Don't Mess With Taxes

If you have to pay the alternative minimum tax, or AMT, you'll be singing the blues instead of the joyous tunes of the holiday season. In today's sixth verse of The 12 Tax Tips of Christmas, we look at just what this dreaded and costly parallel tax is and how you can find out if you might face it. The AMT is a separately figured tax that eliminates many deductions and credits that filers can claim when computing their regular tax bills. By losing these breaks, they see their tax bill go up under the AMT. So who has to... Read more →

Welcome to Don't Mess With Taxes' third annual Year-end Money Moves series. As December's days dwindle, we'll let you know what you still can do to save on your taxes or make money a little extra cash before the year ends. We start off with, of course, tax tasks you need to tend to by Dec. 31. The rest of the week, we examine investment, retirement and charitable giving moves, then finish things up with a look some financial housekeeping details. Some of the strategies cross boundaries. For example, selling assets that have lost value could help lower your tax... Read more →

The IRS train heading out to help Jim and Jane Taxpayer is getting quite crowded. The latest to board is National Taxpayer Advocate Nina Olson. Actually, Olson is the conductor. As the National Taxpayer Advocate, she's the person in charge of holding the IRS accountable for doing its job effectively and while also keeping the customers -- that's you and me -- in mind. And she does a fine job of that in her latest Annual Report to Congress, where she called on the IRS and Capitol Hill to help taxpayers who are in financial trouble. With the recession expected... Read more →

Since Congress has wrapped up the financial services bailout bill that will cost us taxpayers some dollars, they're now trying to come up with some tax breaks for Jane and John Q. Public. Yep, it will be very nice for Representatives and Senators, when they get back to their districts and states for one last pre-election push, to be able to change the subject from the $700 billion rescue package for wealthy Wall Street financiers to tax breaks for the residents of Main Street. But the House and Senate still are having a stare down over how to pay for... Read more →

Congress clocks back in this afternoon, but it's unclear when they'll finally get around to extending several popular tax breaks that expired on Dec. 31, 2007. If they don't act soon, we'll have repeat of the confusion that surrounded 2006 returns. Those paper forms didn't include the state sales tax deduction or the above-the-line deductions for tuition and fees and educator classroom supplies. The reason? Congress took so long to reauthorize the tax breaks. The IRS had to come up with work-arounds, detailed in this blog item, for paper filers. Folks who use tax preparation software had it a bit... Read more →

Hallelujah! The 2008 tax-filing season will be as usual for the vast majority of us. This is a good thing, really! Especially for folks with simple returns and who are expecting refunds. Acting IRS Commissioner Linda Stiff announced today that the upcoming tax season is expected to start on time for everyone except certain taxpayers potentially affected by late enactment of the alternative minimum tax "patch." That means that the IRS will begin processing returns for the vast majority of taxpayers in mid-January as it does every year. However, up to 13.5 million taxpayers who plan to file five AMT-related... Read more →

Talk about timing. Just as the alternative minimum tax 2007 patch was signed into law yesterday, a Tax Court ruling (129 T.C. No. 18) was issued requiring a married couple to include qualified dividends in the calculation of their AMT liability. Below are the case facts, per the opinion issued by Judge Michael B. Thornton. On their 2005 tax return, Tobias and Gertrude Weiss reported $24,376 in qualified dividends -- you know, those earnings that get the preferred capital gains tax rates. But they didn't include that amount in $265,408 that they reported as taxable income, and upon which they... Read more →

The dust has settled on the alternative minimum tax legislation. Dubya is preparing to make it law. And the IRS is madly running its computer programming tests. Now it's time to look at some moves you can make by Dec. 31 if the one-year patch isn't enough to keep you out of the AMT's clutches. First, you want to ignore some earlier advice I gave: Don't prepay your state and local tax bills, either property or income. Sure, making these deductible payments early might generate a larger tax break under the regular tax laws. But since these deductions aren't allowed... Read more →

Our long national AMT nightmare is over. Sorta. For one more year. But down the road, we're going to pay a hefty price for the lack of political will when it comes to taxes. Oh sure, there was lots of press release talk about tax relief for "America's working families." And politicians were going through contortions patting themselves on the back for coming through for John and Jane Average Taxpayer. Little was said, however, about how hedge fund and private equity firm managers escaped tax increases that would have paid for the revenue that will be lost because of the... Read more →

Here in D.C., the word from IRS folks who've been talking with us at the annual Taxpayer Advocacy Panel meeting is that next week is make or break for the AMT patch. If legislation to keep millions -- estimates range from 20 to 25 million taxpayers -- isn't okayed by next Friday, Dec. 21, then the 2008 filing season will be disrupted on a scale heretofore unseen. (Previous blog on this possibility here.) I'm sure all y'all dedicated tax geeks have been diligently maintaining the great AMT patch watch. In November, the House approved a version. The Senate passed a... Read more →

