Since there's a good chance income taxes in the US (at least federal income taxes) might be going away soon, I think it's proper to celebrate Tax Day by sharing our tips on how to legally and lawfully lower your income such that you end up owing no or little taxes. This might be the last time we get to do this sort of thing. One of the reasons I love America is because the tax code reads like a how-to book on Boston Tea Parties.
**None of this is tax advice. I am not a tax advisor. Go talk to your own tax guy or try it and see what happens at your own risk.**
The most important thing to remember is income taxes are taxes on income. Income is money you earn above all of your expenses to earn that money. If you're a wage-slave, you don't get to count much as expenses. They don't even let you count your commuting expenses as expenses.
The trick is to start a business. Now, the business only makes money above its expenses. And businesses get to count a lot more things as expenses.
Getting creative here is not hard. If you run a lawn care business, you need a truck to pull that trailer, right? You could get an old beat up truck that barely runs, or you can buy a nice new truck and it counts as an expense. Congratulations! you have a new truck and your taxes just went down by quite a bit.
If you have a C corp, then you need to hold a shareholders meeting every year. You might think that you want to save as much money on your shareholders meeting, but not so fast. You're allowed to go crazy on your shareholders meeting. That's why so many corporations have extravagant parties. They get to enjoy the party while not spending a dime, and especially not paying taxes on the money spent on the party!
If you don't know how this works, talk to actual tax guys. If you're making over $100k a year, you should be talking with a tax guy already, and you should've already started at least one side business. If you're only making less than that, then it's probably not worth the trouble. Your income is so low and the standard deduction is so good nowadays that you won't end up spending much on taxes even if you don't play the game.
In the end, you want some income but not too much. If you have too much income, you need to be spending that on your businesses. If you have too little, you're probably borrowing money to make ends meet, and the interest will eventually catch up to you.
Another important note: Should you mess up, the IRS can be pretty forgiving. Get a good lawyer, and see if you can negotiate your tax debt down, or get a payment plan. I emphasize again: **get a good lawyer**. Some people live their lives expecting to screw up their taxes and pay for it later. It seems the super-rich know that no one is going to get it right the first time, so they keep trying until the IRS settles with them and then moves on to the next year.
The only people who end up in prison are people who outright commit fraud or don't respond to the letters they send out. IRS problems don't go away, they just get worse, so lawyer up sooner rather than later.
And remember, if you want to fight the IRS, feel free to do so, but don't expect to win.