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Thread: a very unwelcome potential tax suprise ... A.M.T.

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    Banned Melonie's Avatar
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    Default a very unwelcome potential tax suprise ... A.M.T.

    While originally intended to snare a relative handful of extremely rich Americans who were utilizing so many 'tax shelters' that they were able to avoid paying income tax altogether, the Alternative Minimum Tax has never been adjusted for inflation. As a result the AMT affects more and more taxpayers ... and is now at the point where it may affect a good number of full time dancers.



    (snip)"the Joint Committee on Taxation estimated that the number of taxpayers affected by the AMT would rise to 17.5 million in 2010 from 1.5 million taxpayers in 2001. Many of those snared by the tax would be making $75,000 to $100,000 a year -- hardly the wealthy tax dodgers the AMT was designed to catch."(snip)



    (snip)"The AMT applies only when the resulting tax base exceeds an exclusion amount, which is $58,000 for joint filers in 2004, but declines to $45,000 beginning in 2005. For single filers, the exclusion is $40,250 in 2004, and $33,750 beginning in 2005"(snip)

    As it is unlikely that any significant changes are going to be legislated regarding the AMT in the near future, the effect on some full time dancer's take home incomes is likely to only get worse in the near future. However, if you're aware of some factors regarding the types of income which are taxed under the AMT versus exempt, and if you structure your investments accordingly, you may be able to save yourself a significant amount of tax money.

    sources of 'income' taxed by the AMT ... 'paycheck' income, self-employed income, tips, interest on bank accounts / CD's / bonds

    sources of 'income' exempt from the AMT ... stock dividends, capital gains

    I'm not sure about income from rents and royalties. Experts ?

    I'd also be interested in finding out the aggregate difference in total taxes for a dancer earning say $75,000 per year, where in one case there are $1,000 in interest earnings (from say $20k in CD's) but in another case there is $1000 in dividend earnings (from say $20k in stocks).

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    Structure rent and royalties to be payed as dividends.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    The country is broke. They ain't gonna do shit. In fact, they are taking people's property these days and giving it to private developer's who promise more tax dollars per acre on it. I mean, it is pretty obvious what this country is coming to.

    They will lessen taxes on the harvesting of red tailed big mouth bass and call it a "tax break." (Actually they won't lessen the tax, they will simply refund some taxes that were paid that year so that the red tailed big mouth bass people have to beg and plead (bring those check books to the senator's office) for another "refund" each year.)

    Meanwhile the big inequities like the AMT will continue on. (A lot of people with "stock options" in Silly Con Valley got burned by AMT when they were taxed at levels the stock was worth when they were given em - but unable to sell it by management proclamation - compared to what it was worth after the bubble. Imagine the government saying "We are taxing your stock at a value of $100" when your broker is saying "It's worth only $3.00." Ah - the beauty of government accounting.)

    One would think a depression would straighten it out when it currently runs people out the door, but I suspect, like our new third world state California - it will simply make it worse causing that many more businesses to run out of the borders.

    It's going to take another revolution to get it straightened out.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    Structure rent and royalties to be payed as dividends
    This is not always possible ... I'm talking about royalties from stock shares like BPT, SJT, and my recent favorite FDG

    Again not wanting to touch on the political, but the population statistics clearly show that middle class taxpayers are leaving high tax states like CA and NY in droves. If your earnings are in the AMT range, between state, local, property and sales taxes, moving to a low tax state like NV or TX or FL can make a 15% difference in after-tax spendable money vs the same amount of gross income.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    The total tax costs for "low tax states" like Florida and NV aren't always the lowest effective tax costs - once you consider all types of taxes - although counter intuitive, FL without an income tax (but an intangibles tax on stocks/bonds/investments) has an overall tax burdon higher than California.

    While AMT is a cancer upon most taxpayers - there are strategies to minimize it that can be of some assistance. The key is to perform multi-year scenario simulations to minimize your total tax costs.

    Dan
    Daniel D. Morris, CPA
    [email protected]

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    Quote Originally Posted by DanMorris95156
    The total tax costs for "low tax states" like Florida and NV aren't always the lowest effective tax costs - once you consider all types of taxes - although counter intuitive, FL without an income tax (but an intangibles tax on stocks/bonds/investments) has an overall tax burdon higher than California.
    TY for the heads up, I'll probably be moving to Miami in 13-16 months

    Never even heard of that.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    I lived in Tanpa in the 80's and another thing you found was that they nickel and dimed you every chance they got charging you for stuff that in the "high tax" states are free or maybe a dollar or two , building permits stuff like that, typically 20-50 bucks or so for each.

    I remember the "crosstown expressway/tollway" It was a tollway, the original plan was that when the tolls collected paid off the bonds from building it, some time in the 90's after I moved, the tollway would revert to being a freeway, well the way i heard it the local goverment had gotten so used to getting all that money every year, when the bonds were paid off they just kept right on collecting those tolls.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    Then there was the "Vehicle impact tax" fiasco, it was in the 90's, basically if you moved to FL. when you got you FL. plates they charged you an "impact fee" several 100 dollars, the theory was that you moving there raised the wear and tear on the roads, stuff like that.

    It was taken to court and ruled un-constitutional due to the fact that when a FL. native who never had a car went out and bought one he/she could register it with out paying the "impact fee" even though the "impact" was the same, one more car on FL. roads.

