What You Should Know About the Alternative Minimum Tax

This tax more than any other tax can sneak up on you.  And once the tax is applied it's difficult if not impossible to lower it or get rid of it.  The best way to handle the AMT tax is to do tax planning.  At least that way, you can prepare for the tax or avoid it all together.

What You Should Know about AMT

Have you ever wondered if the Alternative Minimum Tax applies to you? You may have to pay this tax if your income is above a certain amount. The AMT attempts to ensure that some individuals who claim certain tax benefits pay a minimum amount of tax.

Here are some things from the IRS that you should know about AMT:

1. You may have to pay the tax if your taxable income, plus certain adjustments, is more than the AMT exemption amount for your filing status. If your income is below this amount, you usually will not owe AMT.

2. The 2013 AMT exemption amounts for each filing status are:

• Single and Head of Household = $51,900

• Married Filing Joint and Qualifying Widow(er) = $80,800

• Married Filing Separate = $40,400

3. The rules for AMT are more complex than the rules for regular income tax. The best way to make it easy on yourself is to use IRS e-file to prepare and file your tax return. E-file tax software will figure AMT for you if you owe it.

4. If you file a paper return, use the AMT Assistant tool on IRS.gov to find out if you may need to pay the tax.

5. If you owe AMT, you usually must file Form 6251, Alternative Minimum Tax – Individuals. Some taxpayers who owe AMT can file Form 1040A and use the AMT Worksheet in the instructions.

Report Your Income Even If You Earned It Illegally

Unreported income, which is supposed to be reported, based on the tax laws makes the taxpayer an illegal person of interest.  I can’t emphasize enough to clients or my readers, the importance of reporting your income.

Even if it feels ok, at the time of the un-wise decision to hide the income, I can guarantee you that there will come a time, when the truth will come back and haunt you.  It may take 18 months, or it may take 3 to six years.

The very second that you spend the monies which weren’t reported to the Department of the Treasury, you are walking on thin ice.  You are spending money which has no bases, or no foundation.  This leaves mental and spiritual gaps in your financial world.

Do yourself a favor and report that which you earn.  Even if you earn the income illegally, if you report the income, you won’t have problems with the IRS.  One important tip, when the Form 1040 ask for your occupation, just say consultant.

From me, to you, to my clients past, present and future and all my readers, report the stupid income.  The IRS has ways of finding out.  In my Book Website Success and the IRS, I discuss some of the ways the IRS finds out about un-reported income.  You can purchase the Book on Amazon, in the Kindle Store. 

You don't need an e-Reader, you can download Amazon's free app and read on your desktop or laptop.  Website Success and the IRS  (They got Al Capone on tax evasion, nothing more)

What To Do When You Receive a Notice from the IRS

You must never forget that IRS Tax Notices support the very foundation of this countries tax structure.  When the IRS Computer has a problem matching reported income, interest, mortgage payments, 1099-MISC or any other income, to a taxpayers tax return, you more than likely will receive a Notice from the IRS.  Usually these notices are only to ask questions, to help the IRS Computer and the IRS Human to understand what the h_ _ _ you are doing on your tax return.

These Notices are extremely important and should not be ignored or taken lightly.  If you don't understand the Notice, notify a Tax Professional immediately.  An IRS Notice generated by the IRS Computer can become a nightmare in your financial life, if the IRS Computer has to notify an IRS Human because you ignored the Notice!

Below are tips, directly from the IRS on how to handle an IRS Notice:


Eight Tips for Taxpayers Who Receive an IRS Notice

 

Receiving a notice from the Internal Revenue Service is no cause for alarm. Every year the IRS sends millions of letters and notices to taxpayers. In the event one shows up in your mailbox, here are eight things you should know.

1. Don’t panic. Many of these letters can be dealt with very simply.

 

2. There are a number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.

 

3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.

 

4. If you receive a notice about a correction to your tax return, you should review the correspondence and compare it with the information on your return.

 

5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due.

 

6. If you do not agree with the correction the IRS made, it is important that you respond as requested. Respond to the IRS in writing to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the lower left corner of the notice.

Allow at least 30 days for a response from the IRS.

 

7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right corner of the notice. When you call, have a copy of your tax return and the correspondence available.

 

8. Keep copies of any correspondence with your tax records.

 

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. For information about penalties and interest charges, see Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional, Important Notes:

a.)  Never send the IRS your original documents, always send a copy. 

b)  If you owe the IRS money and don't yet have the money to pay, you may want to speak with a tax professional to serve as a buffer and help you prepare to provide the correct and true information to the IRS.  It is a Federal crime to lie to a Federal Agent.  It is always best to be prepared, rather than to lie.

c)  Never be afraid to ask questions.  IRS Forms are the key to getting the IRS to help you help yourself.