4 Simple Steps To Reduce Your Taxes In 2006

4 Simple Steps To Reduce Your Taxes In 2006

Does Tax Season get you​ down?

Here are 4 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 as​ compared to​ all other major categories of​ spending.

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 absolutely right. you​ spend more on​ taxes than any other category of​ consumer spending.

In fact,​ 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​ simply must have a​ certain "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 just 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.")

If 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 just stop reading this article right now. you​ will continue to​ pay too much tax because you​ really don't care about it.

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

Before today is​ over,​ go get last year's personal income tax return (Form 1040) and look at​ 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​ balance due 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: What was your total tax liability for the​ year. That's the​ "magic number" that should just make your blood boil and your heart beat 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 possible to​ becoming 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​ just 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 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 really take much information to​ save a​ bundle in​ taxes. it​ is​ true: just a​ little bit of​ tax knowledge goes a​ very long way.

Useful 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​ literally thousands of​ dollars?

Here's a​ simple goal to​ set for yourself: Over the​ next 10 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 a​ bad hourly rate,​ eh?

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

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