What Every Small business Owner Should Know About Their taxes. My tax Tutor For Small business Owners. -

State policymakers frequently cite a 2002 study by two University of Tennessee economists estimating the amount of revenue the states would fail to realize in absence of a national system for taxing Internet sales.

Don’t Suffer the Alternative — The Alternative Minimum tax That Is: Reduce the Effect of AMT by Using taxACT 2007 Preview
CEDAR RAPIDS, IA–(October 24, 2007) - The individual Alternative Minimum tax (AMT), implemented in 1969, is a parallel income tax system that was created to prevent 155 wealthy Americans from aggressively using tax credits, deductions, and legal tax shelters as tools to help them avoid having to pay federal income tax. The idea was simple: Create a minimum tax that ensured everyone pays Uncle Sam his due. Fast forward to present day and you’ll find millions of middle-income Americans are now getting snared by the AMT. The main reason the AMT now reaches into the pockets of the middle-class is because regular income tax brackets are indexed for inflation but the AMT thresholds are not. The result has been the steady expansion of households who find themselves hit by the AMT — especially households with a large number of children, education credits, residential energy credit and / or state and local taxes. Why haven’t Americans been clamoring for an immediate overhaul to the AMT? Thus far, the full effects of the AMT have been deferred by Congress enacting a series of temporary patches — boosting the amount of the AMT exemption. The last temporary fix to increase the exemption, however, expired at the end of 2006. If Congress fails to ratify another provisional one-year increase in the next few months, the number of households paying the AMT will escalate exponentially from approximately 4 million in 2006 to nearly 23 million for 2007. To determine if a taxpayer owes tax under the AMT, filers must calculate their taxes under both the regular tax and AMT systems — making the “Alternative Minimum tax” tax a bit of a misnomer considering taxpayers must pay the higher of the two. The biggest factor impacting AMT filers is that they are no longer eligible to claim certain deductions and exemptions (i.e. education credits, child care credits, and the deduction for state and local taxes). Sound complicated? It can be if taxpayers don’t plan ahead and use the tools that are available to them as a significant portion of taxpayers may be surprised when they are suddenly hit with a big tax bill, plus possible penalties come next April. Some planning tools are even free, such as the tool offered by 2nd Story Software®, Inc., — makers of the popular tax program taxACT. “It seems unlikely that lawmakers will fail to pass another patch to serve as a quick fix to hold down the reach of the AMT. Guessing wrong, however, could prove costly. Unfortunately, there are a vast number of factors that will trigger the alternative tax for any given taxpayer,” says Stephanie Behrends, spokeswoman for 2nd Story Software. “taxACT Preview is a taxpayer’s ally allowing users to perform what-if scenarios to determine their estimated tax liability. Users simply need to step through the taxACT interview entering their forecasted income and deductions for the tax year by answering simple questions in layman’s terms. taxACT simultaneously calculates your projected tax with the regular tax system and the AMT system based on the taxpayer’s tax bracket and the most recent tax information available.” Behrends continues, “taxACT Preview provides valuable forecasting information. taxACT Preview will compute the AMT and limit tax credits as appropriate based on the 2007 draft version of Form 6251 - Alternative Minimum tax - for Individuals (the amount if Congress doesn’t pass an extension) to show the full impact of the AMT; or, estimates can be based on the 2006 Form 6251 instructions (assuming Congress enacts the same temporary patch to AMT as last year).” Visitors need only to complete the site’s free online registration to gain access to taxACT’s Online Deluxe Preview version at www.taxact.com to generate a forecasted federal and state income tax refund or liability amount — providing users with valuable insight into their tax situation. Once the Final version of taxACT releases in early January 2008, users can easily finalize their tax return and print and/or e-file their federal tax return for just $9.95.

This entry was posted on Sunday, January 27th, 2008 at 11:09 am and is filed under Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.