Tax Payer Advocate Service

Tax Payer Advocate Service - your voice at the irs.

Welcome!

Welcome to the Taxpayer Advocate Service (TAS) Tax Toolkit! This Tax Toolkit is a website that contains useful tax information for individuals, businesses, tax professionals and media, including news and updates, ways TAS helps taxpayers, and important information about tax topics and rights.

Who We Are

As an independent organization within the IRS, we help taxpayers resolve problems with the IRS and recommend changes that will prevent the problems. We are “Your Voice at the IRS.”


http://www.taxpayeradvocate.irs.gov/



as listed on the IRS website

IRS Alternative Minimum Tax- topic 556

Topic 556 - Alternative Minimum Tax

The tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain kinds of expenses. The alternative minimum tax (AMT) attempts to ensure that anyone who benefits from these tax advantages pays at least a minimum amount of tax.

The AMT is a separately figured tax that eliminates many deductions and credits, thus increasing tax liability for an individual who would otherwise pay less tax. The tentative minimum tax rates on ordinary income are percentages set by law. For capital gains and certain dividends, the rates in effect for the regular tax are used.

You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount. The exemption amounts are set by law for each filing status and are listed in the Form 6251 Instructions.

To find out if you may be subject to the AMT, refer to the Form 1040 Instructions and the Form 1040A Instructions. If you are filing the Form 1040 you may use the AMT Assistant for Individuals, which is an electronic version of the AMT worksheet available on the IRS webpage at www.irs.gov. The AMT worksheet may tell you that you do not owe the AMT or it may direct you to Form 6251, Alternative Minimum Tax - Individuals. If you are directed to Form 6251, you will have to complete that form to determine whether you owe the AMT. Form 6251 (PDF), Alternative Minimum Tax - Individuals, is available in a PDF format on the IRS web page.

If you are not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year. If eligible, you should complete and attach Form 8801 (PDF), Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts.

Topic 556 - Alternative Minimum Tax

Tax Forms

Tax Forms

Alternative Minimum Tax exemptions for 2010 and 2011

The exemption amounts for 2010 are $47,450 for individual taxpayers, $72,450 for married taxpayers filing jointly and surviving spouses, and $36,225 for married couples filing separately.

For 2011 they are $48,450 for individual taxpayers, $74,450 for married taxpayers filing jointly and surviving spouses, and $37,225 for married couples filing separately.

Read more about it here.

AMT Assistant

Complete Form 6251 if you received or claimed one or more of the items listed on the Qualification Information list below you must fill out Form 625.

AMT Assistant Link

AMT form 625

Instruction for the form 625

Fill this form out in order to find out if you are required to pay the Alternative Minimum Tax (AMT).


Qualification Information

Did you receive or claim any of the following items in this tax year?

Accelerated Depreciation
Stock by exercising an incentive stock option and you did not dispose of the stock in the same year
Tax exempt interest from private activity bonds
Intangible drilling, circulation, research, experimental or mining costs
Amortization of pollution-control facilities or depletion
Income (or loss) from tax-shelter farm activities or passive activities
Income from long-term contracts not figured using the percentage-of-completion method
Interest paid on a home mortgage NOT used to buy, build or substantially improve your home
Investment interest expense reported on Form 4952
Net operating loss deduction
Alternative minimum tax adjustments from an estate, trust, electing large partnership or cooperative
Section 1202 exclusion
Any general business credit in Part I on Form 3800
Empowerment zone and renewal community employment credit
Qualified electric vehicle credit
Alternative fuel vehicle refueling property credit
Credit for prior year minimum tax



http://apps.irs.gov/app/amt2010/index.jsp?ck

Type of Retirement Plans

Types of Retirement Plans


Individual Retirement Arrangements (IRAs):

Traditional IRAs
Roth IRAs

Retirement Plans and Plan Features:

IRS Retirement Plans Navigator
A Web guide to help you choose a retirement plan that is right for your business. The guide also contains information and resources on maintaining plans and correcting plan errors.

