Why Millionaires Never Prepare Their Own Tax Returns
You realize just how serious the problem of taxes is. You pay a ton of money to Uncle Sam, and you don’t like it. In fact, whenever you think about it, you get so mad that you end up "all lathered up and nowhere to go."
If you accept the fact that you pay way too much tax, and if paying taxes makes you so upset, then why haven’t you done anything about it? Why was your tax bill so high last year?
You paid too much tax last year (and the year before that, and the year before that . . .) because you have probably been an innocent victim of many popular myths about taxes. Misconceptions, misinterpretations, mis-information. Just a lot of plain old "untruths" are floating around out there.
Here they are. Get rid of them or you’ll be stuck paying too much tax forever!Tax Myth #1: I don’t make enough money to worry about reducing my taxes.
Nothing could be further from the truth. People at all levels of income can pay less tax. Tax reduction strategies are not just for the rich and famous. No matter how much money you make, you can pay less tax than you currently pay.
And here’s another important point: If you own a business or are self-employed, and your business has a loss, you can use that loss to offset other sources of income, such as your wages from a "regular" job, your spouse’s wages, investment income, rental income, other business income.
So if you are able to increase your deductions (which I’ll be talking about later in this report) so much that you end up with a business loss, that’s OK (at least from a tax standpoint).
In fact, if your business loss is so great that it completely offsets all your other income, so that you end with zero taxable income, then you could conceivably have zero tax to pay for that year!
And if your business loss for one year is so great that it more than offsets all your other income in the current year, you can take advantage of a special rule that lets you: a) Carry back that excess loss to the 2 prior years, thereby entitling you to a refund of taxes you already paid for either (or both) of those 2 prior years; and/or b) Carry forward that excess loss to the next 20 future years, so that any income you earn in the future will be reduced by that excess loss.
Tax Myth #2: Tax reduction strategies are too complicated for me to use.Again, total and complete hogwash. There are plenty of ways for you, the average American, to lower your taxes. Tax reduction is not just for the wealthy who can afford high-priced attorneys who finagle their way out of paying taxes with sophisticated tax-avoidance schemes, you know, like off-shore trusts and foreign bank accounts.
The average Small Business Owner has plenty of tax reduction strategies at his/her disposal. You just have to know what they are and how to use them (more on that later).
Tax Myth #3: "I had my return prepared by an Accountant, so I know I paid the right amount of taxes."There are thousands of excellent, hard-working accountants out there who do a great job of preparing millions of tax returns every year. And if you use a tax professional, maybe your accountant has done everything possible to reduce your taxes to the legal minimum.
Based on my own experience, however, I’m convinced that many taxpayers who use professional tax preparers are overpaying their taxes, sometimes by literally thousands of dollars each year!
Why is that? Well, there are many reasons. The most obvious one is this: Many professional tax preparers are just that: tax preparers and tax preparers only. A good tax preparer may know how to prepare a tax return in his/her sleep. He knows the forms backwards and forwards. He knows what numbers go on which form perfectly.
But that’s it. That’s all he/she knows.A good tax preparer is not necessarily knowledgeable in tax reduction strategies. There’s a big difference between a good tax preparer and a savvy tax reduction specialist.
I frequently get new clients who are looking for more than good tax preparation. They are looking for good tax planning and good tax minimizing information. They want an accountant who doesn’t just "do the returns", send out a bill and say "Next, please."
Tax Myth #4: "My tax situation is OK because my ___________________ (fill in the blank with a family member or other "good friend") takes care of my taxes."
There are various versions of this myth. Do any of these sound familiar?"My brother-in-law takes care of my taxes." "My uncle takes care of my taxes."
"My college buddy takes care of my taxes."
And of course, the same problem exists with Myth #4 as Myth #3. Even when someone you know and trust does your returns, how do you know that this person is not only a good tax preparer but also a good tax reduction specialist?
And often, many of these family members or "buddies" are not even professional tax preparers. This person just happens to be "The Family Accountant", so to speak. Just like every family has one person who knows a lot (or acts like he knows a lot) about cars (or mutual funds, or carpet cleaning, or whatever), many families have someone who "knows enough to be dangerous" with regard to taxes.
Your "Family Accountant" probably loves doing his own return, so why not have him do yours, too?And even if your "Family Accountant" is a professional tax preparer, he’s probably not charging you for the return. He’s doing you a favor. He prepares your return; you change his oil.
My first reaction to this kind of situation (when someone is getting his/her return prepared for free) is this: You get what you pay for! When a family member does your return "for free", how much attention can he give to your need for tax reduction strategies. Probably very little.
Tax Myth #5: "My tax situation is OK because I prepare my own returns." If this statement applies to you, then perhaps you are a "do-it-yourself-er".
Money is tight and you are used to doing things yourself anyway, so why not save a
couple hundred bucks each year and do your own returns?
So you’ve spend countless hours over the years pouring over the forms and instructions, trying to figure out how to do the returns. And you’ve done OK. No letters from the IRS, no audits. Hey, pat yourself on the back!
And now that tax preparation software is so readily available and affordable, doing your own return is a breeze! Just key in a few numbers here and there, push the print button, and presto, you’ve got your return done in record time! And now you can even e-file your return with your own computer.
Have you ever heard of the book, "The Millionaire Next Door" (by Thomas J. Stanley and William D. Danko). It’s a great book; I highly recommend it. This book describes the common characteristics of millionaires in our country. Do you know what three of the most common characteristics of millionaires are:
#1: Millionaires make their millions by owning their own business.For you, that’s good news, because you are a Business Owner or Self-Employed Person. Millionaires rarely become millionaires by working for someone else. If you aspire to becoming a millionaire, your chances are much greater if you work for yourself.
Here’s an amazing statistic: Self-employed people make up less than 20 percent of the workers in America, but self-employed people account for two-thirds of the millionaires in America!
#2: Millionaires become millionaires by hard-work and frugality rather than inheritance.Now here’s a revelation: 80% of all millionaires are "first-generation" millionaires. That means that they did not become wealthy because they were born into the right family. If you line up 10 millionaires, only 2 of them inherited their wealth; the other 8 created their wealth from scratch. The most common type of millionaire in America is the self-made millionaire.
#3: Millionaires became millionaires by minimizing their taxes and getting their tax & other financial affairs "in order."For you, more good news, because you wouldn’t be reading this report right now if you weren’t sincerely eager to pay less tax. Here’s a great statement right from "The Millionaire Next Door": Millionaires and those who will likely become affluent in the future adhere to an important rule: To build wealth, minimize your taxable income.
But now comes the "Million Dollar Question": How do you think millionaires get their tax affairs in order? By doing their own tax return? Of course not! Millionaires NEVER do their own tax returns! They have more productive things to do with their time.
Instead, what millionaires do is spend thousands of dollars each year on tax planning and tax reduction strategies.Whether you are a millionaire or not, you can certainly start acting like one!