Donald Trump says that if you want to be a millionaire, you must get your tax affairs down to the legal minimum.

Money Mastery is a book written by a gentleman named Alan Williams, who said the exact same thing.

There are a lot of reasons for that, but Donald Trump used a slide in a presentation that he allowed my friend Sandy Botkin to use that inspired this article. It’s a very interesting slide. It shows what happens if you’ve got a dollar that doubles every year.

Ok, you start with $1. At the end of year one, it becomes $2. At the end of year two, that doubles and becomes $4. At the end of year three, it becomes $8. At the end of year four, it becomes $16. At the end of year five, it becomes $32. It just keeps doubling.

When you get to 20 years, it is $1,048,576. That $1 bill doubled for 20 years is now worth over $1-million.

Now, watch this. Same dollar doubling, but let’s assume you’re in the 35% bracket. You pay 35% of what you make in taxes, and you add all of the income taxes, the state income taxes, the capital gains taxes, the sales taxes, the transfer taxes, the property taxes, I can go on and on, the hotel taxes, the internet taxes, and gasoline taxes. And 35% is actually conservative.

This time take taxes out of the doubling effect, take that dollar and double it, instead of it being $2, like in the other example, it’s only worth $1.65 because you’ve got to pay at least 35% of that in taxes. And the $1.65 doubling isn’t $3.30, because you’ve got to pay part of that in taxes. It’s only worth $2.70.

Even though it is the same dollar doubling, but now with taxes, take a guess how much that’s worth at the end of 20 years. Remember, the other one was $1,048,000 without taxes. Take a guess how much it’s worth with taxes each year?

Would say probably around $600,000?

Try again. Maybe you’d guess $400,000?

Nope, $400,000 is too high, go ahead give it another shot and try again.

Can’t be less than $300,000 can it?

Much less!

Is it $200,000, less? You’ve got to be kidding! How about $150,000?

Not yet, keep going, one more guess…Less than $100,000?

Yes, much less. You’re never going to get it. It’s $22,370.

That is amazing.

People, you may think I’m crazy so go try it out on your calculator or accounting program and you’ll find its true.

The reason it’s true is not only do you lose 35% on everything you make, but here’s the important point, you also lose all of the interest, all of the compounding year after year.

That is why it’s worth only $22,370. There is nothing more important than tax planning, absolutely nothing. It’s better than a raise. It’s after-tax money.

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Scott Letourneau is the founder and CEO of Nevada Corporate Planners, Inc. Recently, he’s started an exciting new project on how to get viral residual income. Visit right now to find out how to get started!

Sandy Botkin is a former IRS attorney with real IRS experience, as well as a CPA. He was also a trainer of IRS attorneys. Sandy was involved is a lot of the stuff that goes on with audits and things like that. Plus, he was one of the founding members of the IRS Tax Shelter Committee, which is why the initial IRS attack on tax shelters was really because of Sandy and five other guys.

Mr. Botkin is an author of the best-selling book called Lower Your Taxes - Big-Time, and if you look at it up on Amazon.com, it is the highest-rated tax book on Amazon. You won’t find anything rated higher than Lower Your Taxes - Big-Time.

Sandy immediately dove into myth number one during our interview. He stated that some business owners think, “I’m only making $20,000 or $30,000 this year. When I make $150,000, $200,000, $250,000, that’s when I’ll go to a tax seminar or that’s when I’ll learn about tax planning”.

Sandy went on to explain, “That is so wrong. Because if your business generates a loss, as long as you’re running your business like a business, not like a hobby, that loss can be used against any form of income you have - interest, dividends, wages, rents, pensions, anything”.

He continued with, “Let’s say the loss exceeds your income for the year. You can carry back all business losses up to two years, and get a refund from the federal and state government for the last two years of taxes that you pay. Or, you can carry forward all business losses up to 20 years, and offset the next 20 years of earnings”.

Later he explained that the same thing holds true with S-corporation people, except there’s a little more planning there because you have to have sufficient basis. But the same rules apply.

This second myth he felt was even bigger than the first one. He described it in only seven words and stated it’s the number one financial planning mistake in North America. Sandy then proclaimed, “I will promise you this costs more Americans to lose money than any single financial planning mistake. And yes, you’ll never read it in any book around, except in my book, Lower Your Taxes - Big-Time. That myth is; my accountant takes care of my taxes. I have a similar myth; my spouse takes care of my taxes. It can’t be further from the truth”.

“I sort of equate that with a doctor taking care of our body. Would’t it be great if we could eat all of the cholesterol and all of the fattening foods, and once a year we go to a doctor’s office and we get one of these rooter-rooter jobs, Scott?”

In less than 4 minutes Sandy had exposed two of the most dangerous myths facing business owners around the country.

Thinking you aren’t ready for serious tax help and then thinking that your tax preparation specialist or spouse is going to “take care of everything for you”. As you just read; Sandy looks at taxes as a financial planning tool, not just a necessary evil we all must deal with every April 15th.

Description

After interviewing one of the foremost authorities on taxes, I decided to put an article together that exposes two great myths. This article is based off a transcript from an Interview I did with Sandy Botkin. Enjoy.

About the Author (text)

Scott Letourneau is the CEO of NCP,Inc. and an authority in helping people form entities,grow their business,and protect the assets of that business. For more info contact: Scott Letourneau at 702-367-7373 or http://www.nvinc.com/save.htm