IRA-Based Plans:
Payroll Deduction IRAs
Simplified Employee Pension (SEP Plans)
Savings Incentive Match Plans for Employees (SIMPLE IRA Plans)
Salary Reduction Simplified Employee Pension (SARSEP Plans)

Profit-Sharing Plans
401(k) Plans
Defined Benefit Plans
Money Purchase Plans
Employee Stock Ownership Plans (ESOPs)
Governmental Plans
403(b) Plans
457 Plans
409A Nonqualified Deferred Compensation Plans
Designated Roth Accounts
Automatic Enrollment

Resources Highlighting the Benefits and Features of Retirement Plans:

Lots of Benefits - when you set up an employee retirement plan
The route to retirement security is the right retirement plan. We’ll help you along the way!
Publication 3998, Choosing a Retirement Solution for Your Small Business
Publication 4484, Choose a Retirement Plan for Employees of Tax-Exempt and Government Entities
"Increasing Your Retirement Savings" video - IRAs as a tool to use in planning for retirement years. (1:17 min.)
Starting a SEP or SIMPLE IRA Plan video – (2:00 min.)
Fix-It Guides - Common Problems, Real Solutions
Find, fix, and avoid common mistakes in plans.
IRS National Tax Forum Presentations - Choosing and operating your plan.

This information was copied from here:
http://www.irs.gov/retirement/sponsor/article/0,,id=155347,00.html

How To Cut Your Alternative Minimum Tax

How To Cut Your Alternative Minimum Tax

Did you know that you're supposed to calculate your income taxes two different ways? First, you figure your tax liability under the regular tax system, which factors in preferential treatment of some income and allows tax credits for certain types of expenses. Then you calculate your taxes using the rules for the alternative minimum tax (AMT), which eliminates some tax deductions and credits. If the AMT is higher, you will be subject to taxes in addition to your regular income tax. Read on to learn more about reducing your AMT. (To continue reading about taxes, see Tax Tips For The Individual Investor.)

Read more: http://www.investopedia.com/articles/pf/07/amtbasics.asp#ixzz1ZOCKWt90





http://www.investopedia.com/articles/pf/07/amtbasics.asp#axzz1ZIafx7er

http://www.amtindividual.com/amt-tax-rates.html

Alternative Minimum Tax (AMT) Assistant for Individuals

Every year taxpayers need to consider whether they will have to pay the Alternative Minimum Tax (AMT). The AMT Assistant is intended to provide a simple test for taxpayers who fill out their tax returns without using software to determine whether they may be subject to the AMT.

Using the AMT Assistant
The AMT Assistant is easy to use. You just answer a few simple questions about entries on your draft 1040 and the system does the rest. You will see the results immediately on your computer screen. Based on your entries, the results will tell you that either you do not owe the AMT or that you must go further and complete Form 6251 to find out if you owe the AMT.

Your entries are anonymous and the information will be used only for the purpose of determining your eligibility. All entries are erased when you exit or start over. See the “IRS Privacy Policy” for more information.

The Assistant can be used by individuals, tax practitioners and community or public service organizations.

Tax Year 2010 AMT Assistant

Tax Year 2009 AMT Assistant

Tax Year 2008 AMT Assistant

Tax Year 2010 Additional Resources:

Form 1040 Instructions (PDF)
Form 1116, Foreign Tax Credit (Individual, Estate, or Trust) (PDF)
Form 1116 Instructions
Form 6251, Alternative Minimum Tax – Individuals (PDF)
Form 6251 Instructions

Tax Year 2009 Additional Resources:

Tax Tip 2010-33 - Seven facts to help you Understand the Alternative Minimum Tax

Tax Year 2008 Additional Resources:

IR-2008-19 - IRS Successfully Processing Tax Forms Affected by AMT Legislation
AMT and Filing Season 2008: Q&A

AMT Calculator and Planner

AMT Calculator and Planner

This site has a full deatured program for $49.00 that is easy and effective to use.

Try is today

Foriegn Tax Credit or Deduction for AMT

PRACTICE TIP: For most taxpayers, it is usually more advantageous to
take the foreign tax credit than to take a deduction for foreign
taxes paid. A deduction from income serves only to reduce taxable
income while the credit reduces actual tax liability. On a dollar
basis, a tax deduction is only worth the value of the taxpayer's
maximum tax bracket for that income. The credit, on the other hand,
reduces the taxpayer's actual U.S. tax liability by the dollar amount
of the qualifying foreign taxes paid.

