Results 1 to 8 of 8

Thread: Alternative Minimum Tax

  1. #1
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Lightbulb Alternative Minimum Tax

    from


    (snip)""I love to describe the AMT as one of those big roulette-type wheels that goes round and round, and where it stops nobody knows," said Pete Lang, president of Lang Capital LLC, a Hilton Head, S.C.–based private wealth manager.

    This may come as a surprise, but it's not the rich who have the most to worry about. Some 3.9 million taxpayers—4.2 percent of the nation's total—are expected to get hit with the AMT for 2013, according to experts from the Tax Policy Center. The average tab for individuals: $6,600.

    "Unfortunately, AMT is really targeted at the middle market," said Dave McKelvey, partner in Friedman LLP, a New York City accounting and advising firm. "If you make a lot of money, your regular tax is going to be high enough that AMT is not going to be an issue, and if you make an income that's low enough, AMT is not going to be an issue." (snip)

    (snip)So how do you know if you'll face AMT this year? Past experience may be a better guide this January than it's been in the past.

    That's because the compromise that ended the "fiscal cliff" showdown early in 2013 ended the annual uncertainty about the income levels exempt from AMT. Now the thresholds are automatically adjusted each year for inflation. The full exemption applies to an adjusted gross income of $80,800 for a couple filing a joint return, $51,900 for singles. The exemption phases out as income rises.

    "We shouldn't have the threat of huge numbers of additional people being caught by the AMT going forward," said Mark Luscombe, principal federal tax analyst for CCH, a Wolters Kluwer business that studies tax issues.

    The fiscal cliff deal also raised tax rates for higher-income earners. Couples making more than $450,000 a year and singles earning $400,000 or more now face a "marginal rate" of 39.6 percent rather than 35 percent on income above those levels. Because the maximum AMT rate is 28 percent, these well-to-do taxpayers will typically be charged more on their regular returns so they won't face the AMT.

    Taxpayers with small incomes fall within the AMT exemption limits. That leaves the upper middle class to face the tax, especially those with incomes between $200,000 and $500,000, Luscombe said.

    Certain factors raise the AMT risk. The seven triggers are:

    1. living where there are high state and local taxes, which produce big deductions on the regular return
    2. exercising stock options
    3. reporting large investment options
    4. having lots of children
    5. using a home-equity loan for something other than home improvement
    6. having a pile of miscellaneous deductions
    7. claiming business depreciation
    (snip)


    Potential take-aways from this article are that single persons earning $52,000 or more are potentially subject to having to pay higher taxes based on the Alternative Minimum Tax. The odds of AMT forcing the payment of higher taxes is directly related to the number of deductions and exemptions taken in regard to 'regular' taxes. This puts people living in high tax rate states at greater risk of being hit by the AMT, since state ( and local ) taxes paid serve as deductions against federal taxable income.

    Thus the AMT may not only reduce the after-tax dollars left in the pockets of higher earning dancers and camgirls, but it may also reduce the after-tax dollars left in the pockets of their customers.

    At the very least, the AMT provides reason for higher earning dancers and camgirls to utilize tax prep software which runs the AMT calculations along with the 'standard' tax calculations.

  2. #2
    Featured Member minnow's Avatar
    Joined
    Sep 2007
    Location
    USA
    Posts
    1,003
    Thanks
    242
    Thanked 519 Times in 315 Posts
    Blog Entries
    10
    My Mood
    Twisted

    Default Re: Alternative Minimum Tax

    Quote Originally Posted by Melonie View Post
    from [url]http:/

    At the very least, the AMT provides reason for higher earning dancers and camgirls to utilize tax prep software which runs the AMT calculations along with the 'standard' tax calculations.
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^^^^^^^^^^^

    This.. Trying to figure out if you're going to be snared by AMT can be one of the more time consuming tasks in filling out the return. A definite pita. On the flip side, just be thankful that you're making enough $$ to worry about it.
    I'm right 96% of the time. I don't sweat the other 5% .......................

  3. #3
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Alternative Minimum Tax

    ^^^ Indeed ! Unfortunately, dancers in high tax states like California, Illinois, NY, NJ etc. are certainly not 'rich' if they are earning just $51,900 ... this year's AMT exemption limit for a single person with no dependents. For the past few years, the US Congress kept passing 'AMT Fixes' which set the exemption limit quite a bit higher than this year's $51,900. However, with the recent budget agreement, it appears that a ( future inflation adjusted ) $51,900 exemption limit is now here to stay.

    I would also add that, on the 'customer' side, the AMT is likely to take a bigger 'bite' of their incomes as well. This will especially be the case for 'customers' who cashed in stock options and/or other investments in 2013. And, as always, reduced after-tax incomes usually equals reduced spending on 'non-essential' items like lap dances and paid webcam.

  4. #4
    Featured Member minnow's Avatar
    Joined
    Sep 2007
    Location
    USA
    Posts
    1,003
    Thanks
    242
    Thanked 519 Times in 315 Posts
    Blog Entries
    10
    My Mood
    Twisted

    Default Re: Alternative Minimum Tax

    ^^^ First paragraph misleading, as ones income would have to be a lot more than $51,900 to trigger the AMT (e.g., have AMT tax be more than ones regular 1040 form calculated tax.) Exemption not the same as income trigger point.