    They could have changed the law to include these people but chose not to and quit charging it all together, I heard they even had to pay refunds.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    Well, now they are testing GPS units to put in your car to hopefully determine how much to charge you for using the roads. In essence, every road (including your driveway) is about to become a toll road.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    The good news is that the AMT is likely to be repealed sometime soon for the reasons you mentioned above: It is essnetially meant to stop wealthy people from skirting their tax responsibilities, but has ended up hurting people in the middle class.

    The bad news is that the AMT will still be in effect for tax year 2005, so it is something to worry about

    In tax class we used to joke that the AMT was really the "tax attorney and accountant full employment act" because it's such a pain in the ass for non-professionals to understand.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    The good news is that the AMT is likely to be repealed sometime soon for the reasons you mentioned above
    As much as one might wish that logic might actually play a part in future AMT repeal, the fact is that doing so would mean nearly a trillion dollars per year in lost tax revenue. Thus actually considering repeal of the AMT would involve either passing general income tax rate increases or raising other taxes like cap gains to replace that lost revenue, or (God Forbid) gov't actually cutting spending.

    Given the political unpopularity of an across the board tax increase, and given the political unpopularity of cutting the #1 segment of gov't spending i.e. social programs, I'm betting that the AMT is going to remain in place and hit 'middle class' earners harder and harder with each passing year.

    In tax class we used to joke that the AMT was really the "tax attorney and accountant full employment act" because it's such a pain in the ass for non-professionals to understand
    This is the reason that I strongly advocate that anybody earning more than $50,000 per year pony up for TurboTax or another tax program that does the duplicate AMT calculations. I am afraid that many full time dancers who are single with incomes in the $75k+ range and who live in 'high tax rate' states are going to get stung badly by the AMT this year.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    Quote Originally Posted by Deogol
    The country is broke. They ain't gonna do shit. In fact, they are taking people's property these days and giving it to private developer's who promise more tax dollars per acre on it. I mean, it is pretty obvious what this country is coming to.


    One would think a depression would straighten it out when it currently runs people out the door, but I suspect, like our new third world state California - it will simply make it worse causing that many more businesses to run out of the borders.

    It's going to take another revolution to get it straightened out.

    You have hit the nail on the head! Our goverment is so bloated and out of control with spending. I heard an econmist on pbs say about a year or so ago that we are going from a round econmony ( small rich class huge middle class and small poorer class) to a hour glass econmony (huge rich class small middle class and huge poorer class). From everything I have seen since he was very correct.

    The problem is people wont revolt until its too late. The education in this country is a joke yet we spend billons on a war we can't win. We are taxed to the extreme yet like here in detroit we re-elect mayors and officals that are proven corupt. Something has got to give. I am afraid its going to start giving soon.

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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    Quote Originally Posted by Melonie
    As much as one might wish that logic might actually play a part in future AMT repeal, the fact is that doing so would mean nearly a trillion dollars per year in lost tax revenue. Thus actually considering repeal of the AMT would involve either passing general income tax rate increases or raising other taxes like cap gains to replace that lost revenue, or (God Forbid) gov't actually cutting spending.

    Given the political unpopularity of an across the board tax increase, and given the political unpopularity of cutting the #1 segment of gov't spending i.e. social programs, I'm betting that the AMT is going to remain in place and hit 'middle class' earners harder and harder with each passing year.



    This is the reason that I strongly advocate that anybody earning more than $50,000 per year pony up for TurboTax or another tax program that does the duplicate AMT calculations. I am afraid that many full time dancers who are single with incomes in the $75k+ range and who live in 'high tax rate' states are going to get stung badly by the AMT this year.

    I'm not sure I would totally agree with you on pending legistlation. Do a google news (or whatever) search for atricles on the AMT, and you will find that congress has seen that the AMT is hurting people it wasn't designed to affect in the first place. I don't think that it is terribly unreasonable to believe that the AMT will undergo major changes in coming tax years.

    But right on with the turbotax advice. Also, if you have extensive investment assets and heavy capital gains taxes as well as deductions, it may be worthwhile to actually use the services of an accountant. They may seem expensive, but they can more than pay for themselves in avoided taxes if your situation is complicated enough.

    And remember: Booby tassels are tax deductible!

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    Veteran Member TarynJolie's Avatar
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    Default Re: a very unwelcome potential tax suprise ... A.M.T.

    Quote Originally Posted by Vamp

    The problem is people wont revolt until its too late. The education in this country is a joke yet we spend billons on a war we can't win. We are taxed to the extreme yet like here in detroit we re-elect mayors and officals that are proven corupt. Something has got to give. I am afraid its going to start giving soon.
    Tell it sister !!!! Spending nearly 5+ million a month is absured when we have so many domestic issues to deal with in this country.

    We might see some minor improvment with the 2006 elections but I doubt we will see anything major untill after 08 when I predict a clean sweep of the powers that be. I just hope it won't be too late !

    Quote Originally Posted by sbsmoker93101
    And remember: Booby tassels are tax deductible!
    LOL ! Gosh ,I wish I had known that 10 years ago !

    I wonder how much money I could have saved over the years
    Last edited by TarynJolie; 12-13-2005 at 02:07 PM. Reason: additional commen t added

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