Dayhoff Soundtrack: 20070924 CNN Money: AMT: Tick-tock, Congress

Wednesday, September 26, 2007

20070924 CNN Money: AMT: Tick-tock, Congress

Millions of taxpayers have been left in the dark about just how much they'll owe the IRS this year thanks to indecision in D.C.

By Jeanne Sahadi, CNNMoney.com senior writer

September 24 2007

NEW YORK (CNNMoney.com) -- Lawmakers have effectively denied roughly 23 million taxpayers the ability to plan adequately for their taxes this year.

That's because they have yet to decide just what they're going to do about the Alternative Minimum Tax (AMT). If they end up doing nothing, those 23 million folks will get hit with the "wealth" tax - about 19 million of them for the first time.

The AMT was originally intended for the wealthy few when it was created nearly 40 years ago. But because Congress never indexed for inflation the amount of income exempt from AMT and because it disallows a lot of popular tax breaks, tens of millions of middle-class taxpayers could get hit.

While leading politicians and tax experts have been saying that at the very least Congress will pass a "patch" this year to shield the majority of the 23 million from the AMT, it is not clear what that patch would look like.

Since 2001, Congress has temporarily increased income exemption levels and allowed for some personal credits to be used. The last patch - for 2006 - put the exemption levels at $62,550 for joint filers and $42,250 for single filers. Without a patch, the 2007 exemption amounts will fall to $45,000 for joint filers and $33,750 for single filers.

Even if Congress does pass a patch, the Joint Committee on Taxation estimates that 5.4 million tax filers are likely to be subject to the AMT in 2007, up from 4.2 million last year.

[…]

With at most six legislative weeks left on the Congressional schedule this year, it seems highly unlikely that a deal would be sealed on a broad AMT reform package for two reasons:

There is still no consensus on how or whether to pay for it - repeal could reduce expected revenue by close to $1 trillion over 10 years.

A number of issues, like the mortgage crisis, have stolen some momentum from dealing with the AMT.

[…]

Broadly speaking, you might be at risk of having to pay AMT if more than one of these situations apply:

You live in a high-tax state. State and local income taxes are not deductible under AMT as they are under the regular federal income tax code.

You have kids. Personal exemptions are disallowed under the AMT.

You take a lot of miscellaneous deductions, including unreimbursed business expenses. They, too, are disallowed under the AMT.

Your household gross income exceeds $100,000.

[…]

Read the entire article: AMT: Tick-tock, Congress

Link to how families making $75,000 can hit by the AMT

http://money.cnn.com/2007/03/26/pf/taxes/amt_hearing2/index.htm