There can be no denying that the rise in popularity of republican presidential contender Herman Cain is due to his 9-9-9 flat tax plan. It’s also proof that American taxpayers strongly support a dramatic simplification of the federal income tax code.

Cain’s 9-9-9 tax plan is a brilliantly simple proposal to replace the extremely complex current tax code with a three part flat tax – 9% income tax, 9% corporate tax and a 9% national sales tax.

Steve Forbes, editor-in-chief of Forbes Media, estimates that the federal income tax code and all its attendant rules and regulations contain almost 10 million words.  It has changed 14,000 times since 1986; last year alone there were 500 changes to the federal income tax code.

IRS estimates that Americans spend more than 6 billion hours each tax year calculating and filing taxes.  By the tax year 2015, the cost to file taxes will cost Americans $483 billion a year.

Herman Cain’s 9-9-9 tax proposal, or flat tax, would replace all the current tax code with a single rate that would apply to all incomes after deductions.  His flat tax would eliminate taxes on savings, terminate the death tax. It would drastically cut the business profit tax and reduce tax loopholes.  Surprisingly, it would also do away with Social Security and Medicare payroll taxes.

Proponents of the flat tax say it would stimulate the economy and create jobs, would end crony capitalism and reduce lobbying in Washington.

Cain’s 9-9-9 tax plan has it’s challenges.  Introducing a national sales tax, on top of state and local taxes (that are already 9%) is a tough sale.  And if it did come to fruition, Washington politicians will always be looking for reasons to raise it.  This is already a problem in Europe, where some countries that already have their version of a national sales tax, called the Value Added Tax, have steadily increased the tax percentage.

Not everyone is gung-ho on the flat tax proposal.  Critics claim that the lack of the home mortgage interest deduction would hurt housing. They also point out that without a charitable contribution deduction, donations would plumment.

Both proponents and critics of a federal flat tax have to agree that the current federal income tax code is outdated, too complex, and too costly to continue.

Since Cain announced his 9-9-9 tax plan, other presidential contenders are coming with their own version of flat tax.

So what does all this mean?

The writing is on the wall, it’s just a matter of time before the flat tax replaces the current federal tax code.

The IRS announced important changes for the 2012 tax year.  Taxpayers can anticipate a rise in personal exemptions and standard deductions and a widening of tax brackets due to inflation.

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

• The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.

• The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.

• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, deductions, and related phase outs.

• For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

• The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.

• The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.

• For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts, see below

Medical Savings Accounts	Self-only coverage	Family coverage
Minimum annual deductible	$2,100	$4,200
Maximum annual deductible	$3,150	$6,300
Max out-of-pocket expenses	$4,200	$7,650

The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

Estate and Gift

For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.

The annual exclusion for gifts remains at $13,000.

Other Items

The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.
Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.

Taxpayers should take note of these impending tax changes.

source: irs.gov

No matter how bad things get, you can always count on the generosity of Americans to help those in need. In every American community, individuals step up to champion numerous causes by offering time, money and/or services. This year, you can help your neighbors and community by volunteering to provide free tax help.

The Internal Revenue Service is looking for individuals to help prepare tax returns during the tax filing season. Through the Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs, individuals can give free tax help to low-to-moderate income taxpayers, senior citizens and those with disabilities. It’s a great way to give back to your community.

Don’t think you have the expertise to help? Think again. You don’t need previous experience because volunteers receive specialized training and can serve in other capacities beside preparing free tax returns.

In addition, the IRS provides free tax law training, e-file training and all materials need to offer free tax help to those who need it. Not opnly that, tax help volunteers can pretty much work their own hours within the guidelines. Volunteers are expected to work 3 – 5 hours per week from mid-January through the income tax deadline, which is April 17, 2012. You should also know that the sites chosen are usually in your community centers, schools, libraries and other convenient locations.

Last year, more than 88,000 Americans made a difference by providing free tax help, preparing more than 3 million tax returns.

Why not consider helping your community by offering free tax help. Not only will you be helping your community, you will truly be making a difference in someone else’s life.

Isn’t that what Americans have always been about?

More information about the Volunteer Tax program can be found at IRS.gov.