AMT: The Oxymoron
The concept of the alternative minimum tax is anything but minimum. The complex tax code in America originally enacted the AMT in 1969 as a way to keep high-income taxpayers from claiming ambiguous deductions.
The IRS describes the alternative minimum tax as a way to “ensure that individuals and corporations that benefit from certain exclusions, deductions, or credits pay at least a minimum amount of tax (http://www.irs.gov/taxtopics/tc556.html).
Theoretically, the AMT would keep taxes at a more even ratio; higher income people would not be able to claim as many large deductions, making it an actual alternative and minimum tax. As time passed, however, the AMT got slightly out of hand.
Now, the AMT covers a wide variety of things, making it difficult to predict. Taxpayers must compute the AMT and regular taxes and pay the higher one, ensuring that no one is flying under the radar with large deductions. In 1997, only 1% of all taxpayers paid the AMT, which has risen drastically to 20% of taxpayers that will pay in 2013. With half of taxpayers having to consider the alternative minimum tax, it is something that needs to be less obscure and easier to understand.
The IRS has attempted to assist taxpayers having to consider the AMT by providing the AMT assistant. After answering a few questions and entering your information, it will calculate and tell you if you do or do not need to consider the AMT. For more information, this website can be a point of reference. When the tax code is already so extensive, the AMT expanding as much as it has could be seen as impending doom if something doesn’t change.
by Katie Sapp, Industry writer