The following quote by the 17th-century French finance minister, Jean Baptiste Colbert, very aptly sums up the subtle ways taxes are extracted from you:
The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest amount of hissing.
Why is it that your feathers are being plucked so extensively? Could it be that it’s because you have bought into a host of dangerous tax myths that can rob you of your wealth?
Let’s take a look at some of these myths:
Myth #1: A huge tax bill is inevitable and inescapable. This pernicious myth has evolved over the years due to the continual expansion of government, which has required more taxes from Americans to sustain its girth. Taxes have now become the largest expense for most people, exceeding what they pay for food, clothing, housing and transportation combined… combined! While many Americans grumble over the high cost of taxes, few seem to question what they can do about it. The truth of the matter is, believing this myth is forcing Americans to pay the IRS more money than even it requires by law because they don’t know any better.
Myth #2: A large and complex government is necessary. Through an attitude of “entitlement,” many Americans are unknowingly subjecting themselves to larger tax burdens. As we demand more services and greater benefits from government, we are beginning to sag under the weight of supporting such programs. Abandoning an attitude of entitlement and embracing self-reliance will go a long way to reducing overall tax burdens.
Myth #3: Questioning the system increases my chances of getting audited. This is absolutely untrue. If you believe this myth it’s only because you are not aware of all the “good” tax laws and are therefore living in fear of the IRS. Remaining in the dark about tax law and just paying what you think you have to pay, without learning what is really expected might seem like the “safe” path to take, but it’s actually a foolish one. By applying Money Mastery’s Principle 5: “Know the Rules,” you no longer need to cower in fear; knowing the rules changes everything because it puts you in control.
Myth #4: My accountant takes care of my taxes. This is the most pernicious tax myth of all. It is one of the worst wealth killers and makes more money for the IRS than anything else. Believing such a myth is like eating nothing but fatty fried foods, ignoring the symptoms of heart disease, and then going to your doctor and expecting him to make you well. Likewise, if you don’t know the rules for good “tax health,” you can’t go to your accountant and expect he or she to save you thousands of dollars in taxes at the end of the each year. If you don’t know what to tell your accountant by December 31, there is very little he or she can do for you. In addition, accountants usually err on the side of conservatism with regard to deductions in order to aviod the severe IRS penalties that they will incur if they wrongfully counsel their clients. This protects their pocketbook, but not usually yours. If you want to stop wasting money on excessive taxes, it is up to you to learn the rules and make sure your accountant is helping you take full advantage of them. Remember, your accountant is only as good as you are.
For more information about the “good” tax laws, refer to MONEY: What Financial “Experts” Will Never Tell You (Amazon.com).