As an American you are responsible for paying taxes, however why should you pay more than your fair share? Pay what is your responsibility and no more.

In fact, learn “How TOO” to reduce the amount of taxes that you are responsible for. In America there are two very distinct tax systems. These tax systems are defined in the Tax Code the IRS uses as defined by Congress.

Tax System 1
The Employee Working for Paycheck

For most Americans we refer to this as the average tax payer. The Tax System 1 tax payer has a regular job that earns money and pays their taxes; based on their hours worked, how much they told the IRS to take out every paycheck, this is STANDARD W-4 form.

As a Type 1 tax payer, taxes are deducted every time you get a paycheck and then at the end of the year the taxpayer does a tax filing and either gets taxes back or pays more.

This is best summarized as a tax payer;

1. who works to earn a paycheck,
2. pays taxes on the paycheck money earned and
3. then lives on the remainder

Tax System 2
The Employee Who Has a Home-Based Business

This is the tax payer that a regular job and operates a home based-business. The Type 2 tax payer has a regular job that earns money and pays taxes, based on their SPECIAL W-4 filing.

This special filling, is how you complete the W-4 form, allows the tax payer to pay less taxes per paycheck and use this money to pay for their home-based business.

Less taxes are deducted every time they get a paycheck and then at the end of the year the taxpayer does a tax filing and uses their home-based business expenses to off-set the tax liability.

This means that you the tax payer, normally pays minimal taxes at the end of the year.

This is best summarized as a tax payer;

1. who works to earn paycheck and an additional income,
2. pays for their expenses related to the business and then
3. pays taxes on what is left.

To learn more about how you can use your tax dollars to finance your home-based business read the following article: How to Use the W-4 Program