DARRIN T. MISH: Welcome, and good morning to the IRS Solution Attorney show. I am THE IRS Solution Attorney, Darrin T. Mish.
KATRINA MADEWELL: I am your co-host Katrina Madewell. Thanks for joining us this morning. I hope everyone is doing great after the Thanksgiving holiday.
DARRIN T. MISH: Oh yeah, but this is the first time back live in several weeks. 3 weeks at least, right?
KATRINA MADEWELL: I know, yes. We have been pre-recorded and we aired some of those shows over the holiday break.
DARRIN T. MISH: Some are reruns, quite frankly, but pretty exciting, Thanksgiving happened. There was this little thing that happened, what was that November 8th?
KATRINA MADEWELL: Yes that was my birthday. That is not the answer you were looking for, was it?
PAT GEORGE: Are you telling me you guys have not been here since the then?
KATRINA MADEWELL: No, we’ve been here since then haven’t we? Wait, maybe we haven’t. Oh, yeah, I forgot we have not.
PAT GEORGE: No.
KATRINA MADEWELL: Election day was the last time we were here live for your show anyway.
DARRIN T. MISH: No, we weren’t, were we here on election day? Maybe we were I don’t remember but, anyway, we have not been here since the election and so…
PAT GEORGE: Election day was a Tuesday.
DARRIN T. MISH: Ok, so that’s a Tuesday so…
KATRINA MADEWELL: Oh no we weren’t.
DARRIN T. MISH: So, we weren’t here and…
PAT GEORGE: Takes a long time for her to recover from her birthday celebration.
DARRIN T. MISH: Or maybe from the results of the election. We will never know.
KATRINA MADEWELL: I’m still celebrating. Today’s only December 1st. I get a birth month, Pat.
DARRIN T. MISH: And so today’s topic of the show is going to be all about how the President Elect Donald Trump. Donald J. Trump and His Tax Plan Will Affect You and Other Ordinary Americans.
KATRINA MADEWELL: And since this show is entirely all Darrin’s idea I’m going to invite you to call in during the show at 888-404-1010, 888-404-1010. Pat George has had this mischievous look on his face pretty much all morning since we’ve been here, so, I expect him to say just about anything during the show.
DARRIN T. MISH: So, there’s this natural predilection to always think that the grass is greener on the other side, right? I think pretty much no matter…
KATRINA MADEWELL: That’s with everything in life isn’t it?
DARRIN T. MISH: Yeah, pretty much. No matter what job you have, you always kind of eye this other job that you would really rather have or you think you would rather have. I actually think that I have it really pretty good. My life’s pretty good I don’t have to work too many hours. I think I am fairly compensated for my efforts, but I’ve always secretly wanted to be a political commentator. I think that that would be a lot of fun so I’m going to try to resist that urge today too much.
KATRINA MADEWELL: So, Darrin’s going to practice a little on the IRS Solution Attorney show. Fun.
DARRIN T. MISH: Well, I’m not going to….
KATRINA MADEWELL: It is good radio, though. Who doesn’t want to hear how the newest President-elect you know how that will affect your taxes.
DARRIN T. MISH: Well, of course, because you know the President, I used to think this before President Obama, I used to think well how much can the President of the United States really impact my life? Now he can impact the country, he can impact world affairs, there can be wars or not wars, world economy, that kind of thing. But how much can the President actually impact MY life? I never really experienced that until Obamacare kicked in and in just the past year…
KATRINA MADEWELL: Well that affected everybody’s life.
DARRIN T. MISH: Right and in the past year my health care plan was actually cancelled, a health care plan that I really liked that I think that I was promised that I could keep and that I could keep my doctor and my, you know my rates would go down…
KATRINA MADEWELL: Well you could keep them but the rates were just a little higher.
DARRIN T. MISH: And essentially what happened to my health care insurance was the premium was going to triple and the deductible was going to go way up. We solved that, and we don’t have to talk about how we solved that, and it ended up being better in the long run not because of Obama care but in spite of Obama Care.
KATRINA MADEWELL: Yeah. I hate to say this but, unfortunately, I think it got voted in by people that didn’t have insurance or couldn’t get it. Maybe something preexisting. I understand that and it makes sense but I think unfortunately a lot of people that voted for it and voted for that President for that reason or whatever, I think the problem is it wasn’t what they thought it was going to be.
DARRIN T. MISH: Of course not. I don’t even think the Democrats would say that Obamacare turned out the way they wanted. The Democrats would always say, and I’m trying not to be too opinionated this morning, but the Democrats would always say that it didn’t go far enough. That’s always what the left is going to say. But I wasn’t really trying to engage in a long conversation about Obamacare other than that was the first time I ever personally experienced the President of the United States impacted my life personally.
KATRINA MADEWELL: Which makes sense. A lot of times it’s on a broader scale and it doesn’t so much trickle down that much at least where it affects you monthly.
DARRIN T. MISH: Right, exactly, or affects your pocketbook directly. So, that was the impetus or the reason that I came up with the show topic today was because I think this radical new tax plan is going to affect you, ordinary American, you know all in your day to day life.
KATRINA MADEWELL: So what’s the…
DARRIN T. MISH: If this goes through, probably in a good way.
KATRINA MADEWELL: So, what’s the meat and the potatoes? What is he trying to do? What’s the idea behind it? I clearly do not read up on politics perhaps as much as you have, even on this topic.
PAT GEORGE: Oh, do tell.
