Taxes

Alternative Minimum Tax (AMT)

The alternative minimum tax was originally enacted to ensure that high-income taxpayers pay at least a minimum amount of tax if they benefit from certain deductions and other tax preference items.

The AMT tax computation is a parallel system to the regular tax system with its own definitions of income and expenses, rules for income recognition and timing, and exemptions and tax rates. Although every taxpayer is subject to AMT rules, the additional tax is paid only if the tax computation under AMT rules is higher than the tax computed under regular rules.

Even though the AMT was originally targeted toward high-income taxpayers, factors, including inflation and treatment of certain tax credits, can sometimes push lower-income taxpayers into an AMT situation.

For more information, click Alternative_Minimum_Tax_2017

 

Audits

Individual taxpayers who are under audit by the IRS may attend the audit in person without any assistance from a tax professional. However, this can be a dangerous mistake. Although not officially stated, it is the job of an IRS Revenue Agent to conduct an audit with an eye toward finding additional tax owed. With so many gray areas in tax law, and considering the tax code’s complexity, an individual who chooses to go it alone is a sitting duck. Without extensive tax education and experience, the examiner can (and sometimes will) say anything to find additional tax due on the return. Without the necessary knowledge, the taxpayer is powerless to refute the agent’s rationale.

For more information, click on Audits_2017

 

Cancellation of Debt

Taxpayers with cancelled debt can often exclude the cancellation of debt income to the extent they were insolvent immediately before the cancellation. If a cancelled debt is excluded from income, it is nontaxable.

Cancellation of debt (COD) is settlement of a debt for less than the amount owed. A debt may be cancelled by a lender voluntarily or through bankruptcy or other legal proceedings and may result in ordinary income, income from the sale of assets, or both.

For more information, download Cancellation_of_Debt_-_Insolvency_2017