By Kay Bell Bankrate.com
The agency's AMT Assistant is an online tool to help taxpayers determine whether they owe the tax. When the new tax-filing season officially begins, the IRS will add the program for 2007 returns. However, since the AMT changes didn't become law until Dec. 26, 2007, the IRS says it could be late January or even a week or so into Februrary before the provisions are reflected on the agency's Web site.
The AMT Assistant will be especially welcome to filers who still do their taxes by hand, since the automated program essentially replaces the tedious work sheet taxpayers are instructed to use to determine if they fall under the AMT.
With the online program, says the IRS, most people will spend only about 10 minutes to find out their AMT fates.
There are a few special instances where a filer will need to take a few extra online steps, such as claiming the foreign tax credit, dealing with disaster-related tax issues or preparing a return for a child. But most taxpayers will need just Form 1040, completed through line 44, and Schedule A if itemizing.
There are a few special instances where a filer will need to take a few extra online steps, such as claiming the foreign tax credit, dealing with disaster-related tax issues or preparing a return for a child. But most taxpayers will need just Form 1040, completed through line 44, and Schedule A if itemizing.
Tax Forms
Looking for help with taxes? You're in the right place. View and print the most current forms from the IRS.
- Form 1040
- Form 1040 EZ
- Form 1040 (Schedule A&B)
- Form 1040 (Schedule C)
- Tax Tables
- Tax Rate Schedule
- More Federal Forms
- State Forms
You don't have to enter your name, Social Security number or other identifying data. The program, which guides you through a series of question-and-answer pages, only wants the numerical data from your forms.
When you're finished, it will tell you whether you now have to fill out the AMT form, but it won't tell you the actual tax damage. You'll still have to fill out Form 6251 to find out that amount.
AMT starting point
How do you know, without using tax software or the AMT Assistant, if you might be caught in the AMT net? There are some indicators, but it's not always easy to tell.
The starting point for figuring any AMT is your regular taxable income. This is the stage where the AMT Assistant (or work sheet, if you still insist on doing things by hand) kicks in.
Basically, some of the deductions you claimed to figure your regular tax bill must be added back. These are known as tax-preference items. You also might find a special exemption amount is subtracted. The resulting amount is subject to the alternative tax.
Many of the tax breaks not allowed under the AMT system do affect predominantly wealthy individuals or businesses with complicated tax circumstances. These include incentive stock options, intangible drilling costs, tax-exempt interest from certain private activity bonds, and depletion and accelerated depreciation on certain leased personal or real property.
Common tax breaks disallowed
The AMT also rejects or reduces many common tax breaks used every year by individual taxpayers to lower their IRS bills.
For example, under the AMT, you cannot deduct state and local taxes. This is a major blow to many filers, since most states collect income taxes and all jurisdictions have some type of levy that generally can be counted against a federal tax bill.
Medical costs are still allowed, but the AMT requires they exceed at least 10 percent of your adjusted gross income, rather than the 7.5 percent threshold of the regular tax system. Miscellaneous itemized deductions, although limited under the regular tax system, are disallowed under the AMT. Even large families can be hit. If your personal exemption total is big, look out.
Own a home? Some cherished home-related tax breaks take an AMT hit. While mortgage interest on both your main and second home is still AMT-deductible, home equity loan interest is restricted. It can't be deducted unless the money is used solely to pay for home improvements.
And your home's property taxes also are disallowed as deductions under the AMT.
Income levels affected
Once you add back these AMT disallowances and run the numbers, you might be subject to a bigger IRS bill if your taxable income in 2007 was more than:
$66,250 and you are married filing a joint return
$44,350 and you are filing as single or head of household
$33,125 and you are a married taxpayer filing a separate return
For 2008 returns, however, the AMT income exemption amounts are substantially lower, meaning more filers could face the AMT.
For the last few years, Congress has bumped up the earnings amounts to keep more middle-income filers from paying more under the system. Lawmakers did so for the 2007 tax year last December. While that law change helps out millions of taxpayers who might otherwise pay the AMT, the lateness of the legislation slowed down this year's filing season for around 13.5 million taxpayers.
