AMT - how do I plan ahead?

I'm not aware of any online calculator or rule of thumb that doesn't require a draft 1040. In addition, without any Congressional action and GWB signature, the AMT exemptions that existed in 2006 will revert back to tax year 2000 levels in 2007 and certain tax credits will not be allowed against AMT. In other words, it's a mess.

All that said, here are the AMT exemptions for 2005, 2006 and

2007 as of this moment in time. Who knows where Congress where set the new level.

This afternoon the House passed the Senate version of AMT relief. GWB said he will sign it.

Thank you for data. (I skipped searching the Congressional Record and instead came here - to be rewarded with an answer.)

On the topic of this thread - how to plan ahead - I'll be doing annualized ES for 2008 (2007 income was unusually high). It seems planning ahead is growing increasingly difficult, and I'm not sure Congress is the party to blame - hedge fund type activity and participation in that type of product all the way down to money-market funds seems to me to be the more likely culprit in distorting the financial system away from the understandable ... and predictable. Those "guys" (sarcasm deeply intended) run models to profit (or lose) from 6 basis points, talking pseudo-sophisticated risk management (hah!) and pawning their stuff off on banks, pension plans, and on down the 'food chain' - today, anyone with money market funds has exposure to hedge fund machinations. (Sorry about the emotional show - I dislike hedge funds.) This, it seems, spreads the frenzy of highly leveraged quickly changing balances. In simpler terms, it shortens the time frame. That (in my hypothesis) makes planning more and more difficult.

Two major factors in the infamous stock market crash of 1929 were a) lack of disclosure and b) leverage. Today we have well-paid professionals doing the same thing. There ain't no excuse for it.

Of course we will have to wait for the IRS to officially issue the forms, but from what I get from the legislation (House Report 110-431 - TEMPORARY TAX RELIEF ACT OF 2007), they extended the same AMT provisions that were in place for 2006 with the exceptions:

(a) In General- Paragraph (1) of section 55(d) (relating to exemption amount) is amended--

(1) by striking `($62,550 in the case of taxable years beginning in

2006)' in subparagraph (A) and inserting `($66,250 in the case of taxable years beginning in 2007)', and

(2) by striking `($42,500 in the case of taxable years beginning in

2006)' in subparagraph (B) and inserting `($44,350 in the case of taxable years beginning in 2007)'.

This would appear to increase the exemption amount on form 6251 for single or HOH and MFJ by the amounts shown.

They also changed some refundable credit

Gil Faver

It sounds like it would be well worth your $$ to pick up a piece of tax software that offers a Federal and State return (Turbo Tax or others out there). Generally, as I recall, the reason for making an early ES payment is to max the Federal Sch_A deduction for the year in which the early payment is made (for whatever reasons).

You can run spreadhseets with Federal and state computations, but tax software is much more convenient. With only minimal checking to be sure you didn't make a mistake and that the bottom line taxes due makes sense, all you have to do is pro-forma the 1040 numbers. You can run a very small spreadsheet to keep track of pro-forma scenarios, and some "easy button" percentage formulas to compare effective rates under different scenarios. (E.g. "Increase in Tax Due" / "Increase in Income" = "Effective Rate" ... as long as that's less than 1, we're still a country ... I heard in Germany it is sometimes > 1 :-[

The TurboTax Fed & State package is about $70 bucks I think, and is probably available off the shelf as of a week ago. Hope I addressed your question.

Since you're attempting to reduce (or calculate) your installment payments to at least avoid any penalties you need a calcuator specifically designed to compute the AI installments for the coming/ current year, not last year. Such products are available on the net-- google 2210 tax calculator (the "calculator" is necessary to weed out the generall 2210 comments). These are usually more current (up to date) than last year's TT, TC or TA which do a fine job of this, but after the fact. Also, most "tax estimators" are based on last year's tax rates, can't compute AMT form 6251 or (usually admitted) can't really annualize which is a bit more complicated than you could imagine. Usually Publication 505 tries to guide you in this regard but it is really inadequate in that it's worksheets are rediculously complicated and fail to address credits or AMT other that to tell you you must consider them. duh They are also a lot cheaper than even last year's TT (since this year's TT isn't availabe until next December).

Since these calculators don't have to deal with tax rules, just calucations, they are in spreadsheet format, usually resembling in some mannor an actual form 1040 and other forms, and indlude at least auto-calucated AMT form 6251, Schedule D Worksheets and Schedule A instead of the normal tax program Q & A format. Making a change, such as the current AMT Exemptions revision takes the publisher oly minutes to do so such IRS changes are usually available immediately. As a spreadsheet, when you change an input value you can read out its influence on other forms and final taxes immediately. State calculators are generally not available, but each State has their forms available on the net, which are considerable less complicated (usually) than the IRS 1040.

ed

The problem of having to input all your data is logical. How can you get accurate output if you don't supply complete data? However, with a spradsheet calculator you can omit a lot of stuff if you want inaccurate output, or realize it is unnecessary for your problem. What would you omit? Just as you do in completing a 1040 you leave blank lines that do not apply to you, and if you fail to insert a freal value your AGI will be inaccurately low.

ed

text -

As we said, If you leave something out you won't get the right answer. The site you list doesn't have an input window for dividends and interest nor how much of those dividends are Qualified, or tax free income that would affect your taxable social security. It leaves up to you to figure any credits or deductions. I think It would be easier to enter the same data on a complete tax program where you know the basis of its assumptions and find out the actual AMT for verious situations.

ed