Got whacked by AMT

[TexasHusker]

Yep, the dreaded "Alternative Minimum Tax". It wasn't enough that I paid $72,000 in income tax. The AMT worksheet also disallowed a number of my deductions, taking my total to $75K and change.

My effective tax rate this year was 25%. Painful.

[HundredK]

Right there with ya. Sucks. But oh well, I just remind myself that I like most of the things our tax dollars provide.

[TexasHusker]

What I don't like is that many of the deductions other tax-paying Americans enjoy, I do not, because apparently I "make too much." That seems rather discriminatory. I mean, the tax rates go progressively higher as you make more, and on the other end, the available deductions aren't there either any more. I'm screwed on both ends. And then after all that, if the gubmit says I need to pay more, there's a handy AMT that accomplishes that.

Instead of going through all of this charade, why doesn't the gubmit just give me a pay check after keeping what they need? It seems like they are doing that anyway - I'm just having to pay $ thousands to an accountant to get the returns ready, and hope like heck we've successfully waded through the many minefields of the tax code so that we've paid it all accurately.

Silly.

[james.hendrickson]

Texas,

My understanding is corporations have preferred tax arrangments. Have you looked into possible examining your tax situation with a view to changing your incorporation status? My understanding is that S and C corps may have different tax treatments than an LLC.

Also, I feel your pain - I paid like $44,000 in taxes this year as well.

Here is a quote attributed to Warren Buffet which might put things in perspective.

Writing checks to the IRS that include strings of zeros does not bother me ... Overall, we feel extraordinarily lucky to have been dealt a hand in life that enables us to write large checks to the government rather than one requiring the government to regularly write checks to us-say, because we are disabled or unemployed.

[TexasHusker]

Texas,

My understanding is corporations have preferred tax arrangments. Have you looked into possible examining your tax situation with a view to changing your incorporation status? My understanding is that S and C corps may have different tax treatments than an LLC.

Also, I feel your pain - I paid like $44,000 in taxes this year as well.

Here is a quote attributed to Warren Buffet which might put things in perspective.

Writing checks to the IRS that include strings of zeros does not bother me ... Overall, we feel extraordinarily lucky to have been dealt a hand in life that enables us to write large checks to the government rather than one requiring the government to regularly write checks to us-say, because we are disabled or unemployed.

I have an S Corp and a couple of LLCs.

[Fishindude77]

My Dad's response to complaints like this was always ...... "Those are high class problems. Be grateful you have this problem".

I dislike it also, but things could be a whole lot worse.

[cooliemae]

I'll welcome the day that I'm paying 75k in taxes!

[rennigade]

#firstworldproblems

[corn18]

I have an S Corp and a couple of LLCs.

Why don't you keep all your income in the companies? I would imagine most of your daily expenses could be attributed to running your business and then you could pay yourself just enough to cover whatever is not deductible as a business expense. Since you don't have a job, you shouldn't have any personal income. AMT does not apply to businesses.

[TexasHusker]

The comments in this thread are interesting. It is similar to the "soak the rich" mantra of liberals. "Raise the taxes of the rich more...they can afford it."

Your complaints aren't valid because you make so much money. I'd be happy to pay that much in tax. Fairness shouldn't apply to the rich - only to middle class and below. It's OK to have a different set of rules for rich people.

Just because I can afford to pay extra taxes, surtaxes, and AMT doesn't mean it is fair.

[TexasHusker]

Why don't you keep all your income in the companies? I would imagine most of your daily expenses could be attributed to running your business and then you could pay yourself just enough to cover whatever is not deductible as a business expense. Since you don't have a job, you shouldn't have any personal income. AMT does not apply to businesses.

The companies do pay me a modest salary, as I do perform some work for them. But the company distributions flow through to me as well.

I wish it was as easy as your suggestion, but it is not. There is no free lunch - the gubmit is going to get their $$.

[corn18]

The companies do pay me a modest salary, as I do perform some work for them. But the company distributions flow through to me as well.

I wish it was as easy as your suggestion, but it is not. There is no free lunch - the gubmit is going to get their $$.

If it is a business, you can decide how to distribute the profits and how they get taxed. You do not have to distribute the profits outside the corporate entity. Just pay corporate taxes and leave the money on the books. You would have to do the analysis to see if it works out better to pay yourself and pay personal income tax or leave it in the company and pay corporate taxes. Unless there is something I'm missing. Warren Buffet does this with his company.

[corn18]

The comments in this thread are interesting. It is similar to the "soak the rich" mantra of liberals. "Raise the taxes of the rich more...they can afford it."

Your complaints aren't valid because you make so much money. I'd be happy to pay that much in tax. Fairness shouldn't apply to the rich - only to middle class and below. It's OK to have a different set of rules for rich people.

Just because I can afford to pay extra taxes, surtaxes, and AMT doesn't mean it is fair.

At least the federal income top tax bracket stops at 39.4% these days. Used to be the top marginal bracket was 90%. Ouch. I pay net 37% to taxes right now. Marginal is 52% (including state, federal and local).

[AJ444]

Never gotten caught up by it but I don't think the AMT is fair either, I believe in its initial form it was only supposed to capture less than 200 households that had gamed the system to an extreme.

I have never gotten to take advantage of any deductions because I have always used the standard deduction, personally I'm for getting rid of all of them and having a National Consumption Tax vs an Income Tax.

[Singuy]

If it is a business, you can decide how to distribute the profits and how they get taxed. You do not have to distribute the profits outside the corporate entity. Just pay corporate taxes and leave the money on the books. You would have to do the analysis to see if it works out better to pay yourself and pay personal income tax or leave it in the company and pay corporate taxes. Unless there is something I'm missing. Warren Buffet does this with his company.

If you pay the corp taxes than you are being double taxed. The beauty of a Scorp is that all profit beyond payroll gets passed down to the shareholders after a payment of federal taxes ONLY (perhaps just Texus as the single shareholder in this case). Paying corp taxes is for C-corps and that's double taxation since you are paying a corp tax AND then federal income tax if you ever want to see the profit in your pockets.