Taxes: How To Dramatically Reduce Your Taxes With One Simple Step

by Steven W. Allen - Date: 2007-01-25 - Word Count: 1010 Share This!

How to Make It, Keep It, Protect It.

Did you know the federal government may keep up to 65.9% of every W2 check?

It's called withholding tax. What you never see you may never really miss. If you had to pay that same amount in a lump-sum for taxes on tax day each year, you might personally lead the irate crowd in another Boston Tea Party.

There is a way to dramatically reduce your taxes and give yourself a raise in one easy step.

Its an interesting anomaly.

If you are the average W2 employee you know that you make a certain dollar amount in wages each year.

On the other hand, you also know what your weekly, bi-weekly, or monthly take home pay will be at each pay period.

What you do not often consider is that these two amounts do not reconcile.

You see, you are used to getting your paycheck, and you know that it will cover your budgeted expenses, and leave a little for savings, for unexpected expenses, for credit card bills, or sometimes even for fun.

Witholding Total Disguised

You did not really carefully notice that huge amount withheld from your paycheck in the form of tax withholding, did you?

The government learned years ago that taxpayers don't squeal when a little bit of tax is withheld from a paycheck, and is sent to Uncle Sam each payday.

Its so painless, you hardly even notice it.

You are just happy to give Uncle Sam an interest free loan of your hard-earned money, and then receive a wonderful refund of your overpayment after tax day.

If you had to pay that same amount in a lump-sum for taxes on tax day each year, you might personally lead the irate crowd in another Boston Tea Party.

Its kind of like that "frog in the bucket of hot water" syndrome.

If you should put a frog into a bucket of hot water, he will immediately jump out and save himself. However, if you put that same frog into a bucket of luke-warm water and then slowly heat it up, the frog will endure it until he is toast.

Two Types of Taxpayers

Many have now learned that there are actually two types of taxpayers.

A Supreme Court Justice with the befitting name of Learned Hand, made an interesting statement. He said, "There are two income tax systems in this country; one for the educated and one for the uneducated."

The largest mass of tax-payers are W-2 wage earners (who unwittingly choose the tax system for the uneducated).

They get their check each week, pay their bills, and sometimes even save a little, all without complaining about the onerous tax being withheld.

They spend money on transportation to their job, ride the bus, buy a car and continually fill the gas tank, all with after tax-money.

They leave their children in day-care, they buy their lunches, they buy their clothing, they pay for their own vacations, all with that after-tax money.

Money that comes to you after the taxes have been withheld. So, here's how it goes: You earn your money, you pay your taxes, and you get to spend whatever is left.

The current federal income tax rates begin at 15% and increase to 39.6%. Then the states add an additional 5 - 10% and some cities add another 3%.

On top of this you are burdened down by the invisible heavy load of the FICA tax, or Social Security tax.

Invisible Heavy Load

Why do I say that its an invisible heavy load?

Let me explain. The Social Security tax is broken down into two elements. The first element of 7.65% is paid directly by you. Its taken directly from your paycheck before you even see it.

In addition to that, your employer must "match" your contribution of 7.65%. That's another 7.65% that you employer would gladly have paid to you instead.

So let's add this up. A 39.6% federal income tax, plus 10% state income tax, plus another 3% for your city, and a whopping 15.3% for social security.

That makes a grand total of 67.9%!!!

And that does not include sales tax, property tax, luxury tax, or excise tax.

Even if you don't pay the maximum, that's a whopping large amount taken out of your hard earned money before you even see it.

Can you understand how hard it is to get ahead if you are paying roughly 1/2 of your earnings in taxes?

Would you be interested in learning how to reclaim your money?

Wouldn't this be just as good as getting a 50% raise?

Let me tell you about the tax system for the educated. Its as simple as this: You earn your money, you pay your bills, THEN you pay your taxes.

The Simple Step

So what is the one simple step to dramatically reduce your taxes?

It is this: Start your own business, or if you already have your own business, then position it correctly to take advantage of the tax system.

The educated have taken advantage of the tax system. In order to do this, they have started their own business and have seen a gargantuan reduction in their tax load.

You must start your own business.

The amount of allowed deductions for business owners is HUGE.

And its not just the major corporations that take advantage of this.

Its also the small business owner.

No wonder there has been an estimated 20 fold increase in the number of new small businesses started in the last 10 years!

If you don't yet know what kind of business to start, take a look at your own interests, passions, and hobbies. How could you turn one of these into a business? An interest, passion or hobby is a excellent place to start.

So, start your own business now! Or, if you already have a business, learn to take advantage of the 300+ tax deductions available to you if you have your business set up properly.

Learning about starting and positioning your business entity is extremely important to building wealth. Whether you are starting from scratch or you need to position your business entity for maximum tax savings, the education will be invaluable.

Take advantage of the tax system for the educated.

Then you can Make it. Keep it. Protect it.

Related Tags: pay, wages, taxes, reduce, save

Visit for tips and tools on Wealth Preservation. You can also subscribe to his monthly newsletter Secrets to Wealth Preservation. Steven W. Allen has been an Estate Planning attorney for over 30 years. He has authored four books including the soon to be published You Can't Take It With You...So How Will You Leave It Behind?. Download a free chapter at

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