DARRIN T. MISH: So, basically I think that Trump feels that too few Americans are working and that to many U.S jobs have been shipped overseas and that too many you know middle-class families can’t make ends meet…
KATRINA MADEWELL: I think I would agree with all of the above.
DARRIN T. MISH: Yeah, I think he has been pretty vocal about that and often times quite inarticulate or maybe just, the guys like, the guys like a bull in a china shop. He just goes in there and he’s just thrashing around destroying stuff everywhere but I think that it….
KATRINA MADEWELL: He’s a little bit radical if he can calm that down he might do a lot of good.
DARRIN T. MISH: Well, he actually became you know somewhat more Presidential if you want to use that term, like in the month before the election he calmed down…
KATRINA MADEWELL: Yes he did, he did.
DARRIN T. MISH: And now he is back to like baiting flag burners and stuff. It’s really sort of an interesting cultural phenomenon in that he sends out a Tweet. By the way, his bypassing of the media is absolutely brilliant…
KATRINA MADEWELL: I love Twitter.
DARRIN T. MISH: So, he sends out a Tweet that flag burners should lose their citizenship, by the way, which is impossible, and either lose their citizenship or go to jail for a year. Ok, and then I think he knew that that would cause a bunch of radicals to go out and burn flags all across the country which further sort of ignites his base in support of him. I think most of America is actually somewhat offended by flag burning.
KATRINA MADEWELL: Well, think about it why do all typical, and I say this cause I don’t think we are typical media, but why do all typical media people do stuff like that? To get attention.
DARRIN T. MISH: Absolutely and the guy’s just brilliant. I think it has to do with the fact that he’s been on TV for a decade or whatever in the show The Apprentice which, by the way, I liked a lot. I thought there was a lot of business lessons in every single episode of that show and I think he was really pretty fair. I never saw any favoritism towards any race or class or gender or anything. The guy just wants to make money. I mean at least in the context of that show.
KATRINA MADEWELL: Considering the amount of debt our country owes, it’s not a bad thing.
DARRIN T. MISH: No, I think it’s a great thing, I think that this most recent iteration where he helps save those thousand jobs at the Carrier Air Conditioning plant, is really sort of interesting. I can’t imagine President Obama trying to do that.
PAT GEORGE: And you know what’s surprising, also? That he didn’t win Indiana.
DARRIN T. MISH: No, well, yeah, Trump won Indiana.
PAT GEORGE: Did he?
DARRIN T. MISH: Yeah, for sure.
PAT GEORGE: I thought he did not.
DARRIN T. MISH: Yeah, Mike Pence is actually the governor of Indiana.
PAT GEORGE: Ok, I’ve, maybe I was watching that early and I didn’t…
DARRIN T. MISH: It would be even more fascinating is these jobs were in Illinois or New York or California.
KATRINA MADEWELL: Well, I know right now he is visiting all those swing states that you know helped him win. That’s what he’s doing now. I did see that in the Twitter feed.
DARRIN T. MISH: So, basically Donald Trump says he want’s to accomplish four simple goals with his tax plan and here they are: Number 1. Tax relief for middle-class Americans. In order to achieve the American dream, let people keep more money in their pockets and increase after-tax wages.
KATRINA MADEWELL: I mean who doesn’t, that appeals to everybody.
DARRIN T. MISH: I would think. The second one is, simplify the tax codes to reduce the headaches Americans face in preparing their taxes and let everyone keep more of their money.
KATRINA MADEWELL: Hey this is a really good topic for you to chime in on, Darrin, because simplify the tax code, that alone right there. I mean, geez, you read this crap every day, the average person like me or Pat or anybody listening we’re like, yeah, this IRS crap is like, how thick is that book exactly?
DARRIN T. MISH: In the next segment we are going to deep dive into each one of these things and how he intends to accomplish these and they are amazing I mean some of these things actually really could hurt my business and you know what I hope they do in the sense that our tax code is ridiculous, the reason that people need help at my level in my experience level and my education level and intelligence and all that stuff is because the system is just too darn hard to navigate…
KATRINA MADEWELL: Yes.
DARRIN T. MISH: It’s not supposed to be like that. What’s happening….
KATRINA MADEWELL: It’s jacked.
DARRIN T. MISH: Yeah, it’s not supposed to be like that. So number three is, grow the American economy by discouraging corporate inversions adding a huge number of new jobs and making America globally competitive again. So, corporate inversions are where you have a carrier, for example, and they are going to go ahead and create a foreign subsidiary in Mexico. In this example, they are going to do all their manufacturing for a certain product in Mexico and basically that money is going to stay offshore because the way the American tax system is, if that money comes back it gets taxed at the highest corporate tax rate in the World. It makes no sense.
KATRINA MADEWELL: But it happens to a lot of people and there are a lot of jobs that are being moved outsource. I mean even myself I have a lot of staff here, most of my staff is here but I have two VA’s in the Philippines.
DARRIN T. MISH: Yeah of course. I mean…
KATRINA MADEWELL: And they are amazing. I would move them here they are so good.
DARRIN T. MISH: Yeah, I understand and, and but even more important is that we have, you know middle America and the blue collar which is the foundation of the middle class in this country and the middle class is really the foundation of this country. And manufacturing historically has been really big in blue-collar you know in the blue collar area of work and manufacturing is leaving because it’s cheaper to do everything in China. For goodness sake, they are gonna ship…
KATRINA MADEWELL: It is.
DARRIN T. MISH: They are gonna ship chickens over to China have them clean and processed and ship them back and it’s cheaper to do it that way instead….
KATRINA MADEWELL: All I know is Corona is way cheaper in Mexico than when you buy it here that’s all I know.
