Taxation With Representation - Article 4.

Make the System Work for YOU

Those of you who visit this space regularly know that I suggest over and over that you focus on those financial matters that you can actually control - and that you NOT worry unduly about issues over which you have no influence. Here is a prime example of an area you can control regardless of outside economic factors - no matter what Congress and the sitting President do with and to the tax code, you can find ways to use that code to your advantage.

Instead of complaining about it, use it.

And as that code is currently written, it is a favored practice to save and save and save - mostly, save for your retirement. Take a portion of every dollar you make today and set it aside for tomorrow. Then watch the tax savings mount up as your retirement account accumulates.

Out of every dollar you earn, you should save 10 cents - that's right - 10% of every dollar should go into long-term savings. Does this sound difficult? Maybe even impossible? If absolutely impossible - then try for 5%. The important thing is to actually start saving - and the key to being a saver is to start NOW. Do not wait until after something is paid off, or after the school year, or after you get a new job, or after the bonus comes through, or after the tax refund arrives.

Either you save or you don't. There are no points for good intentions. There is no value in waiting.

HOW DOES ONE START SAVING?

1. If you have an employer-sponsored retirement savings plan available, use it. Maximize your contributions. Go in and fill out the forms today. The trade-off is wonderful - this will actually lower your income taxes because you'll be taxed on less income. This is simply perfect.

2. If you are self-employed, you have several tax-favored options for retirement savings - pick one (get help if necessary) and then fund it to the maximum.

3. Do the best possible job when you do your tax return - look for all of the potential tax deductions available to you - ask your tax preparer about writing off donations of clothing to charity; ask about deducting the taxes you pay for investment real estate and automobile licenses; ask about all of the deductions available for your unreimbursed work expenses (including meals, travel out of town, subscriptions, uniforms, education and a host of others). If your tax preparer hasn't been checking all of this with you previously, ask why not? With diligent preparation, many people I know lower their taxes enough to fund as much as half the savings I recommend.

4. Start planning for your next tax return YESTERDAY. Don't wait until next December to fund your retirement. Don't wait until next April to plan your deductions.

Please do not complain about the tax code and Congress unless you are actually working to change things. Meanwhile, there is a good variety of choices we good Americans can use in order to make the tax laws work to our benefit. The bets way to protest the system is to milk it.