IRS updates online AMT calculator

Your Money

January 30, 2007|By Bloomberg News

WASHINGTON -- The Internal Revenue Service said yesterday that it has updated an online calculator to help Americans determine whether they owe the alternative minimum tax.

"This tool helps people learn quickly whether they're going to be paying this tax," IRS Commissioner Mark Everson said.

Most taxpayers can get an answer within five or 10 minutes by entering data into the calculator, he said.

The calculator is an electronic version of an IRS worksheet that helps determine whether a taxpayer needs to fill out Form 6251, which determines any minimum tax liability. Taxpayers who exercised incentive stock options, pay interest on some types of home-equity loans, receive tax-exempt interest from privately issued bonds or engage in about a dozen other business activities are directed to the form automatically.

The minimum tax was created as a parallel tax system in 1969 to prevent 155 wealthy people from reducing their liability through excessive exemptions, credits, and other deductions. Because it wasn't indexed for inflation, the tax increasingly affects people with modest incomes by denying common deductions such as personal exemptions, property taxes and medical expenses.

The tax affected 3.8 million households last year; that number will grow almost sixfold this year unless Congress acts to limit the tax's impact. By 2016, about 45 million American households face higher bills if changes aren't made, according to an estimate in October by the nonpartisan staff of the congressional Joint Committee on Taxation.

Under the law, taxpayers who might be affected must prepare their tax returns using both the regular system and the minimum tax rules.

Congress has limited the impact of the minimum tax over the past five years through a series of temporary measures intended to keep the number of affected households under 4 million. Lawmakers passed such temporary "patches" in 2001, 2004 and 2006. No patch is in effect for 2007.

Lawmakers, including Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and House Ways and Means Committee Chairman Charles B. Rangel, a New York Democrat, have called for repealing or reforming the minimum tax, but haven't said how or when they will do so.

Tax returns are due this year by April 17 because April 15 is a Sunday and April 16 is a holiday in the District of Columbia.

Everson said tax returns prepared using most software also can easily detect potential minimum-tax liability.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.