If you are one of the unlucky taxpayers who filed tax returns and are now subjected to pay the Alternative Minimum Tax (AMT) this year, you may have questions about the tax system. Furthermore, you may have been assessed a tax debt because of the AMT bracket. Below we will address the most common questions taxpayers have about Alternative Minimum Tax, and what to do if you have a tax debt because of it, after you filed tax returns.
What Is the Alternative Minimum Tax?
The Alternative Minimum Tax (AMT) is a parallel tax system that is imposed on taxpayers instead of the regular tax system when they filed tax returns. The tax system was put in place to prevent high-income earners from claiming too many tax deductions and credits, and essentially pay little to no taxes when they filed tax returns.
This system was Congress' attempt to make the tax code fairer for all, but AMT has one major flaw; it is not indexed for inflation, so many middle class families have increasingly become part of a system created for the rich. The AMT hit four percent, or 3.9 million taxpayers, in 2008 with incomes of $200,000 or less on their filed tax returns.
Each year, Congress uses "patch" legislation to combat the rising number of families being hit with the Alternative Minimum taxes after they filed tax returns. Yet, many are still finding themselves included in the brackets, which creates a tax burden on those families, because AMT eliminates some exemptions, tax deductions, and credits from filed tax returns.
Why Did I Get Hit with the Alternative Minimum Tax?
The only way to answer that question is to look at your IRS Form 6251 from last year and compare the Tentative Minimum Tax to the regular tax. If your income, minus the deductions and exemptions AMT doesn't recognize after you filed tax returns, falls in the AMT bracket, you know why you are picked to pay AMT this tax year.
How Can I Avoid the Alternative Minimum Tax?
In a way, there is nothing you can do to avoid paying the Alternative Minimum Tax after you filed tax returns. However, there are tax-planning steps you can take to monitor how close you are getting to paying the AMT.
- Consult with a tax professional to make sure your calculations, and more importantly, the IRS' determination is correct.
- Examine Tax Form 6251 after you filed tax returns for the year to see how close your Tentative Minimum Tax was to the regular tax line.
- Look for credits and exemptions that are being affected by the Tentative Minimum Tax. Find alternative credits to take their place so you can benefit from them after you filed tax returns.
Will the Alternative Minimum Tax Leave Me With a Tax Debt?
The AMT increased tax bills, on average, $6000 in 2008 so there is a very good chance it can have the same effect on those with lesser incomes, especially if they are already going to have a tax bill after they filed tax returns.
If you are faced with a tax debt, you should visit our Tax Debt page on steps to take when you owe the IRS after you filed tax returns. For additional research, visit our Tax Problems page for the different collection actions the IRS can take against you, and our Tax Debt Help page about finding a good tax professional to help resolve the back taxes you owe.
Call now or fill out the form below for a free consultation about your tax debt from the Alternative Minimum Tax you were hit with after you filed tax returns. We'll only connect you with a tax debt relief company holding a B rating with the Better Business Bureau.