Did we have the Alternative Minimum Tax last year or was it a new tax? For the first time ever I am to owe the federal Government taxes for 2007 instead of getting a refund. I am a single mom and a teacher and don't know why this year I am projected to owe close to $1500 if last year I got a refund. I had no major changes in income. I made a little more (only 4 grand) but they took out more which should've balanced that out. Don't know what's going on..................any insight?
2007-12-25 04:02:01 · 4 answers · asked by MO 4 in Business & Finance ➔ Taxes ➔ United States
It wasn't repealed, it was just modified so that it will affect fewer people. And it isn't new - has been around since 1969.
If you had a refund last year, nothing changed much and you are projected to owe this year, look at the two returns side by side and see what's different - SOMETHING has changed. Did one of your kids turn 17 so you no longer will get the child tax credit for him or her? $4000 in extra income, even if they hadn't taken out any more, wouldn't have caused that much of a change. If you are using some online calculator for this year's tax, it's possible that you entered something incorrectly and it's not really that bad. If you'll post more info here like your salary for the year, your withholding for federal income tax, number of kids and their ages, somebody might be able to give you a little more info.
Owing this year has nothing to do with AMT for you, unless you make a heck of a lot more money than other teachers do!
2007-12-25 04:21:15 · answer #1 · answered by Judy 7 · 0⤊ 0⤋
The AMT has NOT been repealed. It has been "patched" again to keep most middle income taxpayers out of its clutches.
The AMT has been around for about 38 years. It was enacted to patch a number of loopholes at the time that often resulted in high-income taxpayers paying little or no tax.
The problem is that the way the law was originally written it did not take into account the impact of inflation. In some cases it could kick in for a Single taxpayer with an income as low as $45k per year. That's a modest income in most of the country today but was just shy of a king's ransom back in 1969 when it was first passed.
Congress has acted every few years to patch it temporarily. The reason that they don't fix it permanently is purely political. Congress bases the budget and budgetary shortfalls or surpluses on projected revenues. If the AMT isn't fixed permanently, that allows them to use the phantom "revenue" from it in the budget process and make things LOOK better than they really are. In hindsight it's always worse than originally projected and THAT is the primary reason for that happening every year, year after year.
If you've been using some software or a website to estimate your taxes it's a virtual certainty that the calculations were based upon the unpatched version for 2007. You'll have to wait until they update the website or if you're using software, publish an update to it to get the correct numbers out.
You're seeing what the AMT might have done to you had it not been patched. If more folks saw this, they'd clamor for Congress to permanently fix it and stop playing political games with the budget process.
Grassroots effort, anyone??
2007-12-25 12:10:34 · answer #2 · answered by Bostonian In MO 7 · 2⤊ 0⤋
AMT has been around since the early 1970s. The problem is, the AMT exemption amounts have been stuck at the old numbers and never adjusted for inflation. The government patches them every year. This year, they didn't do it until last week. (It helps their budget projections if they don't permanently get rid of AMT and just patch it each year at the end of the year.)
If you use software to generate your taxes, the software did the AMT calculations behind the scenes, but didn't print out the the form unless you were affected by it. (If you do your taxes by hand, the IRS computer will also do the calculation and send you the forms if you were supposed to do them.)
The CURRENT software on the web that is available to estimate your taxes is probably using the pre-patch numbers and under those, 25 million people will appear to owe AMT. After the patch, roughly 2.5 million people will owe.
2007-12-25 12:12:14 · answer #3 · answered by Anonymous · 0⤊ 0⤋
I would agree with Judy. Maybe the calculator didn't itemize or account for a deduction you had last year. I would be putting a pro forma return for this year (and maybe the year before too) and compare with last year's return to see where the differences are.
2007-12-25 13:08:34 · answer #4 · answered by TBONE 2 · 0⤊ 0⤋