Don’t Let the Alternative Minimum Tax Catch You by Surprise

According to the Congressional Research Service, 34 million taxpayers could be hit by the alternative minimum tax (AMT) this year. Are you one of the many unsuspecting or uninformed taxpayers who will be caught by the AMT in 2012? With a better understanding of the rules, you may be able to avoid or reduce adverse tax consequences.  Our Bergen County CPA office offers you insight to this.

The AMT was set up in the 1960s to make sure wealthy taxpayers didn’t use deductions and exemptions to avoid paying any income tax. The AMT applies a 26% or 28% tax rate to income above a certain exempt amount.

Because this exempt amount is not indexed for inflation, the AMT has begun to affect more and more middle-income taxpayers each year.

The AMT is a separate tax calculation that parallels the regular income tax, but it does not let you claim personal or dependent exemptions, the standard deduction, and certain itemized deductions. You compute your tax liability under the regular tax system; then you make the necessary adjustments for “tax preferences” and calculate your tax under the AMT rules. You compare your AMT liability to your regular tax liability and pay whichever tax is greater.

It’s wise to estimate your AMT exposure before year-end.  Depending on your situation, it may make sense to avoid tax preference items or postpone certain deductions.  Strategies might include adjusting when you make tax payments or charitable contributions, accelerating income, or changing how you exercise stock options.

We cater to Bergen County CPA tax preparation in New Jersey since we are a Bergen County accountant firm.  Log onto our websites to learn more about Lefstein-Suchoff CPA & Associates, LLC: www.bergencountycpa.com and www.irstaxproblems.com.   For assistance with this or other tax or accounting matters please contact us at 201-947-8081 or 646-688-2807, or email us at info@bergencountycpa.com.

 

 

 

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