PAT GEORGE: And of course he’s always right, he did win Indiana 57-37.
KATRINA MADEWELL: No Pat…
PAT GEORGE: That is why we listen to you.
KATRINA MADEWELL: So number four, which is my favorite I will have to announce that one if you don’t mind Darrin and that’s that number four is he doesn’t want to add to our debt and deficit which are already just off the chain ridiculous.
DARRIN T. MISH: So of those four points I don’t see how anyone can disagree with those things. Now, they may disagree that he can accomplish these things and I’m somewhat skeptical myself but those four points I think are rock solid.
KATRINA MADEWELL: If you want to talk about it, we are here to listen. 888-404-1010. Darrin Mish will be happy to debate this with you 888-404-1010. Back in a minute.
KATRINA MADEWELL: Welcome back, you are listening to the IRS Solution Attorney show.
DARRIN T. MISH: I am the IRS Solution Attorney and today’s Political commentary, host…
KATRINA MADEWELL: That’s Darrin T. Mish.
DARRIN T. MISH: Darrin T. Mish.
KATRINA MADEWELL: I thought you were going to forget your name there for a second. I’m Katrina Madewell your co-host for the show, Pat George back there always shaking it up, making a great show for us.
PAT GEORGE: You are talking about all of the Paupers how we are going to be as far as taxing on us with the new plan.
DARRIN T. MISH: Well, I will tell you the topic of today’s show is how Donald Trumps tax plan is going to change you know the tax situation or the tax structure or…
PAT GEORGE: Worry about the Paupers.
DARRIN T. MISH: How it’s going to impact the paupers, to use Pat George’s terms and this one might directly apply to you…
PAT GEORGE: I don’t doubt it.
DARRIN T. MISH: The first one is…
KATRINA MADEWELL: Well, to recap what we talked about in the first segment, it was the tax relief for middle-class Americans, simplifying the tax code, growing America’s economy by discouraging corporate inversion and then not adding to the deficit, so we are going to go into each one of those yes.
DARRIN T. MISH: The debt or the deficit and it’s important to know that the debt and deficit are two different terms that mean different things. The debt is how much total debt does the country owe which is I think we are at 20 trillion dollars a year now…
KATRINA MADEWELL: It makes me want to throw up.
DARRIN T. MISH: 20 Trillion dollars total now. But the deficit is how much are we short each year and so yeah it’s great to cut the deficit but we haven’t cut the debt in like decades.
KATRINA MADEWELL: It’s all red.
DARRIN T. MISH: It’s all, it just continues to go up and up and up but this first. The way he says he’s going to accomplish his first goal, which was to lower taxes basically from middle-class Americans, is if you are single and earn less than $25,000, which doesn’t apply to you, Pat, or if you are married and…
PAT GEORGE: It could if I could save a lot of taxes.
DARRIN T. MISH: Or if you are married and jointly earn less than $50,000 you are not going to pay any income tax what so ever. That’s actually pretty huge.
KATRINA MADEWELL: Is that poverty though or is that still middle class? $50,000 a year, two people?
DARRIN T. MISH: It’s not, it’s, I think it’s lower middle class but…
PAT GEORGE: It’s not going on vacation I can tell you that.
DARRIN T. MISH: Yeah it’s not.
KATRINA MADEWELL: But I mean that’s not. If you think about the traditional American family they’ve got two or three kids and if you are living on $50,000 a year, that doesn’t go very far.
DARRIN T. MISH: Well, listen to this stat because it’s amazing. That alone would remove nearly 75 million households from the tax rolls. That’s an amazing statistic. I mean that’s households. That’s not even 75 million people. That’s a good number of people. If you think about the inner cities and even poorer suburban areas, there’s probably lots and lots of families living on $50,000 or less. I think the median income is only around only $50,000 so by definition that’s half, that would be half of the country.
KATRINA MADEWELL: That is middle class. So how do you, I guess what I’m, I can’t spit it out now go ahead.
DARRIN T. MISH: Basically what they are saying is, for these people who owe $50,000 or less as a married couple there’s going to be a one-page form that you fill out with the IRS and basically it’s Hey I don’t owe any tax I win.
KATRINA MADEWELL: That’s simplified tax right there.
PAT GEORGE: But that’s people making $50,000 how many people do you think are going to fudge making 60-65 that are going to well all I need to do is get down to around 49 here and I’m not going to have to pay anything.
DARRIN T. MISH: And that Pat George is why I’m going to stay in business.
KATRINA MADEWELL: I think, yeah, they are going to make a stricter, agreed. So what I was thinking is, cause if this is 75 million households and he is going to completely abolish any income tax that they would pay, they have to make that up somewhere?
DARRIN T. MISH: Well, there’s a dirty little secret right now and that is that there’s a huge number of households in America that not only pay no income tax, but they get the Earned Income Tax credit. So, they earn so little money that not only do they not pay any Federal Income tax, but they get a tax refund of money they never paid. Sometimes the amount can be somewhere between $1,000 and $3,000. So that passed during one of my heroes Ronald Reagan’s administration and it’s turned into…
KATRINA MADEWELL: He was a good President.
DARRIN T. MISH: It’s turned into Federal welfare. Trump hasn’t said he is going to abolish that, but that could be one thing that gets abolished. Which is not going to be terribly popular in the poor areas. Right now, there’s this big rush in the inner cities and the, you know the poorer areas in late January early February to go file your tax returns and it’s not because they’re you know wanting to pay it’s because they are getting big refund checks.
