Houston, we have a problem!
If you’ve ever asked yourself “I wonder if I’m paying too much tax”, the answer is likely a resounding “YES”.
Did you know that American taxpayers pay more tax than they need to – to the tune of over $1Billion dollars per year? You read that right. $1 BILLION dollars paid in taxes that didn’t need to be. This is according to the IRS who, let’s be real, probably is underestimating that number by a lot!
If you’re anything like the majority of the clients that I work with, you probably can identify with the following statements and questions:
“I want to follow the tax laws but I feel like I’m paying way too much!”
“I wish there was a way to pay less on my taxes every year.”
“Why do the uber wealthy pay smaller percentages of taxes than the less well-to-do?”
You probably also have a certain amount of fear, maybe even terror, of the IRS and other taxing authorities, especially after the news broke last year that the IRS is bringing in 87,000 new agents. You’d almost rather just send in your fat checks than bring their ire down on you.
Taxes can be stressful, scary, and downright disheartening.
You work hard for your money but it seems to be slipping right through your fingers every time you send a check to Uncle Sam. Like many business owners, you may be paying the same in taxes as you do for all of your other business expenses – combined!
93% of small business owners are overpaying in taxes. They don’t have the sophisticated teams of tax planners working for them around the clock – looking for ways to shield their income from tax liability, new deductions that they may be eligible for, structuring their entities in the most favorable way, and generally taking advantage of the legal tax breaks, deductions and loopholes that the IRS code provides.
The burden of paying taxes is a heavy one indeed. As a small business owner you have set out on a entrepreneurial journey because you have a certain marketable skill, passion, or product. You got into business to do that – not hunt down every tax loophole that might apply to you!
But there’s another layer to the problem. Many (dare I say, most) tax professionals are not skilled in looking for ways for you to strategically save money on taxes. They are great at reporting the history you provide to them – telling the IRS and state agencies what happened last year. But they rarely are looking ahead to help their clients save money next year.
(To be honest, many tax professionals are just trying to keep their heads above water with all the tax changes that happen every year in addition to ever increasing workloads and declining numbers of industry professionals. So, be kind to your tax professional. But also, don’t let them not help you plan your future. This is your life and your money and you deserve to be represented well.)
As I’ve brought in new clients over the years and listened to their stories, the fear, stress and overwhelm is almost palpable in every conversation. Some wonder if they should even have a business at all because it seems to cost them so much in taxes. Many are confused and feel like something is missing but have no idea what that is. Others are frustrated by being told that there’s either nothing that can be done to reduce their tax bills or that the only thing available is to go buy equipment at the end of the year that they don’t even really need. Everyone can identify what they’d rather spend their money on than taxes!
Imagine for a moment what it would feel like to have a smaller tax bill next year than you did this year. What would you do with the extra money? Vacation? Reinvest into your business? Expansion? Down payment on a house? Fund your retirement? The possibilities are endless!
Side note: Now that you know that many Americans are overpaying in taxes, do you start to wonder what the federal government might be doing with all that extra cash they get? Does it go to fund the research studies on the mating habits of South African Ground Squirrels? Or maybe it went toward the $416,000 dollars spent to maintain a self-cleaning toilet in Washington DC (a toilet that wasn’t even in working order for 2 years!)? Wherever it’s being spent, there’s one thing that I believe with all my heart – you would spend it better!
You see, there’s this thing that happens when spending money – the further away from you your dollars get, the less efficiently they are spent. The three levels of spending are:
- To spend your own money on services you’ll use – most efficient
- Someone else spending your money on services that they will use – less efficient
- Someone else spending your money on services for others (not you or them) – least efficient
The government is the epitome of spending other people’s money and they have proven to be inefficient and lackluster in their results!
We live in a system that requires timely paying of taxes. Whether you believe in the Constitutionality of income taxes or not, the raw truth of the matter is that if you don’t pay your taxes, the long arm of the Federal Government will come knocking at some point. You can’t afford to fight them, but you can (and should!) keep every dollar in your own pocket that you legitimately can. You should not be part of the 93% who overpay their taxes or contribute to the $1Billion dollars of inflated tax bills!
It's a new day and you too can take advantage of the staggering amount of strategies, deductions, credits, loopholes and structuring in order to send in the least amount of taxes possible.
My next article will cover the solution to this great American problem.
Tell me in the comments: Do you think you're one of the taxpayers overpaying? Do you agree with the three levels of spending? Is your tax professional helping you plan strategically?
