How to Legally Not Pay Taxes
This subject has been covered in a variety of ways. People have written books about it and many have claimed their advice to be legal when it really wasn't.
However, it's a proven fact that most people DON'T cheat on their taxes. Why? Because they are scared of the Federal Government and what may happen to them if they cheat. Even the person that will fraudulently fill out a credit card application and charge purchases under another person's name normally will not cheat on their taxes. That's how influential we have made the government who serves us.
But the Federal Government is actually EMPLOYED BY US! That's right! So are doctors, lawyers, restaurants, grocery stores and anywhere else we spend money. Think about this the next time you are sitting for hours in a doctor's waiting room. When you have waited a sufficient amount of time after your appointment time, inform the doctor's receptionist that you are leaving unless you are seen. They won't like it -- but there are plenty of doctors that would love to have the money your insurance company is being billed. Stand your ground and demand your rights!
Being in Business for Yourself
When you start a business from your home, you are actually creating a lucrative way to avoid paying taxes on things you normally would as a typical consumer. All of a sudden, you are allowed to take legal deductions off your monthly mortgage payment, electricity, clothing, gasoline, car payment, food and other necessities. For instance, you can eat at a fancy restaurant with your spouse if you discuss your home business while dining. Then, this restaurant meal becomes tax deductible. (Save the receipt.) Think about that the next time you settle for McDonald's.
But the legal way to not pay any taxes at all is to have a SERVICE business. A service business is a service that you provide that does not include the re-sell of a product.
For instance: Babysitting, making crafts, typesetting, desktop publishing, drawing, writing, mowing lawns, fixing and repairing various items purchased by consumers, etc.
But if you make extra money by buying and reselling cars, and you buy a car from Joe down the street and re-sell it to John -- you and John are required by law to pay state taxes. Why? Because the car is a product that you purchased from someone else. Just like if I write a book entirely myself, I don't have to pay taxes when I sell the book. But if the person I sell it to decides to re-sell it -- they are responsible for paying taxes on it when it's sold. Why? Because the customer did not write the book. The book took on the heading of "a product" when my customer bought it. See the difference?
And the reason the creator of a service does not have to pay taxes is because the Government cannot tax your brain's creativity and talent. They can only tax actual products.
So why then have you heard that people who babysit (a service business) have to report their income? Because if the person you babysit for decides to claim you as a deduction on their income taxes (for social security purposes), you have to report your income -- only because of social security laws and regulations.
But if you provide another type of service like typing for college students, selling crafts that you sew and create (remember, the taxes were already paid on the materials you bought to create the craft), writing a book or informational product, etc., your customers will not normally claim this expense as a deduction on their PERSONAL taxes. They may claim it as a business expense (if you sell the service to a company), but that side of the coin takes on an entirely different set of tax rules and regulations.
Don't be overwhelmed. Contact your local IRS or County Licensing Office to discuss if your particular service is exempt. Don't take chances.
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