AMT Tax Liability on Ammended Return

I don't understand what you need an example of. Lines 2, 3 & 5 will show the change. Everything else through Line 15 will be the same in Columns A & C, and the rest is math. You'll attach the revised Schedule A and 6251.

Client does not understand why his Federal tax did NOT change when we added additional local real estate tax to his return. The simple explanation I was referring to was not for the 1040X but why the 6251 still calculates the same total tax due (AMT increrases by the same amount that regular tax is reduced), which I believe it should since the real estate tax is not a deduction for AMT.

Simple: State, local, and foreign taxes (on Schedule A) are not deductible under AMT, so his amendment changes nothing. He may subtract these items for computing the regular tax, but as he has to add them back in (to taxable income under the regular system), the change to his AMTI is zero.

I think you just gave about as simple an explanation as there is. The only thing you might want to add is showing him the before and after numbers for lines 44 and 45 of the 1040 so he can see that one goes down and the other goes up the same amount.

If the other replies don't help your client, I have two suggestions:

1) emphasize the word "minimum" in AMT. It is designed to make sure you pay a certain amount of tax no matter what, it works very well. The mechanics of how it does this might be of interest if your client is inclined to the bean-counting side of life.

2) why in the world are you bothering to file an amended return?

-Mark Bole

That's what I was wondering. Then it dawned on me that the taxpayer assumed that with this added, legitimate deduction, his taxes would go down. Now that it has been shown that they would remain the same, why not drop the idea of filing an amended return?

Gil Faver taxpayer assumed that with this added, legitimate deduction,

So as to create a larger AMT tax asset?

Steve

On Mar 5, 11:21 pm, "Gil Faver"

text -

The reason that I am filing an amended return is because it reduces taxes due in both NY & NJ. I believe it is also a good idea to file the Federal amended return so that all info is consistant.

You mean an AMT credit carryover on Form 8801? Increase in real property taxes would not help. I'm still trying to figure out how people with no knowledge of any AMT deferral items (ISO's, depreciation) still seem to end up with carryover amounts on Form 8801 for prior years...

-Mark Bole

That's a perfectly good reason, and always valid to take state impacts into account. (In California, AMT exemption is currently so high that most everyone who sees federal AMT sees none for CA, so your reasoning would apply).

I don't know what the IRS does with a 1040X showing neither refund nor balance due.... probably not a high priority for them. The consistency you are searching for may be an illusion, unless your state is so tightly tied to the IRS database that it has become the best way to get an update to happen.

You could also try just attaching a revised federal Schedule A (or E or C or whatever) to the amended state return(s) as documentation, in lieu of a full-blown federal amendment.

-Mark Bole

True, with one possible exception, although I've never heard of this actually happening: if you sell the property early in the tax year following the year in which you paid the AMT, and the buyer paid you for pre-paid property taxes, you could maybe avoid paying some tax on this buyer payment on the theory that you did not gain the complete economic benefit from when it was deducted.

This is not necessarily that far-out a scenario, so I suspect it's been tried although I know of no examples of it.

Steve

To expand on Mark's perplexity, the two examples he gave of Timing Issues that speed up payment of AMT, and therefore create potential AMT credit, are probably the only AMT timing issues most of us will ever see.

How do people create AMT credits, which as Mark noted come only from timing issues? Ah, the magic of software. Just plug in numbers on input screens or interview questions, and behold, AMT Credits where none had gone before.

My understanding is that Form 8801 is unrelated to the the issue of correct calculation of Line 10, Form 1040, which according to the 1040 instructions Page 22 is a number influenced by whether you paid AMT the previous year. This covers any refunds of state income tax and property taxes, for which you can in fact carry forward an AMT asset that would not gain you anything on form

8801 itself; and this is the situation potentially affecting the original question in this thread.

Steve