A friend just e-mailed me all excited about a radio report he heard this morning on his way to work. "So I don't have to worry about the AMT now, right?" he wrote. Sorry, buddy. It's not quite celebration time for you and millions of others who are potential alternative minimum tax victims. True, the Senate did pass a bill yesterday evening that would bump up the income exclusion levels; this would take millions of filers out of the clutches of the AMT. But the Senate solution is different from the version the House passed last month. And we all... Read more →

The 2008 filing season is six weeks away. Maybe. The IRS is considering not processing all early returns if Congress doesn't resolved the alternative minimum tax (AMT) issue soon. That would mean that early filers, all those folks who want to get their 1040s in ASAP because they are due refunds, would end up waiting a few extra weeks for their tax cash. That's word from Richard Spires, the deputy IRS commissioner for operations support, in an interview with the Associated Press. "We are worried that if we allow certain filers to file that it does not cause a lot... Read more →

Around 23 million taxpayers are hoping that Congress will indeed get some sort of alternative minimum tax relief passed in time to prevent them from facing a bigger bill on their 2007 returns. And the IRS is just hoping that it's done quickly enough to get the paperwork updated. Uncle Sam still has nightmares about last year's late (Dec. 20) enactment of multiple tax provisions. That threw the filing process into chaos, especially for the millions of taxpayers who filed the old fashioned way, because the paper forms had gone to press many weeks before the tax laws were OK'ed.... Read more →

It's not quite as sweet as the candy you'll be handing out to young ghouls tonight, but lawmakers on Capitol Hill do have a few treats for taxpayer goody bags. A measure that will keep states from taxing your Internet connection for the next seven years is now awaiting Dubya's signature. A bill that will keep millions of taxpayers out of the AMT's clutches for the 2007 tax year has been officially introduced. And many of the tax breaks you and I have enjoyed over the last few years are on track to be around for a bit longer. No... Read more →

Charles Grassley might be getting some calls from his Republican colleagues about his latest position on the alternative minimum tax. Tax publisher BNA reports that Grassley (R-Iowa), the ranking minority member on the Senate Finance Committee, would be willing to accept tax increases on the wealthiest Americans as a way to help finance repeal of the AMT. Grassley has previously noted that he prefers to repeal the costly parallel tax system without requiring Congress to worry about offsets. But since legislative pay-go rules prohibit that, Grassley and his colleagues will have to come up with the money that the government... Read more →

That's how House Ways and Means Committee Chairman Charles Rangel described his planned proposal to overhaul the tax code. The measure, said the New York Democrat, will be the most sweeping tax reform since the historic 1986 tax act. Rangel's measure is expected to call for repeal of the alternative minimum tax, reduce payments for as many as 90 million U.S. households and increase levies on hedge-fund and private-equity executives. In addition, the Representative told reporters, it will produce a "real simplified, fairer system." W&M staff are still working out details, but the legislation is likely to include expanded child... Read more →

As candidates continue along what they hope will be the road to the White House, taxes and tax breaks keep coming up. That's not unusual in any election. And it's especially relevant for the next occupant of the Oval Office, since that person will have to deal with the 2010 expiration date of W's many tax cuts. One common campaign theme is how to preserve middle- and lower-income tax breaks. A popular answer so far is to raise taxes on the wealthiest Americans to pay for continuation or expansion of tax breaks for those in the other tax brackets. Last... Read more →

In the wake of the Taxpayer Advocate's 2006 annual report, analyses and number crunchings are flooding cyberspace. In my earlier posting on the Advocate's recommendation that the alternative minimum tax be scrapped, I cited a 2005 study by the Center on Budget and Policy Priorities. That think tank has updated its AMT projections in a paper issued this week. It's not a dramatic change, but more a confirmation of just how much money the AMT brings in. The new figures: AMT repeal would cost about $750 billion in lost revenues over the next decade (2007-2016), if the income-tax cuts enacted... Read more →

Just in case you haven't gotten around to reading the Taxpayer Advocate's annual report that I mentioned earlier today, and since I promised I'd be back, here's a closer look at this year's top tax trouble: the alternative minimum tax (AMT). National Taxpayer Advocate Nina E. Olson calls this parallel tax system the "poster child for tax-law complexity." It's already on the hit list of the new 110th Congress and Olson, who has targeted the AMT in previous reports, gladly provides Capitol Hill with more ammunition. She notes the cost to affected taxpayers (the average AMT taxpayer in 2006 will... Read more →