A similar last-minute temporary AMT fix is likely to happen again in 2008, especially since the House of Representatives and the Senate are unlikely to agree on comprehensive alternative tax changes in a presidential election year. But until any change, short-term or permanent, is official, the income exclusions for 2008 AMT planning purposes are:
$45,000 and you are married filing a joint return
$33,750 and you are filing as single or head of household
$22,500 and you are a married taxpayer filing a separate return
Typically, the AMT affects taxpayers with large families or sizable deductions. The higher-income filers, whom you would think would automatically fall under the AMT, in fact don't usually face the AMT because they tend to owe more under the regular tax system.
That's because the two top ordinary tax brackets that these filers are likely to face, 33 percent and 35 percent, exceed the maximum 28 percent AMT rate.
If you end up facing the AMT, the extra money you owe, along with the added paperwork hassle, is never welcome. But dealing with it now is better than the alternative: letting the IRS discover that you should have paid it. When Uncle Sam comes asking for back taxes, he wants interest and penalties, too.
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When you're finished, it will tell you whether you now have to fill out the AMT form, but it won't tell you the actual tax damage. You'll still have to fill out Form 6251 to find out that amount.
AMT starting point
How do you know, without using tax software or the AMT Assistant, if you might be caught in the AMT net? There are some indicators, but it's not always easy to tell.
The starting point for figuring any AMT is your regular taxable income. This is the stage where the AMT Assistant (or work sheet, if you still insist on doing things by hand) kicks in.
Basically, some of the deductions you claimed to figure your regular tax bill must be added back. These are known as tax-preference items. You also might find a special exemption amount is subtracted. The resulting amount is subject to the alternative tax.
Many of the tax breaks not allowed under the AMT system do affect predominantly wealthy individuals or businesses with complicated tax circumstances. These include incentive stock options, intangible drilling costs, tax-exempt interest from certain private activity bonds, and depletion and accelerated depreciation on certain leased personal or real property.
Common tax breaks disallowed
The AMT also rejects or reduces many common tax breaks used every year by individual taxpayers to lower their IRS bills.
For example, under the AMT, you cannot deduct state and local taxes. This is a major blow to many filers, since most states collect income taxes and all jurisdictions have some type of levy that generally can be counted against a federal tax bill.
Medical costs are still allowed, but the AMT requires they exceed at least 10 percent of your adjusted gross income, rather than the 7.5 percent threshold of the regular tax system. Miscellaneous itemized deductions, although limited under the regular tax system, are disallowed under the AMT. Even large families can be hit. If your personal exemption total is big, look out.
Own a home? Some cherished home-related tax breaks take an AMT hit. While mortgage interest on both your main and second home is still AMT-deductible, home equity loan interest is restricted. It can't be deducted unless the money is used solely to pay for home improvements.
And your home's property taxes also are disallowed as deductions under the AMT.
Income levels affected
Once you add back these AMT disallowances and run the numbers, you might be subject to a bigger IRS bill if your taxable income in 2007 was more than:
$66,250 and you are married filing a joint return
$44,350 and you are filing as single or head of household
$33,125 and you are a married taxpayer filing a separate return
For 2008 returns, however, the AMT income exemption amounts are substantially lower, meaning more filers could face the AMT.
For the last few years, Congress has bumped up the earnings amounts to keep more middle-income filers from paying more under the system. Lawmakers did so for the 2007 tax year last December. While that law change helps out millions of taxpayers who might otherwise pay the AMT, the lateness of the legislation slowed down this year's filing season for around 13.5 million taxpayers.
A similar last-minute temporary AMT fix is likely to happen again in 2008, especially since the House of Representatives and the Senate are unlikely to agree on comprehensive alternative tax changes in a presidential election year. But until any change, short-term or permanent, is official, the income exclusions for 2008 AMT planning purposes are:
$45,000 and you are married filing a joint return
$33,750 and you are filing as single or head of household
$22,500 and you are a married taxpayer filing a separate return
Typically, the AMT affects taxpayers with large families or sizable deductions. The higher-income filers, whom you would think would automatically fall under the AMT, in fact don't usually face the AMT because they tend to owe more under the regular tax system.
That's because the two top ordinary tax brackets that these filers are likely to face, 33 percent and 35 percent, exceed the maximum 28 percent AMT rate.
If you end up facing the AMT, the extra money you owe, along with the added paperwork hassle, is never welcome. But dealing with it now is better than the alternative: letting the IRS discover that you should have paid it. When Uncle Sam comes asking for back taxes, he wants interest and penalties, too.
Back to Page 1
