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!

The Easter Bunny has received horrible news just days before he is scheduled to make his egg-hiding rounds this year. The IRS is cracking down on Sole Proprietors, such as The Easter Bunny, The Tooth Fairy, and possibly even Santa Claus regarding excessive tax write offs, especially in the mileage claimed for business use.

These characters apparently never set up the right corporate structures to protect themselves and decided to operate as the most simple business form, the sole proprietorship.

Unfortunately, the sole proprietorship has the most liability, least tax benefits and the most possibility of negatively affecting ones revolving debt and future ability to develop business lines of credit. Even the Easter Bunny can not afford to ruin his personal credit by using personal credit cards to finance his Easter Egg Business!

Why is a sole proprietor most likely to be audited?

The IRS believes there is a $300 BILLION tax gap — $300 BILLION in uncollected taxes — each year! The biggest culprit? Not large corporations, but small business owners. In fact, sole proprietorships are 300% more likely to get audited than someone who does not file a schedule C!

It is important that any business owner also document their records properly.  In fact, the Easter Bunny may have excessive claims of business mileage especially since he has never owned a car.

Solution: Run your business like a business.  Document all your business expenses, use QuickBooks® or some other accounting software to operate your business, and DON’T operate as a sole proprietorship! Incorporating is a much better approach.

 

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Scott Letourneau of Nevada Corporate Planners  has been called by the Famous 3 to see how they can correct their situation for the future. Mr. Letourneau says, “The Easter Bunny has concerns also over protecting his Egg-sets (Assets) and his business that just can not be done in his current Sole Proprietor Status.

Update: A drunken Leprechaun faced an IRS audit this week for similar reasons and did not fair well after St Patrick’s Day!