KATRINA MADEWELL: That’s true and if you’ve ever stood in line outside of a welfare office or something like that, or seen it and heard some of the stories. We interact with a lot of people so we see a lot of things. It’s just ridiculous. You see a lot of these middle-class families that can’t get help, which should be meant for short term help not a way of life and that’s the problem.
DARRIN T. MISH: That is a problem, I agree. It’s not fair to the people who are actually on welfare if you think about it. Because welfare, not to get too political and not to be too controversial, but welfare, when it’s designed as a way of life is actually a trap, it’s not a benefit. What you are doing is you are killing all ambition to better yourself as the recipient of the welfare because good enough is good enough and when I think about people who are actually suffering on welfare, if you want to use that term, they are suffering because they don’t have any hope that their life is ever going to be better than living in the housing project with the subsidized housing with the food stamps, with the WIC and it’s just not right and those people need to be empowered to learn to be educated to, so that they could have a better life.
KATRINA MADEWELL: I would agree with that a hundred percent.
DARRIN T. MISH: It’s generational poverty and it’s not fair.
KATRINA MADEWELL: But it’s a hand up it’s not a handout that’s the problem.
DARRIN T. MISH: Yeah, it’s not fair to them because they have not ever been appropriately encouraged. I’m sure there are people who are listening to me and I’m probably making them so mad they are cross-eyed. Don’t drive off the road, it’s just one guy’s opinion that’s it’s generational poverty that’s been institutionalized and I don’t think it’s right. But the second way that Donald Trump is going to go ahead and implement his new tax plan he says is he is going to actually simplify the tax code and only have four tax brackets and they are pretty low.
KATRINA MADEWELL: But that’s fair, I mean, it’s when you think about it if you just basically like this is your tax bracket if you make this much money it is simple.
DARRIN T. MISH: Yeah, right now there are seven tax brackets and he’s going to reduce it down to four, he is going to have 0% which is what we just talked about, 10%, 20% and 25%. I think the current highest tax bracket right now is 30?
KATRINA MADEWELL: Five, isn’t it?
DARRIN T. MISH: 35 or 36% something like that and so it’s going to take it down quite a bit but he’s also going to eliminate the marriage penalty and the alternative minimum tax which is also called AMT and that’s going to give us as a country if this all works out the lowest tax rate since before WWII. Now, why is that good? There’s probably some people sitting there thinking well only the rich people are going to benefit from this because they are not going to pay their fair share which is a term that I hate by the way because…
KATRINA MADEWELL: They support the taxes.
DARRIN T. MISH: Well I don’t know…
KATRINA MADEWELL: For most of America.
DARRIN T. MISH: I don’t know what the exact stat is, but the richest 1% pay something like 90% of the tax revenue that comes into the treasury and so what is their fair share? Is their fare share a larger dollar amount or is it a larger percentage amount it’s just, just not a term that I am comfortable with. To me fairness means quality and why should the person who makes, who works really hard and takes all kinds of risks and makes a million dollars a year, pay a higher percentage of that then the person who sits on the couch all day.
DARRIN T. MISH: Well and small business in this country actually provides the vast majority of all jobs so the small business owner who takes a risk, you know risk is everything, man I can’t tell you how many times I’ve personally risked everything, laid it on the table and rolled the dice, I’ve lost, I’ve lost sometimes but I’ve won more times and that’s what, that’s why..
KATRINA MADEWELL: That’s what entrepreneurship’s about.
DARRIN T. MISH: Exactly, and that’s why there are people working for me at my office right now and their kids are going to school and they have car payments and insurance and gas and all of those things. It’s because of the risk that I have taken as an entrepreneur. I’m not trying to glorify myself. I’m just saying that we have to think about our society in the bigger picture. Small business owners employ a lot of people through their grit and determination, through their late hours, for staying up at the library all night when they are in grad school or whatever. And that’s the sacrifices that they made and the risk that they took.
KATRINA MADEWELL: And they have the student loans to repay that no ones helping them or they had to do without a lot of stuff while they were making the student loan payments so.
DARRIN T. MISH: Yeah, I am 49 years old and when I got out of law school I was 26 and I had owed over $150,000 in student loans. Those weren’t paid for 15 years. So if you think about it for 15 years there were financial decisions or things I could not do financially because I had these huge student loan payments.
I had a lot of friends of mine who didn’t go to law school who just got bachelor degrees and they were living in big houses and driving fancy cars and I was living in a little bitty house in a really kind of cruddy neighborhood driving smaller cars for a long time to help pay for those sacrifices for those decisions that I had made. Again I am not asking for any sympathy but it wasn’t until I was probably 40 years old that my income started to accelerate over where theirs were and it sort of started to even out.
KATRINA MADEWELL: Yeah, and you graduated law school at 26 you said?
DARRIN T. MISH: Mmm hmm, right.
KATRINA MADEWELL: So I mean that is a substantial amount of time.
DARRIN T. MISH: Right, whereas they were getting out of college at 22 or 23 and go right into the workforce so they had a head start so those are called opportunity costs and we all have opportunity costs so the decisions that we make, some of the decisions that we make lead to opportunities that we can’t pursue because of the decisions that we make.
KATRINA MADEWELL: I know the point is simplify the tax code too, but I think there should be more incentive for businesses. In your example, you want to hire a young new lawyer or young new doctor but you work for a lower amount of time but then they help knock out that student loan debt. There should be a lot more incentives like that for corporations to offer to do it and it’s a lot of opportunity. It’s a good learning curve for newer…
DARRIN T. MISH: Yeah, that’s kind of a cool idea and I don’t think, I don’t know that the Government should be involved in that but I like where you are heading with that where corporations…
KATRINA MADEWELL: If they give a tax…
DARRIN T. MISH: Yeah, yeah.
