The AMT smack-down held off for one more year
Filed under: Tax
About 20 million taxpayers were spared from being hit with the Alternative Minimum Tax (AMT), thanks to a bill finally passed by the House of Representatives.The AMT is a provision in the tax law which ensures that taxpayers with "high" income and a lot of deductions pay at least a minimum amount of taxes. But the rules were written back 1969, when the definition of "high" income was a bit different than it is today.
According to the New York Times, $150,000 in income in 1969 would be equivalent to $850,000 in today's dollars. Clearly, what was considered wealthy in 1969 is quite different by today's standards.
The tax law hasn't kept pace with inflation, and this year couples with income of $45,000 would have been affected by AMT. This new bill ups that figure to $66,250 for married taxpayers. It's estimated that this development will keep a married couple from paying an additional $4,000 to $5,000 in tax for the 2007 tax year.
Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.Democrats who voted against this bill are ticked off because they say it's a "tax cut" and a provision was not included to fill the gap. It was estimated that $50 billion would have been collected under the AMT if this bill wasn't passed.
The IRS says there shouldn't be any delays in processing because of this change. They will have the 12 tax forms affected by AMT ready to go within 72 hours of the bill being signed into law. President Bush has said he will sign the bill.
Don't get too excited, though. This same dance will be done again next year. This fix only applies to the 2007 tax year, and unless another temporary or permanent fix is passed into law next year, the same issue will rear its ugly head again.
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