4 Simple Tax Saving Tips

Here are four simple steps that any small business owner can take to lower your tax bill this year.

STEP #1: Understand How Serious Your Tax Problem Is

Are you aware of just how much in taxes you are paying?

Here’s how much the average family spends on various consumer categories — as a percentage of income.

You must realize that it’s not how much you spend on taxes that is important; it’s how much you spend on taxes compared to all other major spending categories.

Consumer Spending:

How Do You Spend Your Hard-Earned Dollars?

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%

So, if you think you are being “nailed” by the government, you are right. You spend more on taxes than any other category of consumer spending.

You spend more on taxes than on food, clothing, and housing combined.

And it’s not just federal income taxes we’re talking about here. There’s also state and local income tax, payroll tax (Social Security and Medicare), sales tax, excise tax, and property tax.

Maybe you already knew “intuitively” that your tax bill is outrageously high. If not, the picture I’ve just painted should thoroughly convince you that you pay too much tax, period.

STEP #2: Get The Right Attitude About Your Taxes

What do I mean by this? Well, you must have a confident “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’m paying way too much tax, and I don’t like it. And it’s about time I did something about it — TODAY!”

After reading those numbers above, how do you feel? Doesn’t that make you furious? If so, great, then you are on your way to solving this problem. The old cliche is true: “You can’t solve a problem until you admit you have one.”)

Suppose 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’m sorry, but you might as well stop reading this article right now. You will continue to pay too much tax because you don’t care about it.

To reduce your taxes, you must be committed to the idea of paying fewer taxes.

Before today is over, get last year’s income tax return (Form 1040) and see how much tax you paid.

When you have Form 1040 in front of you, do you realize where the most important number is on this form?

No, it’s not Line 71 — the refund amount.

No, it’s not Line 74 — the due balance amount.

The most important number on Form 1040 is Line 62.

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.

What matters most is your total tax liability for the year. That’s the “magic number” that should make your blood boil and your heartbeat so fast that you can hardly stand it.

Now that I’ve got you all “riled up” about paying so much tax let’s move on to Step #3.

STEP #3: Realize That Reducing Taxes Is The Easiest Path Possible To Creating Wealth

Consider this simple fact: Reducing your taxes by just $4,000 per year is the easiest way to become a millionaire.

Let me elaborate.

Let’s say you implement some new tax-saving strategies that reduce your taxes by $4,000 each year. Now, if 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 end up with $1,048,745.98 at the end 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’s money that you used to spend on taxes, part of the 32% of your income that goes to taxes each year.

In effect, it’s free money. It’s money that was always there — you didn’t realize it.

Is this a good deal or what? By simply reducing your taxes, the government will finance your million-dollar retirement.

And let’s say your tax situation is such that you save $2,000/year instead of $4,000/year. Same assumptions: you invest the $2,000 each year at 11.5% for 30 years. End result: $524,372.99. Not too shabby, eh?

So all you have to do is come up with the tax-saving strategies that will put $2,000 or $4,000 in your pocket every year, which brings us to Step #4.

STEP #4: Get Hold Of The Tax-Saving Strategies That Will Make You A Millionaire

It doesn’t take much information to save a bundle in taxes. It is true: just a little bit of tax knowledge goes a very long way.

Helpful tax information is freely available. On the Internet, at your local library, and through your local tax professional.

The question is: Are you willing to spend some time this year learning about effective tax strategies that can save you thousands of dollars?

Here’s a simple goal for yourself: Over the next ten weeks, set aside just an hour a week to read up on tax-reduction strategies. That’s all, just 10 hours.

Chances are you’ll find 2 or 3 strategies that reduce your tax bill by $1,000 this year.

So you spend 10 hours and, in effect, pay yourself an extra $1,000 for your time. Not an alarming hourly rate, eh?

Many times, that’s all it takes to pay less tax.