Tax Advisor Gears Up For The Possible Loss of The AMT Exemption
by Holly Petherbridge | Dec. 25, 2012
The end of this election year will bring some last minute tax confusion and tax advisors should gear up for an influx of calls come January. Since this has been an election year, some of the problems surrounding the Bush Tax Cuts have been less news worthy; not less important.
There were many articles which came out during the summer warning about the expiration of these tax cuts which tax payers have become accustomed to receiving. Congress was not able to come to a solution before the elections, and now that the votes have been cast, the pressure is on to work out potential tax problems for the middle class.
The alternative minimum tax (AMT) is the latest tax worry for those tax payers who fall into the upper middle class tax bracket or higher. The AMT is a tax which may have tax payers paying more than their regular tax income. It was originally created for the upper class that used deductions and tax benefits to get out of paying taxes. Basically the AMT tax is a flat tax amount based on your earnings' bracket. If your regular tax is less than the AMT, a tax payer will have to pay the difference. For example, if the AMT is $5000, but your taxes has you paying $3500, you will owe the IRS $1500 more. If your taxes end up being more than the AMT then you will not have to pay any extra.
Congress needs to quickly act before the year is up to keep this AMT tax from landing into households with an annual income larger than $75,000. This tax is in addition to all the other tax credits which will expire at the end of December. There are many which have already passed expiration, but there are numerous others which will leave tax payers scrambling for ways to help their tax liabilities. Local CPAs will have their phones ready once tax payers realize how much they relied on the tax credits.
An average person uses their tax refund to catch up on bills. These same people will be scrambling to find other solutions or in many new cases, finding money to pay new tax liabilities. It is predicted that one in five taxpayers may be affected by the AMT starting in January.
Tax Advisors will have their phones ready for the influx of taxpayers seeking assistance this net tax season. If Congress is not able to prevent the AMT from going into place, it will be close to impossible to make any changes for this next tax year. Once the tax season starts in January, it will be very difficult to lift the tax levy once set in motion. The IRS puts a set of rules in place at the start of the tax season, changing them after the tax game has begun will cause confusion and delays. Congress needs to solve the AMT tax problems before the end of the year.
About Holly Petherbridge
Chris Reeder and Associates Certified Public Accountants is conveniently located in Murrieta, California, but our entire staff of accountants, CPA's and personal or business tax service professionals frequently visit our client's at their location. So, if you can't come to us, we'll certainly come to you. Visit http://www.cdrcpa.com/ for more information.
About Chia-Li Chien
Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward and a faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Contact her at firstname.lastname@example.org or (704) 268-9378 .