    On the second paragraph, a small % of population (and probably SWers) are in a position to cash in on stock options. Presumably, a profit will be realized. For several, this is in a sense "new found", or bonus money. Seems to me that such an individual would be more inclined to spend $$ than Joe or Jane salary worker.
    Last edited by minnow; 01-29-2014 at 02:58 PM. Reason: typo
    I'm right 96% of the time. I don't sweat the other 5% .......................

  5. #5
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Alternative Minimum Tax

    ^^^ well, no single short article can explain all of the complexities of the AMT ...

    Here's some additional info ...

    (snip)AMT Adjustments

    When calculating the alternative minimum tax, various adjustments are made. Some income is added which is not subject to the regular tax. Some deductions are adjusted downwards or eliminated entirely.

    The following items may trigger an AMT liability:
    •Itemized deductions for state and local taxes, medical expenses, and miscellaneous expenses
    •Mortgage interest on home equity debt
    •Accelerated depreciation
    •Exercising (but not selling) incentive stock options
    •Tax-exempt interest from private activity bonds
    •Passive income or losses
    •Net operating loss deduction
    •Foreign tax credits
    •Investment expenses(snip)

    This list is not comprehensive, but reflects the typical adjustments I see that can trigger an AMT liability. Typically, the alternative minimum tax eliminates most or exactly all of the regular tax savings from the above-mentioned deductions. (snip) from

    The AMT applies to many forms of passive / investment income, not just to stock options. It also applies to people who deduct large amounts of state and local income and/or property taxes paid ... potentially making residents of states like California, Illinois, New York, New Jersey etc. much more likely to be 'hit' by the AMT. It also applies to people who have spent large amounts of money for medical treatment. Thus a significant number of taxpayers ( Tax Policy Center estimates 3.9 million taxpayers ) will have to pay higher taxes ( an estimated average of an extra $6,600 each ) this year due to the AMT.

    The mechanism by which the AMT increases tax bills, i.e. by partially or totally disallowing tax deductions for people earning more than the AMT threshold amount, thus pushing the person into a higher percentage tax 'bracket', makes for 'unpredictable' forecasts regarding individual tax bill increases. But it is a certainty that AMT results in higher tax bills not lower ones. It is also a possibility that a person earning a little bit more than the $51,900 AMT threshold could be immediately hit by the AMT ... depending on the size and type of specific tax exemptions / deductions involved for that person.

    More importantly for many dancers and camgirls, the 'upper' middle class Americans most likely to be affected by the AMT also comprise a significant fraction of their customer base !!!
    Last edited by Melonie; 01-29-2014 at 10:53 AM.

  6. #6
    Senior Member drewburner69's Avatar
    Joined
    Apr 2012
    Location
    NY
    Posts
    119
    Thanks
    193
    Thanked 65 Times in 40 Posts
    My Mood
    Cool

    Default Re: Alternative Minimum Tax

    Great posts as usual Melonie!!

  7. The Following User Says Thank You to drewburner69 For This Useful Post:


  8. #7
    God/dess FBR's Avatar
    Joined
    May 2003
    Posts
    8,351
    Thanks
    85
    Thanked 342 Times in 244 Posts
    Blog Entries
    3
    My Mood
    Mellow

    Default Re: Alternative Minimum Tax

    AMT was originally a way to make sure the uber rich paid their "fair share". Now it hits a large percentage of taxpayers. I'm not wealthy by any means but AMT clips me for 3-4K every year if not more.

    FBR
    Once again I have embraced my addiction and have put off the moral dilemma to another day.

  9. #8
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Alternative Minimum Tax

    A. don't feel like the 'lone ranger' ... while I still lived in NY I got 'hit' by the AMT every year too - because of the high amount of state and local income taxes, local property taxes etc. I was required to pay created a large federal tax deduction. However, as a result of the recent budget deal, the AMT exclusion limit has been set low enough where lots of full time dancers living in high tax rate states may now get 'hit'.

    B. and that $3-4,000 which you didn't get to 'keep' thanks to the AMT also meant $3-4,000 which you didn't have available to spend in strip clubs ... thus $3-4,000 reduction in gross incomes for the club and the dancers !

Similar Threads

  1. Camgirl tax class tomorrow - webcam modeling tax advice
    By laurielegs in forum Camming Connection
    Replies: 3
    Last Post: 01-31-2013, 07:26 PM
  2. Replies: 2
    Last Post: 11-06-2008, 04:00 PM
  3. weekend commentary - Alternative Minimum Tax
    By Melonie in forum Dollar Den
    Replies: 10
    Last Post: 11-04-2007, 06:49 PM
  4. separate thread on Alternative Minimum Tax ...
    By Melonie in forum Dollar Den
    Replies: 3
    Last Post: 02-03-2007, 05:41 PM
  5. Replies: 0
    Last Post: 04-14-2006, 11:24 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •