javasaurus (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
javasaurus) wrote2004-03-11 01:14 pm
javasaurus) wrote2004-03-11 01:14 pm
Alternate Minimum Tax -- Important!
As the winter slowly melts away and the flowers start to poke their heads up through the ground, as the chill and dark turns to warmth and light and songbirds return to fill the air with music, a young man cannot help but turn his thoughts to...
Taxes!
Yes, it's that time of year again, and I'm glad to say that BE and I have finally finished ours, except for producing the final copy. It'll go into the mail tomorrow, and wow, was this one hideous. In years past, I've never spent more than an hour on taxes. That was all the time it took. But last year we sold two houses, bought a house, got married, donated a car, etc. It didn't help that the 1098 (mortgage interest and points) form from the bank was off by a factor of 10. A new tax law on dividends worked to our benefit, but involved yet another form. Sigh. But it's done!
Important Info about the Alternate Minimum Tax
As I went through the taxes, I learned a bit about a tax law that has been on the books for about 30 years, but generally hasn't affected most people I know. It's called the Alternate Minimum Tax.
The AMT came about in the 70s when it was discovered that several people making lots of money were (legally) paying no taxes. Congress calmed the public by creating the AMT so that the rich could not hide completely behind certain types of tax shelters.
Unfortunately, the AMT did not include provisions for inflation, and what was "rich" in the early 70s is only middle-class now, and four times as many people are paying AMT than last year. The worst part is that the way the tax works, it is nearly impossible to guess whether it applies to you based on your income. It is expected that (unless Congress changes it), most people will be doing AMT instead of "normal" income tax within the next few years.
So how does it work? The AMT is set up as a completely different system for computing your taxes, and you are responsible for paying the larger of the regular tax or the AMT. The basic idea is that you get a fairly large exemption amount, and then pay a large percentage (something like 26%) on the rest. Here's the rub: a lot of Schedule A deductions don't apply.
The worksheet (and the actual form) are easy to fill out (if you've already finished your 1040 and schedule A), but take a bit of time. And finally, remember, you are responsible for the larger of the two taxes, and the IRS will know if you didn't get it right.
Taxes!
Yes, it's that time of year again, and I'm glad to say that BE and I have finally finished ours, except for producing the final copy. It'll go into the mail tomorrow, and wow, was this one hideous. In years past, I've never spent more than an hour on taxes. That was all the time it took. But last year we sold two houses, bought a house, got married, donated a car, etc. It didn't help that the 1098 (mortgage interest and points) form from the bank was off by a factor of 10. A new tax law on dividends worked to our benefit, but involved yet another form. Sigh. But it's done!
Important Info about the Alternate Minimum Tax
As I went through the taxes, I learned a bit about a tax law that has been on the books for about 30 years, but generally hasn't affected most people I know. It's called the Alternate Minimum Tax.
The AMT came about in the 70s when it was discovered that several people making lots of money were (legally) paying no taxes. Congress calmed the public by creating the AMT so that the rich could not hide completely behind certain types of tax shelters.
Unfortunately, the AMT did not include provisions for inflation, and what was "rich" in the early 70s is only middle-class now, and four times as many people are paying AMT than last year. The worst part is that the way the tax works, it is nearly impossible to guess whether it applies to you based on your income. It is expected that (unless Congress changes it), most people will be doing AMT instead of "normal" income tax within the next few years.
So how does it work? The AMT is set up as a completely different system for computing your taxes, and you are responsible for paying the larger of the regular tax or the AMT. The basic idea is that you get a fairly large exemption amount, and then pay a large percentage (something like 26%) on the rest. Here's the rub: a lot of Schedule A deductions don't apply.
The worksheet (and the actual form) are easy to fill out (if you've already finished your 1040 and schedule A), but take a bit of time. And finally, remember, you are responsible for the larger of the two taxes, and the IRS will know if you didn't get it right.
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