Taxes are one of life's certainties, and no one likes giving up some of their hard-earned cash. With proper tax preparation, however, it's possible to pay less in taxes or receive a larger refund at the end of the year. While paying taxes is inevitable, there are several ways to diminish your tax burden and end each year with more money. Proper tax planning makes it easier to build your personal finances and afford the things you want.
Additionally, by anticipating taxes when you create your financial plan, it's possible to significantly boost how much money you will have in retirement. Many elements of tax planning are quite simple, but it's always worth speaking with a professional who can offer additional guidance on how to successfully work within the tax system.
There are many people spend hours fighting over a $100 overcharge by their credit card company yet spend little or no time learning how to reduce their tax bite by thousands of dollars by hiring an expert. We often see lots of people that we can guarantee they can save several thousands of dollars annually. We used to wonder why most people don’t understand the importance of tax strategies. As a result of some research, we came to realize that there were several myths that were impoverishing a great majority of people in this country. They are as follows:
Myth 1: I didn’t make a lot of money this year, so I don’t need to know about tax planning. This is false. If you’re a consultant or have a small or home-based business, you have access to the last great tax shelter left in this country.
Myth 2: My home-based/small business must have a profit at least three out of five consecutive years. Hundreds of people, including accountants, have said this to their clients. This is false. Congress simply wants you to run your business like a business and not like a hobby. If you do, you can have losses for many years.
Myth 3: My accountant takes care of my taxes. The tax savings your accountant can find for you after December 31 are small compared with what you can save if you implement a tax plan before December 31.
Myth 4: Tax planning won’t save me that much money anyway. Taxes are number one expense in the country. If you add up your federal, state, and Social Security taxes, you may find that what you pay in taxes rivals or exceeds what you pay for food, lodging or mortgage payments, transportation, and clothing combined.
Small businesses generate most of the job growth in the U.S. A lot of times Congress passes laws in favor of small businesses because they know that small business is the economic engine behind our economy. In fact, state that have low taxes on business tend to be more economically successful because they attract business and jobs. The key is to take advantage of these good tax laws.
Thus, the very important point is, the earlier you have your financial and tax plan in place, the faster you can build wealth.
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