You are paying too much income tax - and it's nobody's fault but your own! You do not have to wait for Congress to pass a tax cut bill. You can enact your own personal tax cut with careful tax planning.
Here is some tax planning basics:
* The difference between tax avoidance and tax evasion is $10,000 and five years in prison! Tax avoidance is the lawful and ethical use of accepted procedures to reduce your tax liability. Tax evasion is a willful misrepresentation or concealment of information. Despite growing public acceptance of cheating on tax returns, reckless tax evasion is a very dangerous matter. There are many legal ways to reduce your tax liability - too many to risk your future with tax fraud.
* There exist many situations where a taxpayer has a choice of accomplishing the same end by more than one method. The smart tax planner approaches each personal and business transaction with a view towards reducing taxes by analyzing how and when to conduct the transaction to get the most tax advantages.
* The first criteria for evaluating any transaction, strategy or technique should always be financial. Taxes are second.
Many, many years ago, when I was still an "apprentice" tax preparer, one of my mentor's clients came in and proudly announced that his employer had offered to reimburse him for job-related mileage, but he turned it down because then he would not be able to deduct business travel on his Form 1040 (back then it was deductible in full "above-the-line" as an Adjustment to Income).
My mentor avoided the temptation to tell the client that he was a complete idiot, and attempted to explain, with great patience and tact, that taxes are only pennies on the dollar, and it is much "more better" for someone to give you $1.00 tax free than it is to be able to save 30 cents by claiming a tax deduction. Similarly, there is no benefit in spending $1.00 needlessly to save 30 cents in taxes. You have not saved 30 cents - you have lost 70 cents!
* Tax planning is a year-round process, and must incorporate short and long-term considerations. While handling a transaction in one way may produce a greater short-term tax savings, it may be more costly in the long run.
* The application of any tax planning technique or strategy is dependent on the special "facts and circumstances" of each particular situation. One man's tax savings may result in another man's overpayment. You must evaluate each technique or strategy considered in the context of our own individual situation.
copyright (c) 2006 by Robert D Flach LLC
Robert D Flach is a tax professional with 34 tax seasons of experience preparing 1040s for individuals in all walks of life. He writes and publishes the free monthly online newsletter STUFF AND SUCH (http://rdftaxpro.tripod.com/stuffandsuch) and several other websites, as well as several print newsletters and reports on tax planning and preparation. For more information on his websites go to http://rdftaxpro.tripod.com/websites