Where Does Your Money Go? Taxes

Trying to stay within the theme of Budget Stretcher, I thought a series of articles on knowing where your money is going may help some of you understand just how much you pay on certain expenses.

I’ve decided to start this series of articles with information about the amount and type of taxes you pay. I won’t be able to cover all of the types of taxes that are paid by Americans because that would turn this article into a book. I’m just going to list a few of the most common taxes that most of us have to pay.How much do you pay in taxes every year? I can bet many of you don’t have any idea. You may think you can just look at your tax forms for last year and have the answer. I guarantee that would be just the beginning.Just take a look at the below list of various taxes and do the math yourself:Federal Income Taxes – Uncle Sam is currently taking between 15% and 39% of our Adjusted Gross Income to pay for what ever it is that they spend money on in Washington. The main point I want to make here is that many people feel that because they received a refund,Guest Posting they didn’t pay any taxes. For some people, this is true. However, the vast majority of people that receivea refund are just getting back the money they already paid in through withholding, minus the taxes they owed. HOW MUCH DID YOU PAY LAST YEAR?Income Tax Preparation – Yes, I consider the cost of having our taxes prepared by a professional as a tax. If the federal tax code was published in english, maybe more of us could prepare our own taxes.Social Security – 15.3% of your income goes directly to the federal government for social security and medicare and is conveniently deducted from your paycheck. The myth about your employer paying half is just that. If you weren’t required to pay social security, that is another 7.65% that your employer could pay you.Sales Taxes – Unless you live in a state that doesn’t have a state sales tax, this costs you around 6% to 7% of every penny you spend. Wouldn’t it be nice to buy something for $99.95, hand the clerk a $100 bill and get a nickle back.Property Taxes and Real Estate Taxes – These taxes can run intothe thousands of dollars a year. I know, there are some places you aren’t required to pay these taxes either, however, you can bet they get this money in other ways. Before you renters start smiling, remember that your landlord has to pay these taxes. Want to guess where he gets the money?The Other Guys Taxes – What do you mean “The Other Guys Taxes”? He can pay his own. For each item you buy, the manufacturers and distributors have expenses like the cost of production, packaging, shipping, etc. They also have to pay taxes. Who do you think actually winds up paying these expenses? If you buy it, you do. I have seen estimates that between 20% and 25% of the cost of most items is for taxes that they have to pay. To make a profit, all companies must pass all expenses they have along to the consumer.Gas Tax – With federal gasoline taxes over 18 cents per gallon and state gasoline taxes as high as 35 cents per gallon it isn’t hard to see that, with the price of gas currently under a dollar in most places, over half of the cost of your gas could be going for taxes.Self Employment Taxes – This is simply the way a self employed person pays their Social Security and Medicare. They are required to pay 15.3% of their gross income to cover these expenses. These are the people that really know how much taxes they pay. This is because they are required to write a check for them four times a year and, if they underpaid throughout the year, they may have to write another check on April 15th.When you look at your budget and wonder where all of your money is going, you may want to consider what you are paying in taxes. There are taxpayers in this country that are paying over 50% of their income in one tax or another.Here are links to a couple of other articles I’ve written on

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4 Simple Steps to Reduce Your Taxes

With Tax Season upon us, here are 4 simple steps to lower your tax bill this … #1: … How Serious Your Tax Problem IsAre you aware of just how much in taxes you are paying? Here’s how

With Tax Season upon us,Guest Posting here are 4 simple steps to lower your tax bill this year.

STEP #1: Understand How Serious Your Tax Problem Is

Are you aware of just how much in taxes you are paying?

Here’s how much the average family spends on various consumer categories — as a percentage of income.

You must realize that it’s not how much you spend on taxes that is important, it’s how much you spend on taxes as compared to all other major categories of spending!

Consumer Spending:
How Do You Spend Your Hard-Earned Dollars?

Taxes ———————- 32.0%
Housing ——————– 16.7%
Medical Care ————— 11.5%
Food ———————– 8.2%
Transportation ————- 7.9%
Recreation —————– 5.7%
Clothing ——————- 4.1%
Savings ——————– 1.4%
Other Miscellaneous ——– 12.5%
TOTAL ——————— 100.0%

So, if you think you are being “nailed” by the government, you are absolutely right. You spend more on taxes than any other category of consumer spending.

