The Herman Cain Tax Plan

The Republican Primaries are in full swing and, no big surprise here, the state of the economy is the focus of their campaigning. So, just what do these candidates think we should do about the state of our tax system? Every week, I will cover a candidate’s tax plan. This week, I will discuss the Republican frontrunner, Herman Cain.

Just What Is 9-9-9?
Herman Cain definitely has the most straight forward tax plan out of all the candidates. A small paragraph can completely sum up the 9-9-9 tax plan. It’s a 9% business flat tax, 9% personal flat tax, and 9% national sales tax. Most people hear that single digit percentage and think it will save them a great deal of money and complications. Unfortunately, that’s not true.


Currently, the corporate tax rate is close to 40%, and Cain intends to drop it down to 9%. He also will completely eliminate employee payroll taxes with this tax plan. So, just how will he make up for this huge drop? With your personal taxes and a new national sales tax!

Every single American will be expected to pay 9%. Currently, the rather small percent of our country considered the wealthiest citizens are paying somewhere around 35% of their income in taxes. So, this would be a greatly appreciated tax cut for them.

However, 49.5% of our country pays absolutely no taxes at all. Also, 84% of taxpayers pay less in personal taxes than they would with this plan. And, the only two deductions that would be allowable would be charitable donations and living in the inner city (what he refers to as the “empowerment zone”). You can see how suddenly getting 9% of the income that half the country wasn’t giving before would make up for the dramatic business tax cut.

The brand spanking new 9% national sales tax may not sound that bad. However, take into account that this does not wipe out your local and state sales taxes. That’s right! That’s an extra 9% added onto everything else. On top of that, experts say that this will actually hit the lower and middle classes hardest. Not all that surprisingly, the wealthy spend a much smaller percentage of their money than those with a smaller income.

Will It Work?
If the 9-9-9 tax plan works, it should actually generate $2.16 trillion. On paper it looks like it could greatly lower the national debt. However, it has not been taken seriously at all by most tax experts. Many of them refer to it as a pizza special, referring to Cain’s background as a pizza chain businessman. Others have pointed out that the 9-9-9 tax plan is remarkably similar to the video game Sim City 4 Default Tax Plan.

Also, there is the fact that Herman Cain was hit with a tax lien himself in 2008 for a two year old Georgia state tax debt. Even if he had a valid excuse for not paying that year (he was treating stage 4 cancer), it does seem unlikely that he is a tax expert. He does have consultants, but his chief financial advisor is an investment banker with a Bachelor’s in accountancy. There is a big difference between that and an economist. There is an even bigger difference between that and a nationally acknowledged economist. And, the leading economic experts all seem to agree that Cain’s plan simply won’t work.

Cain doesn’t even see his 9-9-9 tax plan as a permanent solution either. He only plans on using it for a year or two. After that, he feels that the country should revert to the FairTax plan proposed by Leo Linbeck Jr. in 1996. The FairTax plan has been renamed by many as the Flat Tax plan, because many economists also believe that this plan will hit the poor and middle class the hardest.

As you can see, Cain’s 9-9-9 tax plan does have its benefits. However, it seems that it would hurt more taxpayers than those it helped. However, it is pretty rare that a candidate actually employs the tax plans he touts after he has become president.

News About Your Tax Deductions!

If you are even thinking about tax deductions right now, it’s because you are late filing your 2010 tax return. Maybe you are the plan-ahead type and are considering what tax deductions you may use on your 2011 tax return. But, I think it is safe to say that no taxpayer is thinking about tax deductions for 2012. As usual, the IRS is two steps ahead of us. They are already working on 2012 tax deductions. While this seems very far into the future, this is actually right about where the IRS should be in its planning stages.

I tend to post some pretty scary stuff here, but it looks like I have some good news this time. When you file your 2012 tax returns, you can look forward to using increased standard tax deductions! And, your personal and dependent exemptions will be raised to $3,800. On top of all of that, the income threshold to enter into a higher tax bracket has been raised.

If you’re wondering if these new standards will save you from a hefty 2012 tax debt, don’t get your hopes up. At most, the tax deductions have been raised a few hundred dollars. And, you only have another $1,700 of income before you enter a higher tax bracket. These changes will mostly affect people who will owe little in tax debt or be owed a refund for 2012.

Honestly, if you think that tax deductions play a huge part in preventing tax debt, you are headed in the wrong direction. Unless you are forking over a tremendous amount of your income to charities, tax deductions can only save you a small amount on your taxes. If you owe more than $10,000, it has more to do with your income and how much tax was withheld.

The smartest taxpayers make sure that tax season isn’t the only time they are sending what is required to the IRS. If you are a regular employee, you need to make sure that your employer is taking out the correct amount of taxes. If you are self-employed, you should be sending estimated payments every quarter. If you withdraw from a 401K or IRA, you need to talk to a tax professional and pay the correct amount of taxes on that. Those tips combined with the right use of tax deductions may prevent you from owing at all. You may even get a refund!

If you already have a pretty high tax debt, tax deductions won’t cut it down. You need help from a tax debt professional. There are plenty of tax programs out there that keep the IRS out of your finances, assets, and life! My Hit Squad Team is here to help you figure out which ones will really work for you!

