| Monday, February 06, 2006 |
| Alternative Minimum Tax (Watch out for this one!) |
Last night I worked on our federal income taxes. I'm always eager to do it because I love paying taxes! "Just doing my part!" No, really, I normally get money back and that's exciting. Though, I know it's flawed to loan money to the US Government interest free for a year. But I digress.
I use Turbo Tax to e-file because I like the step-by-step hold-my-hand method of entering wages, taxes, credits and so on -- and I like gadgetry. If Apple had an iPod tax-filing device, I'd probably be in the market. However, I digress.
One of the steps during the tax filing process informed me that I did not have to be concerned about AMT -- or Alternative Minimum Tax. That was the first time that I had heard of that term. So, this morning I googled AMT and found an abundance of information.
SmartMoney.com says that the AMT laws were intended to "keep the rich from living tax-free." From a poor liberal's perspective, apparently, this makes sense. The "rich" can claim childcare expenses, medical expenses, charitable donations, mortgage interest and many, many other deductions and, effectively, pay no taxes. Enter Alternative Minimum Tax. The article at SmartMoney.com continues, "[AMT] has its own set of rates and its own rules for deductions, which usually are less generous than the regular rules. Because of these confusing rules, the only ways you can tell if you owe the tax are by filling out the forms (essentially doing your taxes a second time) or by being audited by the Internal Revenue Service."
In 1970, 19,000 people owed the Alternative Minimum Tax. Over 3 million people are paying it now. And by 2009 it is estimated that the IRS will be collecting more money from the AMT than from the regular tax. The problem? Inflation. While the "regular" tax brackets are adjusted every year for inflation, the AMT brackets are not. As more and more people's income grow with the economy, more and more middle-class people get caught in the AMT net.
Those at risk are those with gross incomes over $75,000 and "have write-offs for personal exemptions, taxes and home-equity loan interest." If you gross $100,000 or more, run the AMT numbers for that reason alone. SmartMoney.com warns, "If it turns out you should have paid the AMT but didn't, you will owe the back taxes plus any interest or penalty that the IRS decides to dole out."
This whole AMT has my conservative Spidey senses tingling. But in the interest of keeping this post short and readable, I'll just say, "Usher in the Fair Tax!" |
posted by Joe Napalm @ 11:58 AM   |
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