Our income increased this year due to increase commision. I would have thought acct. would have seen this coming but now he says we owe 15,0000 + federal tax. We did the proper withholding etc. What could my husband have done differently to avoid this. Is it our own stupidity or acct. error or just fact of life. The accountant says it's this AMT tax. Seems to me it would be better to just earn less or atleast my husband needs to plan better cause we have not got 15,000. And he wants to use my inheritance to pay it till he gets paid again next year. Am I being ripped off and by who. Help please...
2007-04-12 11:03:33 · 5 answers · asked by lyda 1 in Business & Finance ➔ Taxes ➔ United States
Its poor planing on your and your husbands part. The accountant could only see this coming if you told him your income was increasing. BTW, you did not do the proper withholding. If you had adjusted your withholding based on the increased income, you would not owe $15,000 more than you had withheld. What you could have done differently is consult your accountant when you know your income will increase. If the increase was commissions, he had to know he was selling more.
2007-04-12 13:26:26 · answer #1 · answered by STEVEN F 7 · 0⤊ 0⤋
Many people have fallen into this trap. The AMT, designed to prevent the "Rich" form avoid taxes entirely, now hits more and more of us in the middle class. As a Tax Pro I always ask my clients to come in no latter than Oct so we can look ahead and plan around this. After the fact is no good, one option you might look at that "may" help and maybe not is an IRA for both of you. You have until April 17th to fund it. Not much Time I know, but it could save you some especially in this case.
This would be a good practice for anyone who has rapidly rising (or falling) income.
2007-04-12 18:59:50 · answer #2 · answered by hdsok 2 · 0⤊ 0⤋
Yikes, that's ugly!
The AMT was originally designed to keep high-income people from finding ways to avoid paying taxes - unfortunately, it's now affecting some upper-middle-income folks also. Income that used to be high is upper-middle now.
You're probably not being ripped off, just have income that falls into a level where you owe a lot of tax. Not much you can do now but pay it. If you can't pay it all at once, the IRS will set up a payment plan to pay it off.
If his income is going to be similar in 2007, he should increase his withholding.
Good luck.
2007-04-12 18:19:42 · answer #3 · answered by Judy 7 · 1⤊ 0⤋
The samething happened to me actually. So I need to keep up with the answers. It seems like I shouldnt have sold as good as I did because people that made $20,000 less than me really only made $2,000 less then me come tax time!
2007-04-12 18:08:01 · answer #4 · answered by Anonymous · 0⤊ 0⤋
the best thing to do is, take your financial info to a third party accountant,let him see whats up
2007-04-12 18:08:18 · answer #5 · answered by ace 2 · 0⤊ 0⤋