Many taxpayers don't ever consider checking to see if they fall into the AMT. In fact, many don't even know what it is. Those that attempt to figure it out, often get confused by the calculations and simply assume that they don't owe it. "Many taxpayers are unaware that the AMT applies to them until they receive a notice from the IRS, and some discover they have AMT liabilities that they did not anticipate and cannt pay," said Taxpayer Advocate Nina Olson in a report to a congressional subcommittee last year. While the instructions for Form 1040's line 45 (where you enter your AMT amount) require taxpayers to fill out fairly simple worksheet, the taxpayer ahs to read 16 exceptions to that worksheet that refer the taxpayer to go directly to Form 6251to figure potential AMT liability. Many don't know where to even go for the form, as they simply picked up a 1040 and started filling it out as usual. One of the exceptions is "interest paid on a mortgage not used to buy, build or substantially improve your home." Does this mean that home equity loan that consolidated the credit cards? "There's no one thing that one can say for sure 'this is going to be an AMT problem," said Mark Luscombe, a principal analyst with CCH. Many are shocked to find that they are in the AMT. After all, it was originally intended to stop the wealthy from avoiding their income taxes. "You don't have to be making a lot of money to fall into the alt-min anymore," said Barbara Steinmetz, a certified financial planner. "Property taxes help boost you there. State income taxes help boost you there." "If you are working through the 1040 and you go line by line, you shouldn't miss it," says the IRS. The AMT currently traps high-income taxpayers with difficult tax situations. Most of these are aware of the issue, because they have their tax returns prepared professionally. Without yearly patches on the AMT, millions of middle-income families could be subject to the parallel tax. "It's like watching a horror movie and there's this slow moving creature that's about to consume the middle class," said Len Burman of the Urban Institute and the Tax Policy Center. |
