There are four challenges to effective wealthbuilding. First is finding a viable way to make money. Second is actually making it. Third is knowing how to keep it. Fourth is actually keeping it. Ever keeping in mind that wealth and money are two very different things, we are compelled here to call wealth the controlling of assets (land and objects of value) in amounts big enough to generate additional assets. Most of us encounter money, on the other hand, not in amounts big enough to produce more money, but rather only in amounts just big enough to keep us from quitting jobs we work just hard enough at to keep from getting fired from. When these conditions prevail, wealthbuiding's nearly impossible.
But. Recalling that "with a lever long enough and a fulcrum fat enough, you can lift the weight of the world; we can say that with a plan well worked enough and persistence powerful enough, you can build the wealth you wish. Wise up though. We're now in the season that bumrushes most would-be weathbuilders. Yep friends, it's Tax Time. Now a tax is either "a contribution for the support of a government required of persons, groups, or businesses within the domain of that government." Or it's "a fee or due levied on the members of an organization to meet its expenses." (American Heritage; 1969)
The system of tiered taxes now in effect—where, ostensibly, the more you make, the more you pay—means we'll lose about about 15%–50% of our Gross Income annually. Once this happens, of course, our incomes become even more gross. We can unintentionally pay still more if the IRS doesn't properly enforce its own rules, or if we don't know enough about these to pay the least legally.
Amazingly, payors have not always been taxed so toughly. The current tax code was first structured by Congress in 1913—less than a good lifetime of 85 years ago. Before then, assessments started at 1% and featured a conceptualy "soak-the-rich" maximum rate of 6!! This upper limit was paid only by those who had an income equal to $20,000,000 and up today.!!!!!!!!! Importantly too, at its inception, a 10% tax was considered USURY and a 20% tax cap was considered CONFISCATORY. (Greene; 1981) Be very clear. Whatever you and I now pay in taxes is DESIGNED to keep us out of the ranks of the rich.
People have always responded to the tax payment "requirement" in three ways: Tax Evasion involves both aggressive revolts like those historic conflicts of "colonial New England" along with the passive non-payment that some say is increasing. Both responses are relatively rare events throughout history. More common—and more legal—are Tax Avoidance techniques which include everything from protests and petitions for reforms to the informed use of Tax Shelters. Most commonly, people respond to tax seasons with timely tax payments. While most U.S. courts view tax evastion as illegal, many people are surprised to hear that Tax Avoidance is legal and you can do this with or without a Tax Practitioner, who is someone you pay to help you reach your tax (paying?) goals
There are basically four types of practicioners: "TAX PREPARERS who work for storefront chains such as H & R Block an handle simple returns. If you are self-employed and invest regularly, a CERTIFIED PUBLIC ACCOUNTANT (CPA) or an ENROLLED AGENT may be more suitable. Make sure the CPA specialized in taxes; not all do. Enrolled agents have worked for the IRS five years or have passed a demanding two-day IRS test. CPA's and enrolled agents provide tax-planning advice as well as prepare tax returns. The final option is a TAX LAWYER whos services would be absolutely necessary when facing a divorce or dealing with a will that requires tax and legal advice." (Ross; 1993)
Always remember the basics. Most people are surprised to learn the "Reagan Revolution" resulted in a tax increase for many. "Tax Reform '86" reduced or eliminated all of the commonly used "tax shelters." Still, there are several very simple ways to minimize your taxes this year. First, keep good records, especially all of your reciepts. Your medical expenses, for example, are deductible once they exceed 7.5% of your Gross Income. Your membership and charity contributions MAY be deductible. Check your W-2 to make sure its accurate since finding an error might save you some.
Above all, fight hard to find a way to invest in your company's tax-deferred plan AND your own IRA. These can reduce your taxable income AND later create the conditions for wealth building where your money is actually generating new money.