
In case you saw those numbers above and said, “Big deal. So I pay 32% in taxes. So what? So does everybody else in this country” — well, I am sorry, but you might as well cease reading this news story right now. You will continue to pay much tax because you don’t care about it.
After reading those numbers above, how do you feel? Doesn’t that make you enraged? If so, great, then you are on your way to solving this issue. The elderly cliche is true: (“You can not solve a controversy until you admit you have one.”)
Before today is over, go get last year’s personal income tax return (Form 1040) and look at how much tax you paid.
To reduce your taxes, you must be committed to the idea of paying less taxes.
When you have Form 1040 in front of you, do you recognize where the most important number is on this form?
No, it is not Line 71 — the refund amount.
No, it is not Line 74 — the balance due amount.
The most important number on Form 1040 is Line 62.
What matters most is: What was your total tax liability for the year. That is the “magic number” that ought to make your blood boil and your heart beat so fast that you can not stand it.
It says: This is your TOTAL TAX. That is how much federal income tax you paid for all of last year. When it comes to reducing your taxes, it doesn’t matter whether you got a refund or whether you had a balance due.
STEP #3: Recognize That Reducing Taxes Is The Simplest Path Feasible To Generating Wealth.
Now that I have got you all “riled up” about paying a lot tax, let’s move on to Step #3.
Let me elaborate.
Think about this easy fact: Reducing your taxes by $4,000 per year is the simplest way feasible to becoming a millionaire.
Let’s say you implement some new tax-saving strategies that reduce your taxes by $4,000 each year. Now, in case you take that $4,000 per year in tax savings and invest it over the next 30 years, assuming you earn 11.5% on your investment, you finish up with $1,048,745.98 at the finish of the 30 years.
And here’s the best part about this scenario: Where did you get the $4,000/year to invest? Well, you got it from money that would have gone to Uncle Sam. It is money that you used to spend on taxes, part of the 32% of your income that goes to taxes each year.
Is this a lovely deal or what? By basically reducing your taxes, the government will finance your million-dollar retirement.
In effect, it is free money. It is money that was always there — you didn’t recognize it.
And let’s say your tax situation is such that you save $2,000/year in lieu of $4,000/year. Same assumptions: you invest the $2,000 each year at 11.5% for 30 years. Outcome: $524,372.99. Not shabby, eh?
So all you need to do is come up with the tax-saving strategies that will put $2,000 or $4,000 in your pocket each and every year. Which brings us to Step #4.
STEP #4: Get Hold Of The Tax-Saving Strategies That Will Make You A Millionaire.
You know, it doesn’t take much information to save a bundle in taxes. It is true: a tiny little bit of tax knowledge goes a long way.
The query is: Are you willing to spend some time this year learning about effective tax strategies that can save you literally thousands of dollars?
Useful tax information is freely available. On the Net, at your local library, and through your local tax professional.
Chances are you’ll find 2 or 3 strategies that reduce your tax bill by $1,000 this year.
Here’s a simple aim to set for yourself: Over the next 10 weeks, set aside an hour a week to read up on tax-reduction strategies. That is all, 10 hours.
So you spend 10 hours and, in effect, pay yourself an additional $1,000 for your time. Not a bad every hour rate, eh?
Plenty of times, that is all it takes to pay less tax.