KATRINA MADEWELL: Credit or something for it.
DARRIN T. MISH: Exactly I like that idea quite a bit. When we come back we can talk about some of the other couple of ways that Donald Trump plans to achieve his goals to simplify the tax code and lower taxes for everyone.
KATRINA MADEWELL: We will be back in a minute. 888-404-1010. If you want to chime in we are live today in the studio unlike the last couple of weeks over the holiday. 888-404-1010 we will be back in a minute.
DARRIN T. MISH: Welcome back, I am THE IRS Solution Attorney Darrin T. Mish.
KATRINA MADEWELL: And I am your co-host Katrina Madewell. I think Darrin was waiting to see if I was going to talk first or if who’s going to jump in for your welcome back.
DARRIN T. MISH: So today we are talking about Donald J. Trump the President-elect and what his plans are to lower the tax, the tax, your taxes and how it’s going to impact you and whether or not he can do it.
KATRINA MADEWELL: Man if you miss this show, check it out in its entirety because it was a really good one.
DARRIN T. MISH: As a short recap, we were talking about what Donald Trump was going to do or he says he’s going to do to change the tax system the first thing is he is going to provide tax relief to more of the middle class in America. He is going to simplify the tax codes, reduce the burden in preparing your taxes which is one of the things that I think is really sort of unfair in the system, to be honest. We make quite a lot of money preparing tax returns but it really shouldn’t be this hard and the tax codes just been added onto for something like 8 or 9 years and that’s why it’s so darn complicated right now.
The third thing he said he was going to do was grow American economy by basically trying to keep American manufacturing jobs in America and by encouraging corporations to bring their manufacturing back on shore and lastly, he doesn’t want to add any more money to our debt or deficit. Now I don’t think he is going to be able to do that but I really like the idea.
KATRINA MADEWELL: That’s the biggest task on the list.
DARRIN T. MISH: And we need to start working on that. So in the last segment we talked about the fact that if you are single and earn less than $25,000 you are not going to pay any tax at all, if you are married and jointly earn less than $50,000 in tax or income you are not going to pay any tax at all and that he intends to simplify the tax code by eliminating some of the deductions or…
KATRINA MADEWELL: Wait, he is eliminating deductions or just changing to four brackets?
DARRIN T. MISH: No yeah I misspoke. He’s not, we are not going to talk about the elimination of deductions at this point he’s eliminating the marriage penalty and the alternative, alternative minimum tax. The marriage penalty is sort of interesting…
KATRINA MADEWELL: I was going to say, I don’t even know what the marriage penalty is?
DARRIN T. MISH: The marriage penalty is this, it’s bizarre. If you are married you actually pay taxes at a higher rate than if you are single.
KATRINA MADEWELL: So, you are telling me that I should be filing separate from my husband, I’m just saying.
DARRIN T. MISH: No. If you were, it’s just if you were married period. If you filed separate from your husband, you actually pay more in taxes.
KATRINA MADEWELL: Oh, lovely.
DARRIN T. MISH: So, yeah, you don’t want to do that, I don’t think. There are reasons why you might want to file separate that are current beyond the scope of what we are talking about here.
KATRINA MADEWELL: Is there any benefits to being single as opposed to being married as far as when you are filing?
DARRIN T. MISH: Oh, yeah you pay. You actually have a lower tax rate if you are single then if you are married. So remember we talked about the same sex marriage and all of that stuff and don’t you remember me chuckling and saying that they….
KATRINA MADEWELL: Yes.
DARRIN T. MISH: I’m not sure that they were quite understanding what they were asking for. If you are married you pay a higher tax rate and not only that if you are married and you don’t want to be married anymore you got to get divorced right? So it’s sort of interesting if…
PAT GEORGE: What is that rate, from what to what?
KATRINA MADEWELL: That is what I was thinking.
DARRIN T. MISH: It’s a few points, it’s a few percentage points. But traditionally….
KATRINA MADEWELL: You would think they would encourage it and make it less if you are married cause you have more to spend in the economy if you have double income family.
DARRIN T. MISH: Well, let’s put this in perspective. The tax code for decades has been used to engineer human behavior so we tax something that we want to happen less and if there is something that is happening to much then we tax it more to try and discourage people from doing that thing and a good example is the mortgage deduction right…
KATRINA MADEWELL: Are you saying they don’t want us to get married?
DARRIN T. MISH: I don’t know, it’s bizarre. So the mortgage deduction is there because the Government wants to encourage more home ownership because homeowners tend to keep their houses nicer, they are more stable you know all of those stereotypes.
KATRINA MADEWELL: Which, I’m a big advocate for that, I don’t want it to go away.
DARRIN T. MISH: Of course, being in real estate, I’m sure you are. And so that’s why the home mortgage deduction exists but I’m not sure, it’s only been in the last decade or 2 that the marriage penalty you know kind of ended up happening and it’s discouraging marriage and you can see that all across the country so anyway.
KATRINA MADEWELL: Well, the younger generation I can certainly see how that would definitely have an impact on them as well.
