Alternative Minimum Tax Facts

Six Facts the IRS Wants You to Know about the Alternative Minimum Tax


The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for 2010.

1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax.

2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.

4. The AMT exemption amounts are set by law for each filing status.

5. For tax year 2010, Congress raised the AMT exemption amounts to the following levels:

• $72,450 for a married couple filing a joint return and qualifying widows and widowers;

• $47,450 for singles and heads of household;

• $36,225 for a married person filing separately.

6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents' tax rate has increased to $6,700 for 2010.

Use the IRS AMT Assistant to determine whether you may be subject to the AMT. Taxpayers can find more information about the Alternative Minimum Tax and how it impacts them by accessing IRS Form 6251, Alternative Minimum Tax —Individuals, and its instructions at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

AMT fix for 2007 Finally Here

Well, the powers that be have decided to give the AMT (Alternative Minimum Tax) a band aid again this year.

There was a lot of dissension amongst Republicans and Democrats on how to save about 20million people from being hit with an average of 2K of extra taxes this year.

The republicans wanted to raise the income ceiling without adding a new tax somewhere else, and the democrats wanted to make sure the loss was paid for with a tax increase in another area to offset it.

The republicans won this round, as time was critical and the dems didn't have enough votes to veto it.

So, will you escape the AMT? It really depends. If you are married and make less than 66K as a couple you may.

If you have a large capital gain for 2007, you may not be so lucky as this may trigger it for your tax return.

There's not much time left to do anything about it, so make sure you run some calculations to see if you will owe extra tax this year.

Oh, yeah. The IRS now has to scramble to correct the forms for 2007 returns. They say that if you are expecting a tax refund, you can expect a delay. Happy New Year.

Hope you are in the lucky group that is not affected.

Paula Straub
www.savegainstax.com
760-917-0858