AMT TAX?

[elle_chris]

Can someone please explain it to me?

 

[missy]

Hi Elle,
I wish I could. It is so damn confusing

Basically you pay whichever is higher. The AMT or the regular tax. You calculate both and whichever is the bigger amount you pay. Nice right?

Here is some info
http://www.fairmark.com/amt/amt101.htm

All I know is that we pay it every year since it has been in effect and it is a real PITA. Very very confusing and that is why we have a CPA do our taxes. No way we could do it ourselves with all the nooks and crannies involved. Sorry I cannot explain it

http://www.fairmark.com/amt/topten.htm

http://www.smartmoney.com/personal-finance/taxes/the-alternative-minimum-tax-9540/?hpadref=1

 

[elrohwen]

I was under the impression that you only pay it if, for some reason, you don''t have a regularly taxable income. Turbo Tax explained it as a way to get people to pay taxes, who wouldn''t normally have to pay. The majority of people with regular jobs don''t need to worry about it at all.

Of course, I know nothing about taxes

But that''s what I''ve been told!

 

[missy]

Date: 3/30/2010 8:35:11 PM
Author: elrohwen
I was under the impression that you only pay it if, for some reason, you don't have a regularly taxable income. Turbo Tax explained it as a way to get people to pay taxes, who wouldn't normally have to pay. The majority of people with regular jobs don't need to worry about it at all.


Of course, I know nothing about taxes

But that's what I've been told!

Well we both have regular jobs and we have paid it every year unfortunately.

It was originally initiated for the very very rich who only made interest income and the AMT was a way to capture the income for those people. However it spread over into a wider circle of people who have to pay it now.

The AMT calculation doesn't begin to kick in until you make over a certain amount of money which is changing all the time. I believe more and more people have to pay it now.

Sorry if I am the bearer of bad news.

(btw I am not complaining as I am thankful we have jobs and get to pay taxes because this is much preferred to being out of work but not paying taxes so don't want to appear ungrateful. This has been a tough couple of years for everyone and I am thankful we came out of it relatively OK though a bit battered and bruised

 

[elle_chris]

Missy- our accountant tries to explain it to us every year but I still don''t get it. All I know is that he said to max out box 1 and we can''t claim the usual deductions. I never payed much attention until this year because we had to pay.. ugh.
Thanks for the links, still don''t totally understand how it works though.

elrohwen- Like Missy, my husband and I have regular jobs. But we also have the maximum withheld throughout the year.

 

[missy]

Sorry Elle that I couldn't explain it better. I really have trouble understanding it myself and with all the nuances etc. These type of things make my head hurt. Sorry you had to pay it too. I guess we could look at it as at least we are making enough money to pay it but LOL I wish I could have that extra money for more pretty jewels

 

[lulu]

It is a fictional monster originally created by the IRS to grab money from the wealthy. It was never indexed for inflation so it''s hitting the middle class.

 

[Karl_K]

Date: 3/30/2010 11:01:33 AM
Author:elle_chris
Can someone please explain it to me?

really simple actually...
If someone makes over a certain amount of money they are allowed very limited deductions and pay a set % of tax on almost all income.
They have to figure it both ways and owe the larger amount.

 

[zipzapgirl]

Basically the AMT was created to stop less than 200 very wealthy individuals who paid no tax. It creates an alternate calculation for taxpayers earning over a specific amount and essentially limits the deductions they can claim. Most tax credits already have "phase-outs" that make them worth less to zero once the taxpayer has a certain amount of taxable income. This goes further and wipes out the itemized deductions like mortgage interest.

Unfortunately, the system was never indexed for inflation, so it will hit ever more middle class taxpayers. Here''s a quote from an IRS report to Congress:

Unlike the regular income tax, the AMT is not indexed for inflation. Over time,
inflation and economic growth have made the AMT affect more and more taxpayers. In
1990, the AMT financially affected only about 132,000 taxpayers. In 2000, it affected an
estimated 1.3 million taxpayers, and in 2010, it is projected to affect 17 million taxpayers.

http://www.house.gov/jec/tax/amt.pdf

 

[elle_chris]

Thanks guys.

I''ve been reading it up on it too.
Have an appointment with our accountant in May to discuss what we can do for next year. I don''t mind paying more, but this year we were hit hard and it was totally unexpected. Our fault I suppose for not paying enough attention in the previous years.

The IRS now has my diamond fund.

 

[Hudson_Hawk]

What is the amount you need to make for AMT to come into play?

 

[elle_chris]

Date: 3/31/2010 1:53:50 PM
Author: Hudson_Hawk
What is the amount you need to make for AMT to come into play?

Not sure as various things trigger it.

It not only has to do with AGI, but your deductions. Google it and you''ll have a 1,000 sites come up.

It doesn''t hurt to ask your accountant about it either because you never know if/when you''ll be hit with it.