What Does It Take To Pay Zero Taxes?
How many times have you heard someone say, "I don't pay any
taxes. My accountant takes real good care of me . . . I haven't
paid a dime in taxes in years."
Does that outrageous statement sound familiar?
Maybe it's your brother-in-law, or a fellow Soccer Mom, or a
co-worker at the office.
And so you think to yourself, "What am I doing wrong? How come
I'm paying taxes and so-and-so says he/she pays nothing? How do
they do it!"
Is it really possible to pay "zero taxes"?
For purposes of this article, let's give your "no-tax" friend or
relative a name. Let's call him "Charlie" (or if he is a she,
just think "Charlene").
OK, what is Charlie up to? What's his secret?
Charlie has no secret. He's not doing anything that you should
be doing. Do not be envious of Charlie, and here's why . . .
I can think of at least five reasons you should ignore whatever
Charlie says about his "no-tax" situation.
REASON #1: Charlie is a liar. Every family has one, so don't
feel bad. Let's face it, some people just like to indulge in
fabrications to make themselves feel good. Charlie is telling
you a big fat lie because Charlie has "issues." 'Nuff said?
REASON #2: Charlie is pond scum. OK, hear me out on this one. I
don't mean to offend you if Charlie is a close and dear
relative, or your best friend, but I'm going to give it to you
straight: Charlie cheats on his tax return, and he cheats big
time. There are plenty of folks out there like Charlie. He's one
of the reasons that you and I pay so much in taxes -- he doesn't
report all his income, and he deducts bogus expenses by the
thousands.
He and his accountant may even be in cahoots on this. Charlie
brings in his records and his accountant crunches the numbers,
then calls Charlie and says, "You owe $5,000." So Charlie
rummages around in his files and somehow manages to come up with
another batch of expenses that miraculously reduce his balance
due to zero. It's like magic!
End result: Charlie's tax return is a big lie.
Charlie is a thief. Charlie should be put in jail for the tens
of thousands in taxes he has illegally withheld from the
government over the years.
REASON #3: Charlie is stupid. Again, I'm sorry if I'm being too
hard on Charlie. But some people are so clueless about taxes
that if they have no balance due on their return, or if they are
getting a refund, they mistakenly believe they didn't pay any
tax that year.
And believe it or not, this is actually a very common
misconception that thousands of people cling to. Ah, to be so
blissfully ignorant!
I hope you are not so naive to think that the "bottom line" on
your tax return tells the whole story about your tax liability.
It doesn't.
REASON #4: Charlie is broke. Charlie may actually pay zero taxes
because --are you ready for this one? -- Charlie doesn't make
any money!
Charlie owns a small business or works full-time at his
self-employment activity, and Charlie may rake in hundreds of
thousands in income from sales of his product or service -- but
Charlie's business spends more than it brings in, and Charlie's
business has a loss every year.
So Charlie doesn't really have a tax problem. Instead Charlie
has any number of other problems. He has a marketing problem, or
a management problem, or a personnel problem. Charlie's business
is failing, and paying zero taxes is just a symptom of a
business that will eventually close.
REASON #5: Charlie is just scraping by. Charlie's business may
not be losing money every year, but it's not really making much
either. He has a small profit -- enough to keep him busy. His
business may even "look" profitable, but it's really the classic
shoestring operation.
So now, I ask you, do you really want to pay zero taxes? People
who don't pay taxes are usually in one of these five categories:
Chronic Liars, Pond Scum, Stupid, Broke, or Just Scraping By.
The purpose of business is to be profitable.
The unavoidable result of a profitable business is taxes. And
yes, you should do everything legally possible to reduce those
taxes. But if you are going to be successful, you are going to
pay some taxes.
When it comes to taxes, stay away from Charlie.