DARRIN T. MISH: For sure. So the third thing that Donald Trump said is that he was going to try and discourage these corporate inversions where companies are creating subsidiaries in foreign countries, sending those jobs overseas and keeping that money overseas. The way he says he is going to accomplish that is no business of any size from a fortune 500 to a mom and pop shop, to even just a guy doing freelance work you know on the side, is ever going to have to pay more than 15% of their business income in taxes. This lower tax rate makes corporate inversions unnecessary because America’s tax rate will be one of the best in the world if that actually occurs. I think that’s really interesting. Now let me explain why this is just not a give away to big you know to big business.
KATRINA MADEWELL: Well his motto is to make America great again and I see this drawing a lot of people back in that really want to live here.
DARRIN T. MISH: Yeah, a lot of times people will say well we should just tax the corporations and I understand the sentiment, I get it I understand why people say that but what happens when you tax a corporation? Well, the cost of the good or service provided by that corporation necessarily goes up, that’s how it works people.
You cannot tax a corporation more and not think that the prices for that good or service are going to go up because we have, I was thinking about this on the way to work today, we have this other bizarre part of the law that says that corporation are mandated by law to maximize profits to shareholders, particularly in public companies. So they, they have this competing structure you know these competing problems where people say well lets tax them more and the corporations like yeah but the law says I have to maximize my profits that means I have to raise my prices to account for these higher taxes.
KATRINA MADEWELL: That would be a conflicting tax code, would it not?
DARRIN T. MISH: It would be and that’s one of the reasons why it needs to be simplified because it’s kind of crazy right now. But I believe if you cut taxes, corporate taxes, more jobs will come back. I mean Apple is already discussing bringing their manufacturing of iPhones, like the one I have here in my hand back to California from China and the estimate that I heard on the additional cost to build this thing in California, which is a high you know expensive place for labor instead of China is like $20 a unit. Now would you…
KATRINA MADEWELL: That’s all it’s going to cost more?
DARRIN T. MISH: Yeah would you pay $20 a unit so that people could build these things in California?
KATRINA MADEWELL: Yes, I think everybody would, everybody would do it cause there is American jobs involved.
DARRIN T. MISH: As long as a culture both sides of the aisle, we get on board and we understand, no this is, this is Patriotism this is you know taking care of our of our own people, our country.
PAT GEORGE: I agree with a lot of this.
KATRINA MADEWELL: It’s scalable. You think about how much an iPhone is that’s the cost of a mini computer in your hand so $20 in that perspective is scalable.
PAT GEORGE: Maybe Samsung should have thought of that before the Note.
KATRINA MADEWELL: Listen, don’t even start, that’s like a whole debate in my office the whole Apple versus Android and I am not an iPhone user. I tried and it didn’t work.
PAT GEORGE: But I agree with a lot of this but I think we should leave the fortune cookies still where they are supposed to because if they bring them back to Alabama could you imagine the messages that will be in those fortune cookies.
DARRIN T. MISH: Well, I have an interesting story about fortune cookies, fortune cookies are not actually even, were not even invented in China and they don’t even use them in China. Fortune cookies were invented in San Francisco and are made in the United States.
KATRINA MADEWELL: How do you know this random, useless knowledge like do you study retarded trivia?
DARRIN T. MISH: I actually went to law school in San Francisco and so there’s a very, very large Chinese community there…
KATRINA MADEWELL: Ok, that makes sense.
DARRIN T. MISH: And some of the best Chinese food at least that I have had I have not been to China but, yeah Chinatown invented fortune cookies. So, the last thing that Donald Trump says that he is going to do, I think is pretty interesting too. He says that no family will have to pay the death tax. He believes that if you earned it and saved that money for your family that your family should get it not the Government. You already paid taxes….
KATRINA MADEWELL: Agreed.
DARRIN T. MISH: On the estate and you shouldn’t have to pay double taxation. Now wait now, the death tax rate is for the…the threshold is pretty high I think it’s a couple of million dollars. And so that doesn’t affect very many people but again you are primarily.
KATRINA MADEWELL: But think about the person that sacrificed a lot of stuff over the years to get to that amount of wealth.
DARRIN T. MISH: And I think that the best argument there is that it’s already been taxed why is it being taxed again?
KATRINA MADEWELL: Exactly.
DARRIN T. MISH: Which is one of the problems that I have with the fact that if you are retired now and you get Social Security retirement benefits if you earn over a certain amount of money then your Social Security becomes taxed, taxable and Bill Clinton did that and I really think that’s unfair because that was taxes that you already paid into the system and so why would you pay tax on taxes that you already paid in and it was already supposed to be a benefit for you, doesn’t make a lot of sense to me and hopefully Mr. Trump will figure out that that’s unfair and should be done away with as well.
PAT GEORGE: That is knucklehead thinking.
KATRINA MADEWELL: This discussion today has been awesome but my only question in the whole outline, is you know going back to number four, he wants to do stuff that doesn’t add to our debt, it doesn’t continue the deficit like how is he going to do that with the things that we talked about, did you pull any info on that or is that more homework for another day?
DARRIN T. MISH: I think that’s a really astute question. You are basically saying, ok, so we are going to lower taxes, How is that not going to add to the debt and deficit? The theory is, and it’s a theory that I would subscribe to, is that if you spur, I think that this plan will massively spur economic activity. I think our growth has been mired around 1% for 8 or 10 years now and the Trump administration is saying they think they are going to get it up to like 4% so that’s a quadrupling of our growth.
So the theory would be that this would spur so much economic activity people would be making so much more money they would be paying more taxes and the government would benefit from that. And we saw that happen in the Reagan Administration and George H.W. Administration as well, we saw when times were good, more taxes were paid. Actually Bill Clinton’s Administration as well you remember the dot com bubble and Clinton get’s a lot of credit for having a really great economy during his administration and he did have a great economy during his administration and as you recall, the deficit started to go down, there started to be surplus, there were some surplus years as well and that’s because there was so much economic activity that the tax, you know the taxes started to cut down on the spending.
