Can someone explain the AMT ( alternative minimum tax ) Please!!! (1 Viewer)

[efil4stnias]

I have read and read about this and please tell me if i am correct.

I understand this: I make X amount of dollars. I pay X amount of taxes in each check. At the end of the year on my W2 it tells me the total of my Income and Fed Tax paid. Now, when I go to file my taxes I take deductions for Mortgage interest ( 2 homes ) and charitable contributions, job related expenses and IRA contributions.
Now that gets me my Taxable Income, which I then use to determine the Tax I should have paid. I take that number and deduct from the Taxes I actually paid for 2007 and determine if I owe or due a refund.

but,

The amt kicks in and says "hold up...becasue you made X amount of income in 2007 and had all these deductions...we have changed the rules and re-calculated your Taxable Income" Now you OWE $3482 have a nice day...

So why have deductions? Why buy/own other things ( investment property, investments etc ) if I am only going to be penalized in the end? If I had standard deductions I would be spot on with my taxes, but because of the AMT, I will have to pay extra to the Feds?

is this correct?

 

[CT Saints Fan]

http://en.wikipedia.org/wiki/Alternative_Minimum_Tax

 

[efil4stnias]

thanks CT...that helped - although it doesnt keep me from paying it, i now understand it and hate it. really hate it. Never had to deal with this before so its new to me. I am being double taxed on my state and property tax since the AMT formula disallows those deductions. And for that I pay more in Federal tax. great.

 

[CajunSaint]

Hence why you must vote republican in the next election. If Dems get in the white house, AMT will be out of control!!!!

The AICPA is fighting this issue very hard.

 

[Goats]

Thats what you get for being rich....errrr....upper middle class

AMT was designed to target a small percentage of the upper class, unfortunately, the government relies too much on that income and AMT aint going no where anytime soon....even if the Republicans get in.

 

[gumbeau]

thanks CT...that helped - although it doesnt keep me from paying it, i now understand it and hate it. really hate it. Never had to deal with this before so its new to me. I am being double taxed on my state and property tax since the AMT formula disallows those deductions. And for that I pay more in Federal tax. great.

Welcome to the Republican party and check out the FairTax. It ain't perfect but it sure is better than what we have and would wake Americans up to our 'real' tax rates.

 

[efil4stnias]

Thats what you get for being rich....errrr....upper middle class

AMT was designed to target a small percentage of the upper class, unfortunately, the government relies too much on that income and AMT aint going no where anytime soon....even if the Republicans get in.

Just imagine what your AMT would have been on that PowerBall Ticket!!!!!

 

[UncleTrvlingJim]

They've been passing temporary measures to lift the AMT for the past several years... did they not do that this year?

 

[UncleTrvlingJim]

OK -- just read that they did increase the exemption to 68000 for married couples... whew... that could have made things a little more annoying come April

 

[jackers]

We should just do away with the entire Federal Income Tax.....period

 

[Pure Energy]

We should just do away with the entire Federal Income Tax.....period

That's the fairtax premise...

 

[saintfan]

How much money did you make? Send it in.

The AMT is a crock. It was originally designed to affect 13 very wealthy people who managed to use deductions to avoid paying any taxes. The AMT has never been indexed for inflation, ergo the middle class is now falling under the umbrella where they can no longer get credit for mortgage interest paid.

The non-indexed AMT is effectively raising income tax rates and eliminating itemized deductions for most middle income citizens. It is an absolute mess that needs to be eliminated or readjusted to affect the very wealthy (at least with a $1,000,000 annual income.

As it stands today (1/23/2008), Congress has only passed a temporary one-year fix to the AMT, but because in their infinite wisdom they waited so long to make up their minds, the IRS will not accept electronic returns for anyone using mortgage interest or education credits (among others) until Feb. 11.

 

[efil4stnias]

How much money did you make? Send it in.

The AMT is a crock. It was originally designed to affect 13 very wealthy people who managed to use deductions to avoid paying any taxes. The AMT has never been indexed for inflation, ergo the middle class is now falling under the umbrella where they can no longer get credit for mortgage interest paid.

The non-indexed AMT is effectively raising income tax rates and eliminating itemized deductions for most middle income citizens. It is an absolute mess that needs to be eliminated or readjusted to affect the very wealthy (at least with a $1,000,000 annual income.

As it stands today (1/23/2008), Congress has only passed a temporary one-year fix to the AMT, but because in their infinite wisdom they waited so long to make up their minds, the IRS will not accept electronic returns for anyone using mortgage interest or education credits (among others) until Feb. 11.

so if I wait til Feb 12 to file, i can avoid AMT?

The non-indexing is what gets me. With all the tax codes, laws and regulations that DO index, why not this? And for that matter, why wouldn't my companys payroll software (Peachtree) have this AMT formula built in so it can alert (if you will ) an employee that they are getting to a point they may want to start paying extra on the fica tax?

I got myself all worked up last nite and read for hours about this stuff. It hits when no one expects it too and blindsides you. It really is horrible.

 

[saintfan]

so if I wait til Feb 12 to file, i can avoid AMT?

The non-indexing is what gets me. With all the tax codes, laws and regulations that DO index, why not this? And for that matter, why wouldn't my companys payroll software (Peachtree) have this AMT formula built in so it can alert (if you will ) an employee that they are getting to a point they may want to start paying extra on the fica tax?

I got myself all worked up last nite and read for hours about this stuff. It hits when no one expects it too and blindsides you. It really is horrible.

I never said you could avoid AMT by waiting until Feb. 12. I said that the IRS will not accept electronic filings for certain returns that meet certain criteria that AMT seeks to override. This only goes to show how late action by our Congress to temporarily fix a gross inequity means a delay for people seeking refunds.

As for your payroll department having some AMT formula built into its computations, I don't see how that would be possible. Every individual's tax situation is different. One person may have a house virtually paid off, and would not be able to claim itemized decuctions. Another may rent, and therefore cannot claim deductions, and a third may live in a mansion with a high mortgage interest payment. There are too many variables for a program to account for the fiscal differences of people.

You are right to be upset over the AMT. As I previosuly stated, it is a tax increase on the middle class.

There are way too many questionable refund and payment schemes in the IRS code. Earned Income Credit, while admirable in its intent, was clearly designed to buy votes from the low income earners. But that's another topic.

 

[cruize]

You're clearly not rich enough. That's why you have to pay.