Finance Tax Time

Does your incorporated business pay alternative minimum tax [”AMT]? If so, there is a 93% chance you have been overpaying your taxes by an average of $11,000 a year according to the Treasury Inspector General.

The Office of the Treasury Inspector General for Tax Administration was created in 1999 to oversee the IRS. One of the duties of the Treasury Inspector General is to study and report the efficiency of the tax payment system, particularly the accuracy of tax collection efforts. Many of the studies conducted by the office reveal starting results, particularly when it comes to businesses overpaying their taxes.

As part of this oversight, the Treasury Inspector General is reporting that many small business corporations are incorrectly paying AMT. The AMT was enacted in the late 1990s, but proved to be a huge burden on small businesses. The tax was confusing and the paperwork was incredibly complex. An amendment was subsequently added to give small business corporations relief from the AMT. Section 55(e) of the Internal Revenue Code now contains language exempting small business corporations from paying the AMT.

Small business corporations can claim an exemption from the AMT if gross revenues average $5 million or less for the initial three years of business. Thereafter, the business can continue to claim the exemption as long as revenues average $7.5 million or less of each subsequent three year period.

According to the Inspector General, companies that fail to claim an exemption to the AMT are overpaying taxes by an average of $11,638 each year. 93% of small business corporations qualify for the exemption. Since the IRS has no duty to notify taxpayers of overpayments, many small business corporations have no idea they are overpaying taxes and are due refunds.

All taxpayers have the right to file amended tax returns for the past three calendar years. Contact us now to find out if you failed to claim the exemption to the AMT and are due a refund for 2001, 2002 and 2003. If you failed to claim the AMT exemption, you may be due a refund totaling over $33,000.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

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Hell hath no fury like a person who just found out the alternative minimum tax applies to them. The IRS has set up an online tool to figure out if you do.

Alternative Minimum Tax

The alternative minimum tax is a procedure that was set up to keep the richest of Americans from avoiding tax paying responsibilities. As is typical of the federal government, the failed to include any language adjusting for income growth and so on. As a result, the alternative minimum tax creams many taxpayers even though it was never intended to cover them.

So, why don’t our beloved leaders just amend the relevant codes? Politicians giving up money they can spend on wars and favorite, but unnecessary, projects in their districts to keep voters happy? Surely, you aren’t that na

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Getting married is the greatest day for 50 percent of couples. The other 50 percent get divorced. Perhaps the marriage tax penalty has something to do with it.

Family Values - Hardly

For all the chatter from politicians about family values, it is ironic that the tax code actually penalizes people for getting married. At its heart, the tax code is designed to modify behavior. Deductions and credits are given in areas the politicians wish to promote and taken away in areas considered less positive. Home ownership is viewed as a good thing, so mortgage interest is deductible. Cigarettes are bad, so they are taxed like no tomorrow. If you buy this argument, one must wonder why married couples suffer under the tax code.

A recent study found that by getting married, couples are forced to pay roughly $1,500 in additional taxes. Known as the marriage penalty, one must wonder what the government is up to. Is it trying to promote family values or not? The numbers would seem to indicate not.

The marriage penalty is a nasty little development for newlyweds. The penalty occurs because married couples must pool their earnings when they report taxes. Typically, this means their pooled earnings move them into a higher tax bracket and they pay more taxes. For instance, assume husband makes $45,000 a year as does wife. As a married couple, their pooled income is $90,000 with the accompanying tax consequences. For really doomed couples, the combined income will actually kick in the alternative minimum tax. The AMT more or less voids many major deductions. In the tax industry, there is a nickname for this situation - the divorce tax.

The marriage penalty has existed for years, yet the politicians have failed to find a fix. They pay lip service to the idea, but no major changes have been made to fix the problem. The best they have come up with is doubling the standard deduction for married couples, but this has had little impact since most couples itemize their deductions.

It appears the marriage tax penalty is here to stay for the foreseeable future. One has to wonder why our family values President didn’t include a fix in his tax cuts.

Richard A. Chapo is with http://www.businesstaxrecovery.com - recovery of business taxes through tax help and tax relief. Visit http://www.businesstaxrecovery.com/articles to read more business tax articles.

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