KATRINA MADEWELL: Right, and if you don’t remember that or you can’t relate to it the same is true when the housing market collapsed that sparked a global economic meltdown and a lot of people still are not spending like they were before that time.
DARRIN T. MISH: And I feel sorry for, there’s a whole generation of young people, you know, that may be in their 20’s now that don’t remember a better economy than we have had for the last 8 or 10 years.
KATRINA MADEWELL: Right.
DARRIN T. MISH: They just don’t, they don’t know any better they were in grammar school, high school or whatever.
KATRINA MADEWELL: Well we see millennials who their parents lost their house and so they think home ownership is bad but they don’t get it.
DARRIN T. MISH: Boy, that’s sad.
KATRINA MADEWELL: It is.
DARRIN T. MISH: That’s really sad and I think that as a country we can do better and I’m not saying that Donald J. Trump is the savior, there’s a lot of things he does that just having to scratch my head.
KATRINA MADEWELL: But he got voted because he is different, people are tired of the same political BS and he is different than everything else that I have ever heard and that’s why he got elected you know it certainly is not for his personality cause I don’t think people like him in general as a person.
DARRIN T. MISH: We were talking at the break about how Trump won because he wasn’t part of the establishment for either the left or the right, he’s just this fresh, you know this fresh guy who kind of speaks his mind, what you see is what you get. We are also seeing that he is somewhat malleable, he’s been changing his opinions and that’s a little bit scary because we don’t know exactly where he is coming from. If this plan were implemented, I think that this plan could you know do wonders for our economy and help a lot of people’s lives.
KATRINA MADEWELL: So, Pat George put up here on the break this usdebtclock.org we are going to go ahead and push that on over to the IRS Solution Attorney Facebook page so you guys can have a quick look at it, it’s like I want to throw up looking at that.
DARRIN T. MISH: 19 trillion 9 hundred and 9 billion dollars and counting, I’m looking here and every couple of seconds another 500 bucks, actually it’s a lot more than that. It looks like maybe 25 or $30,000 a second.
KATRINA MADEWELL: We might even do a live stream for you guys and just throw it up there on the page so you can have a look as we get to the train wreck of the week next. It’s going to be a little bit longer than normal so we are going to come back with that after a few questions from our listeners is that fair enough Darrin enough time to do that? Maybe one question so Tweet it or call it @darrin_mish another day 888-get-mish you can reach him directly we will answer your questions on the air. We will be back in a minute.
KATRINA MADEWELL: Welcome back, you are listening to the IRS Solution Attorney show with Mr. Darrin Mish.
DARRIN T. MISH: THE IRS Solution Attorney.
KATRINA MADEWELL: And if you missed the part the earlier part of the show catch the whole thing on his podcast is it what’s the name of that thing now these days?
DARRIN T. MISH: Well the podcast will be called The IRS Solution Attorney.
KATRINA MADEWELL: You changed the name, right? You can search for Darrin Mish.
DARRIN T. MISH: You can search for Darrin Mish and it will come up on iTunes and we do have listeners out there to the podcasts and on the app as well. So that’s pretty exciting.
KATRINA MADEWELL: Great interesting topic like not so straight IRS but there was a little part we will have to maybe add some more of that to another day, one of those topics that we talked about.
DARRIN T. MISH: Well, as these things start to unravel we will certainly have loads and loads of show content because as the formal plan actually is rolled out and starts to be voted on and maybe approved then we will have more to talk about how these changes may impact you as just an ordinary person walking around wanting to pay less tax. I don’t know that many people who want to pay more tax, I’ve spoken to people in my life who believe that taxes should be higher but they never want them to be higher on themselves. They always want it to be higher for somebody else.
KATRINA MADEWELL: Somebody else, somebody else will pay it.
DARRIN T. MISH: And this cuts across all economic lines too, sometimes I will speak with people who think that they are the little guy and they are only earning half a million dollars a year and you know. The rich guy is always the guy that is earning more than you so, nobody really wants to pay more taxes when it boils down to it.
KATRINA MADEWELL: No I don’t think so.
DARRIN T. MISH: And I would include myself on that.
KATRINA MADEWELL: Yeah, everybody I think we should probably talk about that. Alright, so to answer at least one of the questions that we have we will go ahead and answer Matt’s question he wants to know when does the 2017 tax season officially start?
DARRIN T. MISH: Well that’s a pretty good question, normally, it wouldn’t be that good a question I would say around the middle of January but this year it’s actually going to be delayed somewhat because the IRS is going through like these security issues with their computers and what not and they are trying to cut down on some fraud so I think the official first day is January 31st but I think they are saying that refunds are going to be delayed well into February and there’s going to be some people who are not going to be very happy about that.
KATRINA MADEWELL: Alright, lets squeeze Theresa’s question there to she wants to know how will Donald Trump eradicating Obama care affect our taxes? Is that a long answer?
DARRIN T. MISH: Well, it is a long answer that I am going to make short. I think that Donald Trump says that when they eliminate Obamacare that they are going to put back, they will encourage more use of health savings accounts and that’s something that I have used for years.
Health savings accounts are really pretty neat because you use your pre-tax money to pay for your deductibles and what not when you go to the doctor and one of the things that I like about it is it motivates us as consumers of health services to care what things cost. So, if you asked the doctor what something cost they usually have this deer in the headlight kind of look and they have to go check with the office manager but there’s a wide variety of costs for services and this applies for prescription drugs as well. If you have a very expensive prescription medication that you take it will pay.
