My long and thrilling journey as a tax accountant began.
I interviewed with the senior tax manager the next day. He asked me the usual questions about my experience, education, and interests. And then he asked a really odd question. “Tom,” he said. “How good is your printing?”
I was taken a bit off-guard by this question. It turns out that they prepared a lot of their tax returns by hand. They printed them in pencil and then photocopied them for their files. He wanted to make sure my handwriting was legible so that their clients and the IRS wouldn’t be frustrated by not being able to make out the numbers on the tax returns. Fortunately, my handwriting was legible, because I had worked hard to learn good printing. He hired me on the spot.
That was in 1980. Since then, I have devoted my life to learning (and loving) the tax law. What I’ve discovered over the years is that the basic principles of the tax law are actually simple. So simple, in fact, that anybody can learn them, even Albert Einstein. (I’m convinced that Dr. Einstein wouldn’t have been so frustrated with the tax system if he had just had someone to teach him the basic principles). The principles are so simple that by the time you finish reading this book you will know every basic principle needed to permanently lower your taxes. And once you know the rules, you can live a lower-tax life, which I promise is a richer life in every way. In fact, you might even be able to legally reduce your taxes to zero and enjoy tax-free wealth.
| Understanding Taxes Doesn’t Mean Doing It Yourself | |
| 1. | You still need a good tax advisor who understands the details of the tax law. |
| 2. | A good tax advisor can help you create and implement sound tax strategies besides doing your tax returns. |
Taxes Are Fun—Really
Anyone who knows me knows that for me, taxes are fun. Yes, I did just say “fun.” I know how warped that may sound, but I love the tax law. And I firmly believe that everyone can find out just how fun, easy, and understandable taxes are with just a little basic information. Don’t believe me? Well, think about this. Have you ever received a tax refund? Do you remember how happy you were when you opened that letter and saw a beautiful check? That was fun, wasn’t it? In fact, did you ever notice that the word “refund” has “fun” right in the middle of it? Okay, corny joke, but you get the point.
This book is dedicated to helping get you a bigger tax refund. And we’re not just talking about a one-time deal. When you apply the principles taught in this book, you’ll get a nice refund every year. And who knows? You may even reduce your taxes to zero and enjoy the freedom that comes with tax-free wealth.
I guarantee your path to tax-free wealth is easier, simpler, and more fun than you can imagine. Think of this book as a guide to a freer financial life, a life where you get to keep more of your hard-earned money right where it belongs—in your pocket, and not the government’s. Let’s get started.
| CHAPTER 2: KEY POINTS | |
| 1. | It’s time to take action on reducing your taxes. Don’t be the average person paying 30 to 50 percent or more of your hard-earned income through income, sales, value-added, payroll, estate, or property taxes—start by learning the basics of the tax law. |
| 2. | Become part of the privileged class of taxpayers by learning how the tax law can work for you and how you can easily pay 10 to 40 percent less in taxes. |
Tax Strategy #2 – Invest Where you Travel
As you will learn in Chapter 6, almost any expense can be deductible. It sounds funny to say, but one of my favorite expenses is travel. I love to travel and meet new people and experience new cultures. Sometimes, I just want to get away to relax and get some peace of mind.
One of my favorite places on earth is Hawaii. The people of Hawaii are so genuine and laid back. I go to Hawaii at least once a year for a couple of weeks. Of course, I also want my travel to Hawaii to be deductible—and, thankfully, it can be with proper planning.
Any travel can be deductible by making it a business or investment expense. As long as your travel has its primary purpose as business, then all of the travel expenses, including hotel, airfare and meals, will be deductible. In order for travel’s primary purpose to be business, the IRS says that you have to spend more time doing business than you do in recreation. So, if you are going to Hawaii for a week, then more than half your time there has to be spent doing business. This simply means more than 4 hours of a regular 8-hour workday, meaning you need to spend four and a half hours working each day. But who wants to work while vacationing in Hawaii? What if the work is fun, interesting, and makes you lots of money? Would you do it then? What if you made Hawaiian real estate a major part of your investment strategy? When you add up the tax benefits plus add in all of the money you could make investing for four and a half hours each day, you may decide that spending that time looking at real estate and meeting with property managers isn’t so bad after all. Just take a look in Chapter 5 at what this strategy did for my client who travels to New Mexico each year.
“Any one may so arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury. There is not even a patriotic duty to increase one’s taxes.”
– Judge Learned Hand
A while back, one of my good friends, Guy Zanti, taught a group of people how to play CASHFLOW 101, a financial-simulation board game invented by Robert and Kim Kiyosaki. Playing the game is an excellent way to not only learn but also put into practice the Rich Dad principles on money and investing. As Guy talked about some of the tax benefits of real estate, particularly tax-free exchanges, a woman in the audience raised her hand.
Playing CASHFLOW 101 is an excellent way to learn the Rich Dad principles on money and investing.
“Yes, ma’am,” Guy said.
“Don’t you think that it’s wrong to reduce your taxes like that?,” she asked. “Isn’t it our responsibility to pay the taxes that we owe instead of trying to find ways to steal from the government?”
Guy was stunned. He couldn’t believe what he’d just heard. He couldn’t comprehend why she would think that it was wrong to reduce her tax burden. After all, doesn’t everyone want to reduce taxes? But the reality is that we’re trained to believe that we somehow owe the government our money. The truth is that we don’t. In fact, the tax code is set up to help us reduce our tax burden—and to do so legally.
I’d say it’s just the opposite of what this woman and many others think; it’s wrong to not reduce your tax burden. Not taking advantage of the aspects of the law that are there to help you means you are stealing from yourself, your family, and
