Victim or Victor

APRIL

It begins with April Fool's Day and ends with "May Day!" It makes sense that April is the month we face filing our income tax returns.

We start the process feeling foolishly out of control and overwhelmed by all the paperwork needed to prepare our return and end up wanting, or needing, to call "911" because of the taxes we owe. Some of us even wait in line until midnight on April 15th, just to put off filing and paying as long as possible.

At the other extreme, many employees look forward to filing their tax returns, and even file early, because they expect to receive tax refunds. Unfortunately, they have allowed the government to be their banker, and worse, they have been paid no interest on their money while the government held it. Their excuse is that this is how they force themselves to save money. (Would you deposit money in a savings account that paid zero interest?) Interest or no interest, the stark truth is that there is usually a net savings of ZERO! They usually end up spending their refund as soon as they receive it the mail. (Are you saying "Ouch?")

Take this opportunity to take control of your financial life. It may be too late to change your tax situation for 2007, but NOW is the time to start making changes for 2008.

--If you have an accountant, ask her to review your return with you to make sure you are taking advantage of all the tax deductions available to you. (News bulletin: The IRS will not notify you of deductions you "should" have taken.) This should be something your accountant does automatically, but ask anyway!
--Even if you are happy with your accountant, you may want to interview a new accountant and ask her to review your prior year's tax return. You know what they say about a "fresh set of eyes."
--If you do not have an accountant, maybe it is time you find one. Ask for referrals from your friends and ask the accountant for an initial consultation to review your last year's tax return.
--If you are an employee, start an automatic savings deduction plan instead of having a higher amount of taxes withheld from your paycheck. This "Pay Yourself First concept" will still help you put away money for savings and investing before you get your paycheck. It is much better to have the money in your control instead of leaving it in Uncle Sam's control.
--As an employee, you may also want to consider starting a part-time business on the side. Employees have their taxes withheld before they receive their paycheck. Business owners receive their income and can pay their business expenses before they pay their taxes. In other words, an employee can only spend AFTER tax dollars but a business owner can spend PRE-tax dollars.
--Business owners have many more tax planning opportunities than employees. Think about your current interests, hobbies or sports you enjoy. There may be a successful business venture just waiting for you.
--As a business owner, you may be able to convert certain personal expenses into legitimate business deductions (like cell phones, second phone lines, subscriptions, and certain business related travel expenses. Emphasis on the word legitimate!)
--You don't have to know everything, just know who to ask and be willing to take action.

At the end of the day we each see our worst enemy or our best friend when we look in the mirror. Which one will you be, victim or victor?


Co-author of the Wall Street Journal Bestseller Three Feet From Gold and the #1 New York Times Bestseller Rich Dad Poor Dad.
Member of the President's Advisory Council on Financial Literacy
CEO of Pay Your Family First
www.payyourfamilyfirst.com