Think tax-backward to avoid the AMT

NF Reporter · 12-10-2006, 12:02 PM

Reuters - Taxpayers, walk away from the gift wrap and pick up your pencils. You have less than a month to strategize your way out of the alternative minimum tax for 2006.

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waltky · 10-26-2007, 11:39 PM

Rangel gonna 'fix' the AMT...

Rangel Tax Bill 'Largest Tax Increase Ever'
October 26, 2007 - Rep. Charlie Rangel (D-N.Y.) has unveiled his tax reform plan, saying it will "fix" the Alternative Minimum Tax (AMT) and provide tax relief to millions of Americans, but House Republicans say the bill is the "mother of all tax hikes" and will stymie economic growth.

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Rangel introduced the Tax Reduction and Reform Act of 2007 on Thursday. "This legislation will provide tax relief to more than 90 million working families and cut the corporate tax rate to help American companies stay competitive internationally," he said.

"For too long, hardworking families have struggled to keep pace with the rising cost of living in America. This legislation would put money back in their pockets to combat the growing economic insecurity gripping our nation," he added. Rangel said tax relief will come through a permanent repeal of the AMT, a refundable child tax credit, an increase in the standard deduction and enhanced earned income tax credit.

(The AMT, launched in 1970, is designed to prevent individuals in high-income brackets from avoiding certain taxes, such as long-term capital gains and some personal exemptions; in recent years, however, the AMT has been increasingly applied to people making $75,000 to $250,000 who take standard deductions, such as those for property and children.)

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waltky · 10-30-2007, 12:26 AM

Mother of all tax hikes...

AMT Will Hike Taxes for Millions in Middle Class, Say Experts
October 29, 2007 - While critics oppose Rep. Charlie Rangel's (D-N.Y.) plan to eliminate the alternative minimum tax (AMT), many say reforms in the tax are needed to protect millions of middle-class Americans from a tax increase.

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By 2010, according to an estimate by the Congressional Budget Office (CBO), fully two-thirds of Americans with taxable incomes between $50,000 and $100,000 will be required to pay the AMT. Also by 2010, nine out of 10 Americans with incomes between $100,000 and $500,000 will pay it. The AMT, launched in 1970, was designed to prevent individuals in high-income brackets from avoiding certain taxes, such as long-term capital gains and some personal exemptions.

"Unlike the basic income tax, the AMT is not indexed for inflation, with the result that its burden is expected to grow rapidly in coming years," said Chris Edwards, director of tax policy studies at the libertarian Cato Institute. "Without relief from Congress, 23 million taxpayers will pay the AMT in 2007," he added. "The average liability will be more than $3,000, and that added burden will hit most families by surprise."

Rangel introduced the Tax Reduction and Reform Act of 2007 on Thursday, which would eliminate the AMT, but because the bill is "revenue neutral," the $1 trillion in tax revenue the AMT was expected to bring in will be shifted to other types of taxation. This has lead congressional Republicans to call the bill the "mother of all tax hikes."

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waltky · 11-09-2007, 07:55 PM

House blocks AMT...

House Passes $80 Billion Tax Relief Bill
Friday, November 09, 2007 -- House Democrats on Friday pushed through an $80 billion bill to block the spread of a dreaded tax on middle-income people.

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The White House and Republicans, protesting tax increases in the bill affecting mainly investment fund managers, maintained that it would never become law. The 216-193 vote to "patch" the alternative minimum tax for a year sends the issue to the Senate, where its prospects are at best uncertain. Not one House Republican voted for it. What is certain is that if Congress and the White House do not reach a compromise by the end of the year, anywhere from 21 million to 25 million middle-income taxpayers will be hit by the AMT, costing them as much as $2,000 in extra taxes.

The AMT was created in 1969 to ensure that a very small number of wealthy people could not use tax breaks or deductions to avoid paying any taxes. But it was never indexed for inflation, and every year the AMT draws in more middle-income taxpayers. This year some 4 million people were subject to the tax. Congress has recently responded with annual fixes or patches to limit those affected by the tax while searching for a way to eliminate it. House Ways and Means Committee Chairman Charles Rangel, D-N.Y., last month outlined a plan to repeal the AMT, at a cost of $831 billion over 10 years, but acknowledged that action on his proposal is a long way off.

Friday's bill would extend AMT relief for one year, at a cost of about $51 billion. It includes another $30 billion in largely popular tax relief measures, including expanding the child tax credit, providing a property tax deduction to some 30 million families and extending a tax exemption for the combat pay of military personnel. It extends several dozen targeted tax breaks due to expire at the end of the year, including a deduction for college tuition, a deduction for teachers' out-of-pocket expenses and deductions for residents of states that do not have income taxes. Others benefit winemakers, employers of Katrina victims, contributors to charities and state lawmakers.

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waltky · 12-19-2007, 08:43 PM

Only a one year fix...

Congress Blocks Expanded Tax
Wednesday, Dec. 19, 2007 (WASHINGTON) — Congress acted in its final hours Wednesday to block growth of the alternative minimum tax, putting off an economic hardship affecting more than 20 million taxpayers and avoiding what would have been a political black mark for both parties.

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The House voted 352-64 for a one-year fix of the AMT, a four-decade tax originally meant only to touch super-rich tax dodgers but now hitting millions of middle- and upper-middle income level households. Without that fix, an annual ritual of Congress, those subject to the tax would have risen from 4 million in 2006 to about 25 million in 2007, with the average levy of $2,000 a taxpayer.

