Question about Alternative Minimum Tax

[dinonz]

I've researched it and most of the simple overviews don't explain it to the fine detail, and I don't speak enough legalese to read the IRS forms directly.

I just wondered whether AMT effectively replaces the Federal Tax portion of your tax for that year, or all of it (including Social Security, Medicare, and possibly state taxes although that doesn't apply to me - Texas!).

I.e. if my AMT calculates to $200,000, and my 1040 shows I already paid $50,000 in Federal Tax, $8000 in Social Security and $4000 in Medicare, do I then owe a further $138,000 or $150,000?

[chassis]

Easy answer: can TurboTax figure it out for you?

Longer answer: I paid the AMT a couple of filing years and the formulae and instructions were straightforward enough for me. In other words, follow the instructions and put the numbers in the boxes. Not trying to be trite, but it was sufficiently clear in my view.

[RickFLM4]

I believe AMT is alternative minimum to federal taxes only not social security or state, so I’d think $150K.

[dinonz]

Originally Posted by chassis

Easy answer: can TurboTax figure it out for you?

Longer answer: I paid the AMT a couple of filing years and the formulae and instructions were straightforward enough for me. In other words, follow the instructions and put the numbers in the boxes. Not trying to be trite, but it was sufficiently clear in my view.

I have a CPA but they're really busy right now and would prefer not to talk to me about it.

I may have to act fairly fast depending on the Fair Market Value I can get put on a 3921, but I'm trying to work out my damage next year quickly before I commit. If I jump my tax bill next April will easily be in the 6 figure range so it's not a decision to take lightly.

[dinonz]

Originally Posted by RickFLM4

I believe AMT is alternative minimum to federal taxes only not social security or state, so I’d think $150K.

Thanks Rick - all my investigations are looking to be that way, but it's amazing how many examples out there have fundamental faults I never know what to trust. One I saw quoted $16K in Social Security - double the annual maximum for a single person. Other calculated the full AMT at 28% once you went over the threshold, rather than 26% up to the threshold and 28% on the remainder - makes it hard to trust anything when a computer programmer can pick out their faults.

[RickFLM4]

Originally Posted by dinonz

Thanks Rick - all my investigations are looking to be that way, but it's amazing how many examples out there have fundamental faults I never know what to trust. One I saw quoted $16K in Social Security - double the annual maximum for a single person. Other calculated the full AMT at 28% once you went over the threshold, rather than 26% up to the threshold and 28% on the remainder - makes it hard to trust anything when a computer programmer can pick out their faults.

Re: social security example, maybe it was for someone self employed. The self employed like me pay double social security and Medicare because we pay employee and employer portions.

I haven’t had to deal with AMT but on other topics have actually found the IRS publications the best source for info. They are usually well written, which is surprising given that everything else about the agency is a cluster.

[dinonz]

Originally Posted by RickFLM4

Re: social security example, maybe it was for someone self employed. The self employed like me pay double social security and Medicare because we pay employee and employer portions.

I haven’t had to deal with AMT but on other topics have actually found the IRS publications the best source for info. They are usually well written, which is surprising given that everything else about the agency is a cluster.

No - it was calculating just a normal persons income tac - Medicare and Federal was bang on, they just forgot about the Social Security cap.

Maybe I'll re-read the IRS documents, but it's looking more and more like its worth it in the long run even if it will sting a lot next year.