Wealth Habits

CHAPTER 12It's Not How Much You Earn, It's How Much You Keep: How to Give as Little Money as Legally Possible to the IRS

“The amount of tax you pay ultimately depends on whether you are educated or uneducated about the system.”

I'm known for being obsessed with giving as little of my money to the IRS as is humanly, and legally, possible.

Is this because I hate the IRS and taxes?

Well, who doesn't, but that's not the point.

The point is that the difference between a moderately successful entrepreneur and a truly wealthy entrepreneur is in how much attention they pay to keeping more of what they make—and taxes is one of those areas.

You can bring in tons of revenue and keep your expenses low so you make a profit. And you think, “I'm rich!” But guess what, you're not going to be if you're not smart about taxes.

Ignorance about taxes is one of the ways I see otherwise successful entrepreneurs bleed money out of their bottom line.

Next to bad debt, taxes can be another knife to the heart of your wealth.

How on earth did this whole thing start, and why don’t we know more about it?

What follows is a quick look at history of taxation in the United States.

A Brief History

During the US Civil War, the first federal income tax was created in 1861 as a way to finance the war. Subsequently, in 1862, Congress passed the Internal Revenue Act, which created the Bureau of Internal Revenue (the modern-day IRS). Following the end of the Civil War, the income tax did not have substantial support ...