In Case You Missed Your IRS Extension Deadline

For most taxpayers who filed for an IRS extension, the deadline came and went this week. If you didn’t file your tax return in time, you may be feeling scared right now. Don’t get scared. Take action! It is never a good idea to simply bury your head in the sand, if your tax issues get more difficult. You need to really examine why you are in the situation you are in and then you can make an action plan. I’ll help you out by asking you two questions:

Why did you file for an IRS extension?
If you filed the IRS extension simply because you knew you didn’t have time to do it correctly, then you filed for the right reason. If you filed an IRS extension because you knew you were going to owe, then you filed for the wrong reason.

An IRS extension is an IRS extension to file and not an IRS extension to pay. When you filed for an IRS extension, you should have sent a check for the amount you estimated you would owe. If that number was wrong, you would either have to pay the IRS more money or the IRS would owe you. If you didn’t make a payment before April 15th, you are going to owe penalties and interest now too.

Why did you miss the IRS extension deadline?
Did you simply just run out of time? That’s understandable. Some tax years are more complicated than others and life can get in the way of IRS paperwork sometimes. If you just need more time to file, just keep working on it. Yes, you may owe a Failure to File penalty now. However, if you get your tax return in and have it done right, you’re probably saving yourself from more painful headaches in the future.

If you missed the deadline because you just didn’t know how you would pay your debt, you have more work ahead of you. First of all, just get your return filed. The IRS is expecting a tax return from you now and, by not filing it, you are waving a giant red flag in their faces. If you can’t pay your whole tax debt, send what you can. Then, figure out how you are going to pay the rest.

There are a lot of tax programs out there for a lot of different situations. Start researching them. Better yet, consult a tax professional. My team is available to discuss your tax situation and help you figure out the best way to handle your missed IRS extension deadline.

The American Jobs Act & Your Small Business Payroll Taxes

What the American Jobs Act means for Payroll Taxes
Obama proposed on September 9th, 2011 to cut payroll taxes as part of his American Jobs Act. He proposes to cut payroll taxes down to 3.1% for all employers and declare a payroll tax free holiday for any business that adds new workers or increases the wages of their current workers. This would help regular taxpayers take home more money and dramatically decrease what employers have to shell out to the IRS on a quarterly basis.

But don't get too excited...
While it sounds like this could significantly improve tax matters for small business owners, you still need to be smart when it comes to your payroll taxes. I'm not saying that you should assume that your IRS tax issues will never get easier to handle. Instead, I'm saying that you should remember the classic military phrase "Prepare for the Worst and Hope for the Best." You will never be fully protected from IRS problems unless you prepare for those that could possibly arise.

Remember, Obama is still pushing for the cut in payroll taxes. It hasn't passed yet. Right now, you should be prepared to pay the current 4.2% that is in place for payroll taxes. If the American Jobs Act does pass, it should encourage you to hire more employees and reward some of your current employees with better pay. Just don't go crazy with it.

So, what should you?
Plan ahead! How will adding new employees and providing better pay to current employees help your business grow? What could be the drawbacks? If you can project that your company's profits will grow enough to cover in the long rung what a temporary payroll tax is covering now, then you are making some great decisions!

If you need help with your payroll taxes, you need to contact the best in the industry. Not only will the Hit Squad liberate you from your tax problems now, we will arm you against tax problems later!

Marijuana Clinic Taxed Like An Illegal Drug Trafficker

It is amazing just how aggressive the IRS gets when it comes to business tax. They know that’s where they’ll collect the BIG MONEY! Now the Federal government is using the IRS as a weapon against businesses that work in the medicinal marijuana industry.

A medicinal marijuana clinic in Oakland called the Harborside Health Center was recently slapped with a $2.4 million tax debt. An audit recently finished for tax years 2007 and 2008; disallowed all of their expenses. Why? There’s a tax code from 1982 that states you can’t claim cost deductions on your business tax returns, if your business traffics illegal drugs. 

Steve DeAngelo, the CEO of Harborside Health Center, believes the IRS was out of line. His argument is that a medicinal marijuana clinic is legal and not a drug trafficking organization. In fact, even the auditors in charge stated that all product expenses were properly deducted.

 DeAngelo has hired a tax attorney and has until December 22^nd to contest the audit findings. He’ll also need to prepare for more audits on 2009 and 2010. While DeAngelo is concerned with the government’s threats to shut down his business, he doesn’t seem to be reluctant to pay what he feels he owes in business tax. Just last month, Harborside established itself as one of the top ten taxpayers in Oakland. DeAngelo even stated he was delighted to contribute to his community.

The IRS is not going to stop with Harborside Health Center. They have already begun auditing other medicinal marijuana dispensaries. The people running these operations seem to be genuinely concerned that they will no longer be allowed to operate and that their patients will be left out in the cold.

These recent IRS audits coupled with the Federal government’s threat to seize any property being used for marijuana production have caused a big ruckus among legalized medicinal marijuana supporters. Even state officials are writing the Senate regarding this. Advocates argue that forcing dispensaries to shut down with outrageous business tax bills will only cause illegal drug trafficking. 

Whether you believe marijuana should be legal or not, one thing is for certain: There doesn’t seem to be a limit to what the IRS will do to collect on business tax. If they can shut down an entire industry simply by performing audits, imagine what they can do to your business. This is why it’s important to be armed with information and work with a tax representation firm.

If you are having business tax problems , you need the biggest guns in the industry. That’s what the Hit Squad is here for. Don’t let the IRS shut down your doors and your dreams. We can help you with your business and payroll taxes, and keep the IRS away!