In fact, you spend more on taxes than on food, clothing, and housing combined!

And it’s not just federal income taxes we’re talking about here. There’s also state and local income tax, payroll tax (Social Security and Medicare), sales tax, excise tax and property tax.

Maybe you already knew “intuitively” that your tax bill is outrageously high. If not, the picture I’ve just painted should thoroughly convince you that you pay too much tax, period.

STEP #2: Get The Right Attitude About Your Taxes

What do I mean by this? Well, you simply must have a certain “mental attitude” toward this whole idea of paying taxes. I’ll get right to the point — you must have an attitude about taxes that says, “Enough is enough. I’m paying way too much tax and I don’t like it! And it’s about time I did something about it — TODAY!”

After reading those numbers above, how do you feel? Doesn’t that just make you furious? If so, great, then you are on your way to solving this problem. (Remember the old cliche — “You can’t solve a problem until you admit you have one!”)

If you saw those numbers above and said, “Big deal. So I pay 32% in taxes. So what? So does everybody else in this country” — well, I’m sorry, but you might as well just stop reading this article right now. You will continue to pay too much tax because you really don’t care about it.

To reduce your taxes, you must have a passion for paying less tax. You must get angry about it.

Before today is over, go get last year’s personal income tax return (Form 1040) and look at how much tax you paid.

When you have Form 1040 in front of you, do you realize where the most important number is on this form?

NO, it’s not Line 67 — which tells you how much of a refund you got (if any!).

NO, it’s not Line 70 — which tells you how much you still owed, the balance due with the return.

The most important number on Form 1040 is Line 58.

It says: This is your TOTAL TAX. That is how much federal income tax you paid for all of last year. When it comes to reducing your taxes, it doesn’t matter whether you got a refund or whether you had a balance due.

What matters is — what was your total tax liability for the year. That’s the “magic number” that should just make your blood boil and your heart beat so fast that you can hardly stand it.

Now that I’ve got you all “riled up” about paying so much tax, let’s move on to Step #3.

STEP #3: Realize That Reducing Taxes Is The Easiest Path Possible To Creating Wealth

Consider this simple fact: Reducing your taxes by just $4,000 per year is the easiest way possible to becoming a millionaire.

Let me elaborate.

Let’s say you implement some new tax-saving strategies that reduce your taxes by $4,000 each year. Now, if you take that $4,000 per year in tax savings and invest it over the next 30 years, assuming you earn 11.5% on your investment, you end up with $1,048,745.98 at the end of the 30 years!

And here’s the best part about this scenario: Where did you get the $4,000/year to invest? Well, you got it from money that would have gone to Uncle Sam! It’s money that you used to spend on taxes, part of the 32% of your income that goes to taxes each year.

In effect, it’s free money! It’s money that was always there — you just didn’t realize it.

Is this a good deal or what? By simply reducing your taxes, the government will finance your million-dollar retirement.

And let’s say your tax situation is such that you save $2,000/year instead of $4,000/year. Same assumptions: you invest the $2,000 each year at 11.5% for 30 years. End result: $524,372.99. Not too shabby, eh?

So all you have to do is come up with the tax-saving strategies that will put $2,000 or $4,000 in your pocket each and every year. Which brings us to Step #4.

STEP #4: Get Hold Of The Tax-Saving Strategies That Will Make You A Millionaire!

You know, it doesn’t really take much information to save a bundle in taxes. It is true: Just A Little Bit Of Tax Knowledge Can Save You Thousands Of Dollars Every Year!

Useful tax information is freely available. On the Internet, at your local library, and through your local tax professional.

The question is: Are you willing to spend some time this year learning about effective tax strategies that can save you literally thousands of dollars?

Here’s a simple goal to set for yourself: Over the next 10 weeks, set aside just an hour a week to read up on tax-reduction strategies. That’s all, just 10 hours.

Chances are you’ll find 2 or 3 strategies that reduce your tax bill by $1,000 this year.

So you spend 10 hours and, in effect, pay yourself an

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