“Briefly, the alternative minimum tax (AMT) is an income tax that applies when an individual, as well as a corporation, estate, or trust, has taxable income above a certain threshold,” explained Los Angeles Income Tax Planning and Income Tax Litigator Attorney Bruce Givner. “Basically, wealthy individuals are required to pay income tax equal to the higher of their AMT or regular rate income tax.”
The problem this year is that the Internal Revenue Service’s (IRS) computer system has not received its annual programming for inflation. In previous years, Congress has enacted “patches” to index the AMT’s income thresholds for inflation. This prevented taxpayers who were not subject to the AMT from being subject to the AMT. The last patch expired on December 31, 2011. Since the current AMT exemption amounts are scheduled to revert to their lowest rates in the last five years, according to the IRS approximately 28 million additional taxpayers could be socked with AMT for tax year 2012.
Also, since the AMT patch has generally included a special tax credit ordering rule that applies to all taxpayers claiming certain tax credits, whether they owe AMT or not, enacting an AMT patch could affect more than 60 million taxpayers who file individual income tax returns.
IRS Commissioner Steven T. Miller has noted that if the AMT patch is enacted no later than December 31, 2012, the IRS “would likely be able to open the 2013 tax filing season with minimal delays for most taxpayers.” Democrats and Republicans in both houses back fixing the AMT.
Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.