Confessions of a Tax Whisperer.

By Sarnaa Archie

Tax is fascinating. That doesn’t sound like the truth, but I assure you, and I’ll tell you why as briefly as I can—in fact, in four succinct reasons. The first reason is that if you don’t treat it seriously, you or your heirs will eventually. This isn’t meant to scare you—just the facts.

I won’t bore you with the many cases I’ve read about people doing “smart” things designed to lessen their tax burden and the penalties, the interest, the back taxes owed, blah, blah, blah, they eventually paid.

That’s the negative side when you do things that, I promise you, make more sense in your head than they will to the taxing authorities or sometimes to just basic logic and reason.

Ignore it, mistreat it, or mislead it, and eventually you’ll be royally screwed—and owe more than you would have paid in the first place.

That’s reason number one.

The positive side of tax. Yes, there’s a positive side: the side where you can choose how you’re taxed. From 0% to 40% or more and everything in between. Yes, it’s kind of up to you.  This is a fundamental principle in tax law. You get to choose. The secret most want to know about how some people and corporations pay less than others is that those businesses and those people avail themselves of, effectively, choosing their tax burden by arranging their affairs in a way the tax code advocates. (This, we professionals call tax planning.)

The tax code is better seen as a financial incentives machine.

It’s a tool our government uses to get certain behaviors or make specific economic effects happen in the economy, and, though more so for state governments than the federal government, to raise money. It, for instance, gives advantages to married people or people with kids that it doesn’t give to single people and the childless. It can discount your tax bill if you buy certain electric vehicles. For a business, the company’s structure can automatically lessen the tax bill, and some particular features even allow you to reduce Uncle Sam’s cut and increase your own—without doing anything questionable, secret, illegal, or too complex.

The tax code is a buffet of options. You get to choose.

That’s fascinating reason number two.

What I’m saying is that the level that you’re taxed at is based on a few factors: your status and situation in a variety of things and the types or categories of income you earn, how, where it comes from, when it’s earned, and how and why and in what year you account for what.

For a business, the government (state and federal), by their respective tax codes, is your silent but very demanding equity investor since the government will take anywhere from $0.21 to $0.40 of every dollar you make. But thankfully, the tax laws can also tell you and do, if you know how to read and apply it (kind of like the Bible but less up for interpretation), as cryptic and tangential as it can be, to turn that scale from $0.21 and $0.40 of every dollar to $0.00 to $0.03 of every dollar or some scale in between. (Yes, these are real numbers.)

The tax code, though its name doesn’t imply it, can help you make more money and pay less at the same time.

That’s fascinating reason number three.

Fascinating reason number four, and the last one, is that the tax rules touch everything from life to death and beyond. Andrew Carnegie, one of the world’s greatest capitalists and philanthropists, long dead, still adheres to the ever-changing U.S. tax code, and because of it, our society is made all the richer.