"What we are hearing across the country today is a collective sigh of relief," said Rep. Eric Cantor, R-Va. The legislation now goes to President Bush, who says he will sign it because, bowing to White House and GOP demands, it does not include tax increases or other new sources of revenue to pay for the $50 billion cost of the tax relief.

The last-minute nature of the vote on the AMT fix resulted from a fundamental difference between the House and Senate. House Democrats had insisted that the $50 billion in tax relief resulting from the one-year fix must be paid for by an equivalent amount of revenue elsewhere, mainly by closing a loophole on offshore tax havens. Senate Republicans, however, blocked the Senate from taking up legislation that includes a tax increase, and Bush threatened to veto any bill that raised taxes.

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waltky · 12-22-2007, 12:44 AM

Granny wants t' know how the IRS is s'posed to act before Congress if the IRS can't act till after Congress hands down the tax laws first??...

Democrats: IRS Should Have Acted Before We Did
December 21, 2007 - If Americans face delays in the getting their tax refunds this year, Democratic leaders want them to blame the Bush administration - even though the Democrat-led Congress caused the problem.

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In a letter to President Bush on Thursday, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid urged him "to make every effort to ensure" that the 23 million families who will benefit from AMT relief "receive their refund in a timely manner." But Congress did not pass AMT relief in a timely matter. It wasn't until Wednesday of this week -- the very last minute -- that Congress finally passed a temporary fix for the Alternative Minimum Tax, a levy that increasingly ensnares the middle class.

As press reports and administration officials have warned for weeks, the fix comes a bit late. Millions of Americans are expected to face delays in getting their tax refunds because the Internal Revenue Service must scramble to revise and print tax forms -- and change its computer programs -- to reflect the changes.

The New York Times reported on Dec. 5 that the delay in passing the AMT fix was already endangering a "smooth start" to the tax filing season. According to that Dec. 5 report, the main problem is reprogramming I.R.S. computers: "The agency's protocol calls for seven weeks to analyze changes in tax law, write the software code and test it, as well as notify all the tax professionals and others affected," the New York Times reported. But Pelosi and Reid said the IRS should have anticipated what Congress would end up doing.

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waltky · 12-28-2007, 02:58 AM

Wonder if this means everyone will have until May 15th to file their return or they gonna have to file an automatic extension?...

AMT Patch To Delay Tax Filings By 1 Month
Friday, December 28, 2007; Millions of Americans will have to delay filing their tax returns next year until mid-February -- a month later than usual -- because Congress took so long to repair the alternative minimum tax.

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The Internal Revenue Service said yesterday that as many as 13.5 million taxpayers who use five tax forms related to the AMT will have to wait to file their returns until the agency can reprogram its computers to comply with the new law. It estimated that taxpayers can begin sending in those forms around Feb. 11, nearly a month after the usual start of the filing season.

Not all of the 13.5 million taxpayers who use those forms are expected to file in those first four weeks, however. Based on traditional filing patterns, the IRS estimated that 3 million to 4 million taxpayers would probably have to postpone the timing of their filings because of the computer reprogramming. "We regret the inconvenience the delay will mean for millions of early tax filers, especially those expecting a refund," said acting IRS Commissioner Linda Stiff.

Last week, Congress approved a one-year repair, or "patch," of the AMT, which had threatened to increase taxes on about 20 million middle- and upper-middle-income households. The levy was never meant to hit that group but rather was designed in 1969 to make sure the nation's richest individuals would have to pay at least some federal income tax even though they could otherwise find ways to eliminate their tax liability.

Lawmakers struggled all year to approve the AMT patch because a new rule required them to offset the $50 billion in lost revenue it would cost the U.S. Treasury. In the end, lawmakers could not agree how to pay for that large a loss, President Bush threatened to veto the tax increases that were being contemplated, and Congress voted to waive its pay-as-you-go rule and passed the patch without an offset.

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waltky · 09-24-2008, 01:54 AM

AMT relief...

Senate Passes Huge Tax Break Package
WASHINGTON, Sept. 23, 2008 - $100 Billion Bill Targets Alternative Minimum Tax; President Signals His Approval

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The Senate passed a giant tax package Tuesday that saves more than 20 million taxpayers from the bite of the alternative minimum tax. At a cost of more than $100 billion, the bill also nudges the nation toward greater use of alternative energy resources, renews popular tax breaks for businesses and individuals, and extends relief to disaster victims.

It includes a provision to ensure that mental health problems get the same level of insurance benefits as other medical treatment. The bill passed 93-2. "The economy is struggling," Senate Finance Committee Chairman Max Baucus, D-Mont., said. "At times like these, Americans need tax cuts that they've come to count on, that can help them get by."

But with time running out in this session of Congress, the House is choosing to diverge from the Senate by taking up a bill that fully pays for the business and individual tax breaks by eliminating some tax breaks for hedge fund managers and for corporations doing business overseas. The Senate only partially offsets the costs of its business and individual tax breaks, and Senate leaders warned that any changes could doom the bill. The House could take up its version as early as Wednesday.

More Senate Passes Huge Tax Break Package, $100 Billion Bill Targets Alternative Minimum Tax; President Signals His Approval - CBS News