I guarantee you this it will pay to shop that price around because the pharmacies, it might be $400 at one pharmacy and it might be a hundred dollars at another so if your insurance is covering it you don’t really care and why does that matter well that because that leads to an increase of costs of everything if we don’t care what things costs, the price is normally going to go up.
If you have a very expensive prescription medication that you take it will pay, I guarantee you this it will pay to shop that price around because the pharmacies, it might be $400 at one pharmacy and it might be a hundred dollars at another so if your insurance is covering it you don’t really care and why does that matter well that because that leads to an increase of costs of everything if we don’t care what things costs, the price is normally going to go up.
KATRINA MADEWELL: We’ve seen some wild stuff really with insurance as a whole anyway, but I think it’s about that time Pat isn’t it I heard a little tick, tick whoo whoo there’s your train wreck of the week.
DARRIN T. MISH: Ok so we are having some computer difficulties today I am going to blame it all on Pat George personally. Oh, there it is.
KATRINA MADEWELL: I thought my train sound effects were ok.
DARRIN T. MISH: It’s about that time, it’s the time for the IRS train wreck of the week. This is the segment of the show where I talk about somebody who came in and they were a train wreck and typically they have a happy ending. In this particular case, it’s kind of a longer story that I am going to try to make short, but a gentleman came into my office about 10 years ago and he was involved in a business that had some unpaid payroll taxes and it was a lot of money, it was approaching a million dollars.
It was interesting because he was not a shareholder of the business, he just worked there. He was just like a manager type person that worked there and the owners, the shareholders, were actually relatives but he was in charge of the day to day operations of the business, as I recall.
What happened is the IRS eventually assessed what is called the Trust Fund Recovery Penalty against him. So what that means is in a payroll tax case the IRS can assess about 65% of the total liability that the business owes against human beings, against responsible people and it’s typically one guy but it doesn’t have to be one guy. In this particular case, there were three responsible people. The two shareholders and my client. It was really unfair because he had not made those decisions not to pay the payroll taxes.
He was just sort of in the middle and the IRS wouldn’t agree to let him out and so he ended up owing, I don’t know it was a lot of money, he ended up owing $500,000 or $600,000 to the IRS. This was about 10 years ago, it must have been about 2006 when we represented him back during that time frame.
Well, after that was assessed against him, he went ahead and we waited because we didn’t enter into an installment agreement right away because we knew it was going to be a lot of money. Eventually, he ended up in an installment agreement of about $1200-$1300 a month, which was a lot of money, but he was a pretty good earner and so he was in this installment agreement for years and years.
One of the things I really liked about this particular client is he was a man of his word, if he said he was going to do something he always did it and I think that’s really admirable. In this particular case, there was some glitch I can’t recall exactly why, the IRS terminated his installment agreement for some really silly technicality and so he got back in touch with me and we started talking about what the situation was and he asked me what he should do.
Well, remember there is a 10 year statute of limitations for the payment of tax and when he got back with me to talk about what he should do, there was only 2 years left on the statute of limitations so if we had contacted the IRS the IRS was going to ask for $3,000, or $4,000 or $5,000 a month. He had been paying $1300 a month for years and years and, in his opinion, that’s what he agreed to do so that’s what he was going to do.
So we decided that he was just going to keep paying $1300 a month and try to keep the IRS off his back and we didn’t know if that would work for sure, but we thought it probably would. So that’s what he did and ultimately we just ran out the clock. The clock just ran out like last week and he saved $401,000 that he didn’t have to pay to the IRS because the clock basically just ran out on the IRS.
PAT GEORGE: And you were responsible.
DARRIN T. MISH: Well, I was partly responsible. I got to help him. It was really interesting. Yesterday I found out and literally within five minutes of finding out I had him on the phone and we were hooting and hollering and celebrating and it’s really going to change his life. He’s not been able to buy a house because he had a….
KATRINA MADEWELL: I was going to say, I can sell him a house for that amount of money.
PAT GEORGE: Yes, you can.
DARRIN T. MISH: He had an over $300,000 tax lien on him for over 10 years and so his credit is good. Except for he has a $300,000 tax lien on him. So he’s pretty excited.
KATRINA MADEWELL: But’s it’s gone now, right, like you are wiping it out?
DARRIN T. MISH: It’s going to be gone, yeah. The IRS has been a little bit less diligent about releasing liens automatically lately and so there is another step that I have to take to have it released.
KATRINA MADEWELL: You have to hunt them down and kill them to remove the tax lien.
PAT GEORGE: I wish we had more time so that you could decipher this debt clock as far as you know the tax part of it.
DARRIN T. MISH: Yeah, maybe next time, it’s pretty interesting. The things that jump out is you know..
PAT GEORGE: Revenue per citizen and revenue per taxpayer.
DARRIN T. MISH: Yeah, revenue per citizen is $10,156 and revenue per taxpayer is $27,617. What does that tell you? There is somewhere around three citizens who aren’t paying taxes for every citizen who is paying taxes.
KATRINA MADEWELL: We are streaming this by the way on The IRS Solution Attorney page. You will get to see Mr. Darrin Mish and the usdebtclock.org as well. Pat George back there and myself we will be back same time same place next week. Tampa home talk is pre-recorded tomorrow with Emerald home inspection just so you know in case Pat tries to mess with me. Thanks for listening this week.
DARRIN T. MISH: For today we are out thanks.