Flat tax plans are the hot topic in the republican presidental candidate race. After seeing the popularity of Herman Cain skyrocket after his proposed 9-9-9 flat tax, Texas governor and presidental candidate Rick Perry has proposed his own flat tax plan.

Perry has proposed his own flat tax plan that allows taxpayers the option to continue using the current tax code or pay a flat tax of 20%. Even though the details of his flat tax strategy hasn’t been announced, the tax plan cannot work.

In summary, the Texas governor’s flat tax plan would give taxpayers a choice between filing taxes under the current tax code and an flat tax of 20%. Those who opt for the flat tax could maintain their mortgage deductions if they earn less than half a million dollars, about 99% of taxpayers. Perry’s flat tax plan would allow taxpayers to declare exemptions of $12,500 for each family member.

At first glance the plan might look appealing but it falls short because it won’t foster growth and it would send the federal deficit even higher.

The advantages of implementing a flat tax is to encourage individuals and corporates to invest in businesses instead of looking for tax breaks and tax loopholes. By offering taxpayers the option to choose between a 20% flat tax and the current tax code, big businesses will continue to rely on their tax accountants to file under the current system.

Rick Perry’s 20% flat tax proposal appears to be nothing but a knee-jerk reaction to Herman Cain’s 9-9-9 flat tax plan.

I wonder if the governor read his plan and critiqued it with his tax accountants before announcing it!

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

You can get tax help, ask tax questions, learn tax facts, and get information from the IRS in several ways. Whether it’s by phone, mail, online, or face-to-face, the Internal Revenue provides the tax help that you need.

Here are the options available to taxpayers for resolving issues with the IRS:

The Taxpayer Advocate Service

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers unable to provide essentials like food, housing and transportation; who are seeking tax help or trying to resolve tax problems; and those who believe an IRS procedure is not working as it should. Here are some tax facts about the Taxpayer Advocate Service:

• The Taxpayer Advocate Service is your voice at the IRS.
• TAS is free, confidential, and tailored to your tax needs.
• You may be eligible for the tax help service if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere.
• This IRS tax service helps individual taxpayers and businesses whose problems are causing financial difficulty or significant cost, including the cost of hiring professional help, like a tax attorney.
• TAS employees know the IRS and how to navigate it. Taxpayers who qualify for the service will be assigned an advocate who will listen to your problem, understand how to resolve it, and follow through until the resolution of the tax problem.
• There is a tax advocate in every state, the District of Columbia, and Puerto Rico. You can visit the IRS website www.irs.gov/advocate to find your local Taxpayer Advocate.

Low Income Taxpayer Clinics (LITCs)

The Low Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. LITCs are independent from the IRS. Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. If an individual’s native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities.

Free Tax Services

Taxpayers who want to learn about the various IRS services and resources, should refer to IRS Publication 910, IRS Guide to Free Tax Services. The guide includes free tax information from the IRS, publications, services, and education and assistance programs. Taxpayers can also get facts about taxes.

Free Help With Your Tax Return

Free help in preparing your return is available nationwide from IRS-trained volunteers. The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers and the Tax counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Many VITA sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. To find the nearest VITA or TCE site, call 1-800-829-1040.
As part of the TCE program, AARP offers the Tax-Aide counseling program. To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP Tax-Aide online.

Internet

Many taxpayers prefer using the IRS website for getting IRS tax help and answers to their tax questions. Using the IRS website, taxpayers can also:

• Efile.
  Find out about commercial tax preparation and efile services available free to eligible taxpayers.
• Check the status of your tax refund.
  You can go to IRS.gov and click on Where’s My Refund. Wait at least 72 hours after the IRS acknowledges receipt of your efiled return, or 3 to 4 weeks after mailing a paper return. Have your tax return available so you can provide your social security number, your filing status and the exact amount of your refund.
• Download tax forms, instructions and IRS publications.
• Order IRS products online.
• Research your tax questions online.
• Discover interesting tax facts
• Search publications online by topic or keyword.
• Use the online Internal Revenue Code, regulations, or other offical guidance.
• Figure your withholding allowances using the online withholding calculator.
• Determine if Form 6251 must be filed by using the Alternative Minimum Tax (AMT) Assistant.
• Sign up to receive local and national tax news by email.
• Get information on starting and operating a small business.

Phone

The IRS provides tax help and services via phone. Call the IRS to:

• Order forms, instructions and publications by calling 1-800-TAX-FORM (1-800-829-3676).
• Ask your tax questions and get tax facts from IRS experts, by calling 1-800-829-1040.
• Solve tax problems
  You can get face-to-face help solving tax problems every business day at the IRS Taxpayer Assistance Centers. Call your local Taxpayer Assistance for an appointment. To find the one closest to you go to local Taxpayer Assistance.
• Get tax help using TTY/TDD equipment
  Call 1-800-829-4059 to ask tax questions or to order tax forms and publications.
• Access TeleTax topics
  Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.
• Get tax refund information
  To check the status of your tax refund call 1-800-829-1954 or 1-800-829-4477.
• Find out the status of other refunds
  Call 1-800-829-1040 to check the status of a prior-year refund or amended tax refund.

Walk-in

You can walk in to your local Taxpayer Assistance Center every business day for expert tax help. No appointment is necessary.

Mail

You can send your order for forms, instructions, and publications to the address below. You should receive a response within 10 days after your request is received.

Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613

DVD For Tax Products

You can order Publication 1796, IRS Tax Products DVD, and obtain:

• Current-year forms, instructions, and publications.
• Prior-year forms, instructions, and publications.
• Tax Map: an electronic research tool and finding aid.
• Tax law frequently asked questions. 2011.
• Tax Topics from the IRS telephone response system.
• Internal Revenue Code—Title 26 of the U.S. Code.
• Fill-in, print, and save features for most tax forms.
• Internal Revenue Bulletins.
• Toll-free and email technical support.
• Two releases during the year.
  The first release will ship the beginning of January 2011.
  The final release will ship the beginning of March 2011.

Purchase the DVD from National Technical Information Service (NTIS) at ww.irs.gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee).

source: irs.gov