How much income tax did you pay last year?

If you are like most people, you will say the amount of tax you paid on April 15. Others will say none, they got a refund!

It is amazing that so many people are unconscious of the fact that taxes are their biggest expense. In most households, it totals more than housing, clothing and food.

To figure out how much tax you really paid, look at your pay stub and multiply the total taxes taken out, federal, state, local and social security, then multiply by 12 or 52, depending on whether you are paid monthly or weekly. Add or subtract any additional payments you made on April 15 or deduct your refund from the annual total.

Shocked? You should be.

Ever heard of Tax Freedom Day? That is the day in the year when the average American has made enough money to pay his taxes for the year.

For most of the country, it is, ironically, approximately April 15. For heavily taxed North East states like New York and Connecticut, with their heavier tax burdens, it can be as late as May, 25!

Think about it. You are working on your job as much as 40% of the time, just to pay your taxes. That translates to working Monday, Tuesday and until 3:15 PM on Wednesday, every week, just to pay your taxes!

Looked at another way, each day you work from 9AM-12:20PM just to pay your taxes!

How would you like to be able to stuff a lot of that money back into your wallet? You worked hard for it, dont let the government confiscate it, especially when you see the preferential treatment others get from our friend, Uncle Sam.

The business owner, as opposed to you, the lowly employee; is under a very different, very lenient income tax system!

Dont believe it? What percentage of all of the income taxes paid in this country by individuals and businesses is paid by corporations, you know, big businesses, Exxon, Halliburton, Mobil, etc?

Seven (7) percent!

How do they get away with that? Dont get me started! But rather than complain, join them. As Robert Kiyosaki, the author of the Rich Dad series says, it is easier to bend the system your way than to break it

If you are a business owner, you can write off all of your necessary, reasonable and ordinary (IRS lingo) business expenses. If there is any money left in the business, you pay taxes only on that amount.

That means the business owner has paid all of her salaries, travel, transportation, benefits and entertainment with before tax income. If she has actually spent more than the business brought in, as happens most of the time in a new business, she not only has no income tax to pay, she can write off the loss against other income!

Whoa! Did you get that? A business pays all of its expenses and if they exceed its income, can deduct that amount from other income.

OK, how does that affect you?

You must have a business, even a home based business, such as a Network Marketing business, "The Affordable Franchise," I call it. An Internet based business is probably best.

As long as you are trying to make a profit and you follow the IRSs Byzantine rules on taking and documenting your business expenses; which means you should not try this without professional tax help, you can write off your business expenses (necessary, ordinary and reasonable, of course).

The irony of this approach is that you are already paying most of these expenses now; the use of your car, entertaining, vacationing, etc. When you perform the same activities with a business objective, they magically become business deductions.

Example. You drive your family to the mall on Saturday. That is clearly not a business expense. However, you stop to make a sales call or deliver product to a client near the mall. That trip now becomes primarily a business use of your car and the government will allow you to write off approximately 36 cents per mile for business use of your car. 1,000 miles equals a $360 write off.

You go out to dinner with friends or do you take prospects or clients out to dinner, see the difference? The government will let you deduct of the dinners cost, providing you properly support the expense with documentation.

Certainly in the beginning, when you are getting your business off the ground, or you suddenly wake up and figure out how to re-characterize more of your personal expenses, you will probably lose money, at least on paper.

You will actually spend the same money you were already spending on cars, entertainment, travel, etc. but you cleverly gave them a business twist, so now they are deductible.

Remember, when a business loses money the government allows it to write it off against other income. Can you think of any other income you might have to write off your losses against? Come on, think really, really hard!

What about your salary. Your job or self-employment income! Right on!

You can deduct your business losses against that income.

Depending on the specific business you are in, your income, the size of your family, (you can pay your kids to perform business tasks for you and pay them a tax deductible salary as opposed to giving them an allowance!) and the quality of your tax professionals, you could write off thousands of dollars of your salary each year.

Those write offs reduce your income taxes, meaning you would get a much larger refund at the end of the year, right? But you are not going to have to wait.

You can go into work the day after you start your new business (or after you read this article!) and change the amount of tax withheld from your pay check from that point on.

In most cases, that will mean from $200-$1,000 more per month in your pay check. Your Next Day Pay Raise!