WHEN ARE TAXES TOO MUCH?

Dear Friends, Family & Subscribers:

There is nothing unpatriotic about trying to reduce your taxes. The government taxes your income when you earn it, taxes your money when you spend it, taxes your money on the interest or dividends you earn when you save it, and then when you die, it taxes what's left over. Talk about an efficient system of separating you from your wealth, this is about as thorough as you can get.

If you're paying more than your fair share of taxes, you will never get ahead. What you pay in taxes, you never recover…it's gone. And if you are like most people I see, then you are losing a lot of your money unnecessarily to your Uncle Sam.

Hidden Taxes Everywhere:
Think for a moment about the taxes you pay every day: when you fill your tank with gas, you pay almost 50% of every gallon in taxes; when you purchase lunch, there is not only sales tax on the purchase price, but hidden corporate taxes in the bread, meat, and the soda you consume; if you stop and pick up a bottle of wine for dinner, the duty taxes are approximately 60% of the sales price; and when you arrive at your cozy, heated home, you will pay 25 cents or more for every gallon of heating fuel you use. You pay local and county sales and property taxes, state, county and federal income and services taxes, taxes on the purchase of an airline ticket to visit your family back home, and even taxes in the form of fees to obtain or file public information in your local community. The list goes on and on, according to recently complied information by the Oxford Club.

You get the idea. Taxes in the US have completely gotten out of control… and all of these taxes before you even sit down and calculate your state and federal income taxes due for last year.

Who Pays the Taxes?
According to the IRS, the top 1% of all income earners pay 36% of all personal income taxes; the top 5% pay 55% of all taxes; the top 10% pay 66%; and the top 25% pay 83% of all income taxes. Sound a bit lopsided and unfair to you?

To qualify in the elite group as a top income earner is much easier than you might think. According to the IRS numbers, all you needed to earn to be among the top 25% of all tax filers is to earn a whooping $52,965. In other words, the average Joes and Janes are the so-called "wealthy" individuals, while the sage of Hyannisport, Senator Ted Kennedy, continues to propose yet another tax increase to "tax the rich".

Are your Tax Dollars Well Spent?
Is your tax money being used wisely by our bureaucratics? You be the judge: In 2000 $8.5 million in food stamps were paid to 26,000 recipients, all of which were dead; and during the same year more than $100 billion (yes billion, not million) was erroneously sent to Medicare recipients. Incompetence and apathy in spending your hard earned money permeates government bureaucracy. You might just as well flush your cash down the toilet.

How to Calculate Your Taxes
In 1913, the first year the tax code took effect, there were just 170 pages of laws and regulations. Today, it has grown to over 17,000 pages of confusing, intermingled, and crossed-referenced burdensome regulations. To interpret the tax code you will need to look at the hundred of thousands of pages of IRS Rulings, Revenue Procedures, Opinion Letters, Information Letters, Technical Advice Memorandums, Private Letter Rulings, Chief Counsel Orders and Notices, and General Counsel Memoranda.

During the 1980s the tax code was altered more than 100 times. The Tax reform Act of 1986 brought amendments to more than 2,000 sections of the IRS Code and created more than 100 new forms, with thousands of pages from hundreds of booklets to interpret the changes. Major tax changes again occurred in 1990 and 1993.

To make matters even worse, the so-called "Tax Simplification" program enacted in 2001 consisted of 441 tax code changes. The on-again, off-again, on-again estate taxes are an estate planner's worst nightmare in trying to guess what year a client might die to minimize estate tax burdens.

And do you think you can get help from the IRS on interpreting the laws? The IRS telephone taxpayer assistance program fielded approximately 8.5 million wrong answers last year to the most basic inquiries. Approximately $4 billion in assessment notices were sent out to 10 million Americans last year, with approximately 50% of those incorrect. During an audit of the General Accounting Office of the IRS in recent years, there was widespread evidence discovered of financial malfeasance and gross negligence, and the IRS could not account for 64 percent of its Congressional appropriation.

So, what can you do about trying to reduce your taxes and pay no more than your fair share?

Looking for the Advantage
Using qualified tax planners, in advance of year-end tax filing, is essential. If you wait until tax time to count the beans from last year, you have done little to protect your money. Start at the beginning of each year to work with a good planner, someone that is forward thinking, and plan ahead for what steps you can take for the upcoming tax year. Start planning today for next tax year filings.

Importantly, use tax strategies to eliminate taxes on interest, dividends and capital gains in your investment portfolio. Think tax deferral. While traditional Pension Plans, 401Ks, IRAs, and 529 Educational Plans are all great starters, use more sophisticated planning techniques that work best for your particular situation. For example, inquire how "like-kind" exchanges under Section 1031 and 1035 might benefit you when selling real estate or exchanging stocks. And, find out how private annuities and charitable gifting might have tremendous tax saving benefits. The list of tax saving opportunities go on and on, if you learn how to use them.

And too, think global and diversify your assets using an offshore trust. This is also an excellent vehicle to help protect and preserve your assets from the litigious society that we live in today where everything you worked hard to achieve can be lost overnight. Using an offshore trust and legal tax planning strategies can offer the best of all worlds.

There are opportunities for legally avoiding taxes and asset protection planning. Seeking qualified counsel to achieve the results that work best for you is critical.

Remember, making money is only half the battle; the other half of the battle is keeping it!

Best Regards,

David Tanzer
Attorney at Law

P.S. To learn more about stateside and offshore asset protection and wealth preservation planning techniques, read The Complete Guide: "How to Legally Protect Your Assets".

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