So you hate taxes? Well you shouldn't! The first major complaint we will deal with is the following:
"The wealthy and powerful have tons of money, but pay nothing in taxes."
Our response to this concern is no, they DO pay taxes, however, as a percent of income it depends on which tax loopholes they utilize. Most common among the uber-wealthy is keeping their money invested and only paying Capital Gains taxes. This same strategy is used by some of the wealthiest individuals in the world, as in billionaire investors. It is essentially paying yourself through dividends on investments to qualify for 15% taxation and only taking a small salary on top of those dividends which is usually taxed between 15% and 28%.
Another example is a wealthy individual who will tie up most of their cash in real estate investments. The benefit of this is the ability to deduct more expenses, mainly interest and property taxes on these investments. Another perfectly legal strategy.
Where either of these strategies becomes an issue is when the money is being invested off-shore in tax havens whereby there is no taxation. Until recently this was perfectly legal utilizing the proper asset management services, however, only time will tell if the government actually cracks down on this. The businesses and individuals who utilize this strategy strongly believe that consumption should be taxed more than production and as such try to keep their rewards of production, their profits, in a tax-free account.
Many of these strategies can be utilized by even low or middle income individuals. First off, most low income individuals end up paying nothing in as far as taxes and receive refunds thanks to credits that they qualify for. Secondly, middle income individuals have plenty of incentives, one of which is the "Saver's Credit" whereby you not only get tax deferral for certain retirement investments, but you also qualify for an additional tax credit for saving for a rainy day.
Even better is you don't need to have tons of money to start your own business. It can be anything from home day-care for friends and neighbors or making some money off of your handy work. For lower income individuals income from such activities can actually qualify you for a higher refund, thus your production gets rewarded. This is why we are astounded by the number of low-income individuals who will not allow their relative to claim child-care expenses for fear of taxation, when in reality, it benefits both individuals.
So as you see, the wealthy aren't lucky, they're just smart when it comes to taxes. Using a few of their tactics will help you receive the same benefits. For advice on how to use the tax laws to your benefit, please contact one of our Tax Patriots who can help you utilize tax strategies of the wealthy, even if you work a minimum wage job.
This is just the first reason why we love taxes when you probably hate them. Stay tuned for Part 2...
Clint Masser
Licensed Tax Patriot & Director of Marketing
Jefferson Franklin Tax Services
Goodyear, AZ
Working on tax returns since 2006, he is currently a licensed tax professional in the process of studying for the Enrolled Agent exam. All of his work has been performed under the guidance of his father, a CPA/Enrolled Agent with over 30 years of experience who has provided tax preparation services and tax strategies for everyone from minimum wage employees to multi-millionaire business owners.
0 comments:
Post a Comment