“Only little people pay taxes!” That is a famous quote from Leona Helmsley. A rich hotel owner from NYC in the 1980s. She was known as the “Queen of Mean” and left her entire estate to her dog Trouble. Really.
She implied only poor and middle-class people pay taxes whereas rich people have schemes to get around paying taxes. This mostly true unfortunately. The tax code has a plethora of loopholes that the rich with their army of accountants and tax lawyers can exploit. You have heard of the golden rule right? “He has who has the gold makes the rules.” That applies to the tax code.
Enough about rich people. You are going to have to pay taxes or get fined or maybe go to jail for tax evasion ala Al Capone in the 1930s (see his smiling mug below). So we are going to need to minimize those pesky payments.
Taxes are just another expense to be minimized, just like cable tv bills and buying coffee
But you don’t have an army of accountants! True, but you can do the next best thing. When doing your taxes get tax preparation software. They have that army of accountants that you rent out. Turbo Tax is one example that works great. You will need to buy the software every year and it’s not cheap as in $100 or so depending on the complexity of your taxes. You can get a discounted version at warehouse clubs like Costco if you are a member and save a bit off the price.
Why use tax preparation software?
- The software scours the tax code for loopholes just like rich people’s accountants.
- Easy preparation without a CPA and less chance of error
- Good record keeping system over time
- Cheaper than using an accountant or tax prep firm. Yes you could do the taxes by hand but that might leave money on the table give the sheer complexity of the tax code.
- Low relative cost vs. risk and return
- Chances are there is a deduction for self employment, horse breeding, school supplies, mining or some other thing you can take advantage of to reduce your outflow
- Remember we want to pay as little as possible to get more to invest
- Pay a little and potentially save big. If it finds you one deduction that you didn’t know about it could pay for itself. The first time I used such software I ended up saving $900.