EXAMPLE 1: A taxpayer is in the 27.5 percent U.S. income tax bracket
for 2001. His deduction of $1,000 in foreign taxes paid is worth, at
most, $280 (less in later years, when the brackets will be lower),
the value of his maximum income tax bracket. If he elects the foreign
tax credit, the $1,000 is worth $1,000. If qualifying, the taxpayer
deducts (credits) his overall U.S. tax liability by the full amount
of $1,000 for the foreign taxes he paid.

EXAMPLE 2: A U.S. taxpayer receives a $1,000 dividend from a foreign
corporation in 2001. He pays tax to the foreign country, at a 30
percent rate, a tax of $300. His U.S. marginal tax rate is 30.5
percent. If he deducts the $300 foreign tax (leaving him with a
taxable income of $700) he pays a $214 United States tax ($700 x 30.5
percent = $214). His total tax liability on $1,000 of taxable income
therefore, is $514 ($300 plus $214 = $514). If, however, the taxpayer
elects to credit the $300 foreign tax against his $305 United States
tax ($1,000 x 30.5 percent = $305) otherwise due, his United States
tax is $5 ($305 minus $300 = $5). His total tax liability is $305,
which is $209 less than if he had taken the deduction.

However, there are circumstances in which the deduction is more
beneficial than the credit. For example, although excess credit
carryovers are allowed, if a taxpayer has insufficient foreign source
income to claim the credit, the carryovers have time limits and might
expire before they can be absorbed. Also, if the taxpayer will suffer
an overall net operating loss (NOL), he would have no tax liability
against which to use the credit. A deduction in this case would
increase the NOL. Thus, in effect, the taxpayer would extend the time
period for a carryforward from the five-year period allowed the
credit to the twenty-year period allowed the NOL. Code Section
172(b)(1)(A)(ii). For most taxpayers however,
the credit will usually be preferable.

CAUTION: A taxpayer claiming the foreign tax credit may be liable for
the alternative minimum tax (AMT) under Code Section 55(a). A set of
special rules applies for the "alternative minimum
foreign tax credit." See Code Section 59. The AMT
generally is discussed in Ch. 60. The AMT foreign tax
credit is specifically covered in Section 60.13

In certain circumstances, the credit may be denied altogether. The IRS has
published its concerns that certain taxpayers (primarily multinational
corporations) may enter into arrangements that would lead to abuse of the
foreign tax credit. In the IRS's view, abusive arrangements generally are
those that yield little or no economic profit relative to the expected
U.S. tax benefits derived from the availability of the foreign tax credit;
they thus provide a shelter for low-taxed foreign-source income from a
residual U.S. tax. Such arrangements are more fully described in Notice
98-5, 1998-1 C.B. 334.


Read the full story here.

Reduce AMT

Reduce your Alternative Minimum Taxes
Here is an example of extreame case and a few good suggestions.


By ALEKSANDRA TODOROVA

SITTING IN HIS

accountant's office earlier this year, 63-year-old Joseph Halstead of San Diego, Calif., was contemplating a divorce despite being very happily married for the last 13 years.

The culprit: The Halsteads' annual income a little over $220,000 combined with their ownership of four rental properties, is throwing them smack in the middle of the dreaded alternative minimum tax trap. As a result, federal and state taxes are eating up more than 40% of their 2007 income, not to mention the fact that they lose some valuable deductions, including state and local income tax and property-tax write-offs.

If they were to divorce, however, Halstead could deduct the $48,000 in alimony payments he'd make to his wife and lessen the AMT hit on his $170,000 income. His wife, with only $50,000 in earnings, would avoid the AMT altogether. And, at that point, they could even deduct most of their rental property losses nearly $30,000 for this year which would further increase their tax savings.

For better or for worse, Halstead's wife isn't the divorcing kind. "We're pretty traditional and she wouldn't have it," he says. Their five daughters, he adds, would also be "overly upset if Mama and I got divorced."

So instead of family court, Halstead flew to Florida a few weekends ago, arranging for the sale of one of the rental properties that was supposed to generate part of their future retirement income. Getting rid of the house now, even at a loss of $40,000, he reasons, would make more sense over the long term since most of the deductions associated with it aren't allowed by the AMT anyway.

