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A Time to Reap and A Time to Sow

Guest post by: Dan McDevitt

Article Overview: People must pay their taxes, whether the rules are understood or not. Often, the less you know, the more you pay. The law says that you must pay taxes. But there is no law that says you have to leave a tip. The tax credit, rather than merely lowering the tax bracket as a deduction does, is a dollar for dollar reduction in the amount of tax owed. A one thousand dollar tax deduction may save you a few hundred dollars, whereas a one thousand dollar tax credit puts the entire one thousand dollars back in your pocket. That is nicer.

A Time to Reap and A Time to Sow

A cold cell is not the best place to ponder your tax situation. When life is viewed as the glass is half-full, you see things as better and best. However, no matter how you see it, the government is always thirsty to drink from your glass. It seems best to do what you can to keep the cup better than half-full, lest your own tongue be parched.

The U.S. tax system is a beautiful, complex, organic collection of declarations. People must pay their taxes, whether the rules are understood or not. Often, the less you know, the more you pay. The law says that you must pay taxes. But there is no law that says you have to leave a tip.

The legal ways to minimize the amount paid is called tax avoidance. You pay the tax unless there is a provision in the tax code that allows a discount. Tax avoidance is legal. Using some illegal method to minimize the tax liability is tax evasion. It is best to know the difference, and tax evasion should be avoided.

Views on taxes will vary. Albert Einstein, a smart person, said 'the hardest thing in the world to understand is the income tax'. The government deficit is the difference between the amount of money the government spends and the amount it has the nerve to collect, says Sam Ewing.

Stanton Deleplane suggested a simplified tax form: How much money did you make last year? Mail it in. Someone said that it would be nice if we could pay our taxes with a smile, but normally cash is required. At times, it seems you have to laugh to keep from crying.

Reality of taxes will not vary. Tax deductions are nice. Tax credits are nicer. Tax deductions reduce the taxes owed by decreasing the income, putting a person in a lower tax bracket where they owe less in terms of taxes. Tax credits are figured after determining the tax bracket. The tax credit, rather than merely lowering the tax bracket as a deduction does, is a dollar for dollar reduction in the amount of tax owed. A one thousand dollar tax deduction may save you a few hundred dollars, whereas a one thousand dollar tax credit puts the entire one thousand dollars back in your pocket. That is nicer.

The dollar value of a tax deduction can vary. The dollar value of a tax credit is constant, for everyone. Every thousand dollars of tax credit equals a thousand dollars of real money, your real money.

Business matters, like the tax codes, can be technical, sometimes dull, and certainly beyond the scope of these few paragraphs. Private discussion with a business intermediary, tax professional or attorney is usually advisable and useful.

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Article Tags: dollar reduction, tax bracket, tax credit, tax deduction, thousand dollars



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