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The IRS beat up Rocky Balboa harder than
Apollo Creed ever could.
Rocky Balboa, the main character in the boxing movie Rocky, gave the fight of his life when boxing champion Apollo Creed invited him to be his challenger. Even though Rocky was celebrated by fans for his incredible effort, the victory was ultimately awarded to Apollo, who had beaten Rocky up so bad that at the end of their fight Rocky was taken to the local hospital for eye surgery.
After such an incredible beating, Rocky may not have have realized an even tougher opponent was about to show up.
The IRS can bring the toughest people to their knees.
Here is an excerpt from Rocky when Rocky's former boss Tony Gazzo asks him how he would like to invest the money he won for fighting Apollo:
Tony Gazzo: Now listen. How much money did you make in your last fight? I mean how much money did you clear?
Rocky: About 37 grand.
Tony: I know. Taxes kill ya.
Pretax deductions: your paycheck's best defense against the IRS.
Before Rocky was even handed his winnings the IRS took their cut, and the same thing happens to millions of people every week on payday. Before your employer hands you a check the IRS gets their share of your pay. However, there are many ways to greatly reduce the amount the IRS gets.
Pretax deductions are deductions from your gross pay (the amount the IRS taxes). Many items, such as contributions to a health savings account or medical insurance payments, can be deducted from your gross pay before the IRS taxes it. Taking advantage of as many of these pretax deductions as possible allows you to lower your gross pay which in turn means your tax liability will be lower.
Examples of 2010 pretax payroll deductions:
-Employer-sponsored retirement plan
-Health Benefit Premiums (No limits)
-Vision and Dental Care Premiums (No limits)
-Flexible Savings Accounts for Health Care (No IRS limit, limits set by employer)
-Flexible Savings Accounts for Dependent Care ($5,000)
-Health Care Savings Accounts ($3,050 for self, $6,150 for family)
-Commuter Costs ($2,760 limit for parking or transit)
Learn more about many of these options here.
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