The richest Americans pay less tax via paid overall a lower tax rate than average due to what the IRS shows they do differently.
The ultra-rich save the most tax, according to IRS statistics. And over 90% of them have one thing in common. They do not sign their own returns. They hire tax pros instead. It shows they paid at a combined 24% rate on average, down 1% compared to the 25% national average.
The more money you make, the more complicated the returns. But it also means the more money you have for tax planning, to pay someone to navigate the complex tax system. They find ways to legally avoid paying tax.
Most less wealthy Americans don't pay for tax planning. Thus they miss out on the various ways of legally avoiding paying taxes. Tax avoidance is finding ways within the law to keep taxation at its smallest amount. That, after all, is what the paid professionals are there to do.
Here’s what you need to know.
What Tax Planning Really Does
Tax planning is the art of arranging your affairs in ways that postpone or avoid taxes as allowed through the ever-changing tax regulations. By employing effective tax planning strategies, you can have more money to save and invest or more money to spend.
Put another way, tax planning means deferring and flat out avoiding taxes by taking advantage of beneficial tax-law provisions, increasing and accelerating tax deductions and tax credits, and generally making maximum use of all applicable breaks available under our fabulous IRS Code.
While the federal income tax rules are now more complicated than ever, the benefits of good tax planning to owe less tax are arguably more valuable than ever before.
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You might ask yourself if you can afford Tax planning, but the real question is - Can you afford not to plan and pay less taxes?