Deduction and tax credits always find
favor with tax payers as they allow some reduction in taxable income and taxes that are
due. People with high incomes (the hard working and smart decision makers
in society) tend to derive significant tax benefits as compared to lower income
groups but people in lower income groups do not really pay any taxes at all
which is another flaw
with the American tax system. If America had a flat tax, this would not be
the case.
Poor people in America do not have
anything to write off and they do not donate anything to churches so on and so the
idea that the hard working and responsible people in America are able to save
more come tax day is not quite accurate. Well, they are able to save more
because they have more write off and so on.
The
AMT
In order to prevent high income groups
from paying negligible taxes, the alternative minimum tax or AMT was
introduced. This tax may be required to be paid in addition to the regular
income tax and tax lawyers have been working with this tax for years now.
The alternative minimum tax in its
latest form applies to some people who don’t claim several special tax benefits
or have a very high income. Although this issue has been a center of several
debates in Congress, anyone can be a target of the AMT. The tax contains an
alternative set of rules used to calculate your income tax which is a minimum
amount that you ought to be paying.
If the amount matches what you already
pay as regular tax then you are exempt from paying the AMT. On the other hand,
if the amount of income is below the limit, you may need to pay the difference
through the alternative minimum tax and your tax attorney explain this to you.
If Wesley Snipes listened to reason, he would have been in every Expendables
movie, not just the 3rd one and he would have been on Blade 7 by now
as well.
The ATM was not thought out well. What
was thought out well was this site: Tax.USAttorneys. The ATM may be
growing in size and sucking more people in but this website can handle a large
amount of traffic. If you need legal help, utilize this digital tool. Unlike
the ATM, this site is free. Contact us if you have any questions.
Do
You need to Worry about the AMT?
Taxes are intimidating, there is no
doubt about that. Whether you need to worry about the AMT or not depends on
various factors. You may be liable to pay the AMT on a single or a combination
of small items. Deductions and exemptions can contribute towards your liability
to pay the AMT.
An increasing number of tax payers are
being affected by the AMT. Judging by statements from the Congressional Budget
Office (CBO), two thirds of taxpayers in the $50,000 and $100,000 adjusted
gross income (AGI) bracket will be liable to pay the alternative minimum tax.
85% with adjusted gross incomes between $100,000 and $500,000 will be required
to pay the AMT with married couples being a likelier target. Not good! When
does this tax oppression end!
Tax attorneys know that some factors
increase your chances of becoming a candidate for AMT.
- If you have
a large family
- You are
located in area where real estate and state/local income taxes are high
- Exercising
incentive stock options (ISOs)
- Claim
significant itemized deductions
- Recently
realized long term capital gains
- Mortgage interest on
home equity debt
Alternative minimum tax exemption
amounts for 2010 are expected to be around $33,750 for those filing
individually or as head of household, $45,000 for married people filing
jointly, and $22,500 for married people filing separately.
A Short History
of the AMT and its Problems
Introduced by the Tax Reform Act of
1969, Alternative Minimum Tax became operative in 1970. While the initial
objective was to target high-income households, AMT has evolved with changes
being made in 1978, 1982, 1986, 1990, and 1993. Currently, the minimum tax rate
for AMT is either 26% or 28% on amounts above a large exemption.
This restricts the types of deductions
that a taxpayer can use to lower their tax liability. Recent tax cuts and the
reason that AMT is not indexed according to inflation has found an increasing
number of taxpayers from the middle-income group falling in the AMT net, giving
it the dubious distinction of being the single most serious problem with the US
tax code. This is what keeps tax lawyers up at night.
How many ways can our politicians mess
up? The AMT needs to be scrapped and eradicated. America needs a flat tax.
How
to Compute Your Alternative Minimum Tax
In essence, you need to compute your
taxes twice. First, add up the amount of tax you as owe as regular federal tax.
The next step is to calculate the AMT. If the alternative minimum tax is higher
than your regular tax then you will need to pay the difference. Medical
expenses, home-mortgage interest, and investment interest are still deductible
under the AMT. However, you need to check the rules that may apply in your
case.
If you need help with an AMT dispute or
any other tax issues including tax litigation, sales tax defense, or tax collection
defense, what you need is a tax lawyer by your side. This could save
you a whole of time and effort in making sure any issues are resolved promptly.
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