Such are the unintended consequences of the AMT. Introduced in 1969, this alternative taxation system was designed to prevent the wealthiest Americans from taking so many deductions that they end up paying little or no taxes at all. But while the regular tax system is indexed for inflation, the AMT is not. Once intended for America's highest earners, the AMT now hits more middle-income folks than ever before.

Only 20,000 taxpayers were subject to the AMT in 1970, according to research by the Tax Policy Center, a nonpartisan group. In 2007, it hit 3.5 million. Half of those taxpayers earned between $200,000 and $500,000 and another 5% earned less than $200,000. By 2010, the group says, the AMT will reach more than 80% of filers earning between $100,000 and $200,000 and half of those earning between $75,000 and $100,000.

For more details on how the AMT works, read our story

That extra cost would be even higher were it not for the AMT patch Here are some other strategies people use to avoid getting hit by the AMT.
Delaying payment of state taxes

Not paying one's taxes on time is an unwise not to mention expensive
proposition

. But that's exactly what Wendy Shick, principal of tax services at Ohio-based accountancy firm Rea & Associates, advised a client to do to avoid the AMT several years ago. Shick's client had a large capital gain that would have increased his Ohio state tax liability and therefore trigger the AMT. By extending his payments over two years, he paid Ohio a penalty, but avoided the higher tax. "That penalty was less than what he would have owed with AMT," she says.

It's a strategy that may work for taxpayers who realize large capital gains in one year, but don't otherwise earn enough to be subject to the AMT. The catch: The longer they stretch those state tax payments out, the more penalties they'll have to pay, which could potentially offset the tax savings.
Moving to another state

States like New York, California or Ohio, which have high state and local income tax rates, or New Jersey, known for its high property taxes, are red-hot spots for the AMT. For some people, moving to another state is well worth the trouble, given the potential tax savings.

Tim Speiss, head of the Personal Wealth Advisors group at accounting firm Eisner LLP, says he's had clients move to Pennsylvania from New York or New Jersey in order to escape the AMT. "It's not that terribly far, it's easy to get to and it has a 3% income tax rate," he notes. "We have virtually no clients in Pennsylvania who pay the AMT, and it's primarily due to the fact that when the state tax is so low, the disallowance is not large enough to put someone in AMT."

One snag: A taxpayer who moves to another state, but keeps their old home as a part-time residence, Speiss warns, is at risk for an IRS audit. The IRS may suspect rightfully so, in many cases that the person still lives in the higher-tax state, but is maintaining a residence in another state to lower their tax bill, he explains.
Asking for a smaller salary and bigger expense account

Another common AMT victim: employees with a high level of unreimbursed business expenses that they later deduct from their taxable income. "For sales people, consultants...all those employee business expenses add to their exposure to the AMT," says Jeff Schnepper, author of "How to Pay Zero Taxes." He advises that employees in this situation ask for a lower salary, but a bigger expense account. It's a win-win situation for both sides: The employer will pay less Social Security and Medicare tax since the employee's wages will be lower, and with fully-reimbursed business expenses, the employee's take-home pay will remain untouched by the AMT, he says.

For the full article read here.

Payless AMT

Reduce AlternativeMinimum Taxes

Alternative Minimum Tax Calculator

Alternative Minimum Tax Calculator

Six Facts the IRS Wants You to Know about the Alternative Minimum Tax


IRS Tax Tip 2011-47, March 8, 2011

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for 2010.

Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax.

Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.

The AMT exemption amounts are set by law for each filing status.

For tax year 2010, Congress raised the AMT exemption amounts to the following levels:

$72,450 for a married couple filing a joint return and qualifying widows and widowers;
$47,450 for singles and heads of household;
$36,225 for a married person filing separately.

6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents' tax rate has increased to $6,700 for 2010.

Use the IRS AMT Assistant to determine whether you may be subject to the AMT. Taxpayers can find more information about the Alternative Minimum Tax and how it impacts them by accessing IRS Form 6251, Alternative Minimum Tax —Individuals, and its instructions at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).



Links:

AMT Assistant

IRS Form 6251, Alternative Minimum Tax—Individuals