AMT could trip up 21 million next year

[question everything]

AMT could trip up 21 million next year

Alternative minimum tax ensnares middle class, big families

By Mark Schwanhausser
KNIGHT RIDDER NEWS SERVICE

March 5, 2006

Here's what politicians don't say when they boast about cutting income taxes. Every trim forces more Americans to pay the dreaded alternative minimum tax instead.

“It is the great American bait and switch,” said Claudia Hill, owner of a Cupertino tax-preparation firm and editor-in-chief of the Journal of Tax Practice & Procedures. “They say, 'We're going to give you tax breaks' – and then you find out you don't qualify.”

This parallel tax system was created 37 years ago to take away tax breaks from about 150 wealthy taxpayers who had piled up write-offs to erase their tax bills. Chances are, it seems irrelevant if you aren't among the 4 million taxpayers who owe it for 2005. But give it time – a year, to be exact. These days you don't have to be rich for the AMT to wipe out your write-offs.

Though most of them are unaware, 21 million Americans are on the hook to pay the AMT next tax season barring congressional intervention. Some experts predict lawmakers will restore an expired tax provision that had slowed the AMT's spread through 2005. If they don't, there will be a fivefold increase in the number of taxpayers who will owe what one prominent U.S. senator calls the “Darth Vader of the tax code.”

The AMT's dark side is that its burden increasingly will be borne by middle-class taxpayers by intensifying the “marriage penalty,” biting big families harder, erasing itemized deductions and shrinking breaks related to kids. In 2006, a family of four will step into the AMT quicksand once its adjusted gross income exceeds $67,500 – by claiming the standard deduction and four personal exemptions, the Congressional Budget Office says.

(snip)


Find this article at:
http://www.signonsandiego.com/uniontrib/20060305/news_lz1b5amt.html

[NYC]

1. Very interesting. Maybe it won't happen.

...Some experts predict lawmakers will restore an expired tax provision that had slowed the AMT's spread through 2005. If they don't, there will be a fivefold increase in the number of taxpayers who will owe what one prominent U.S. senator calls the “Darth Vader of the tax code.”

Maybe this won't happen.

[bluestateguy]

2. This could be the Democrats tax issue if they make something of it

That would be the Democratic tax plan:

Raise the AMT tax limit and junk the Bush tax cuts for the wealthiest Americans. It can't lose.

[ramapodem]

3. Senator Menendez

has said he is making this an issue.