Preparing a Plan for Alternative Minimum Tax Relief

If current debt negotiations are agreed to soon, we may avoid going over the fiscal cliff but it doesn?t mean we?re out of the woods. There will be IRS problems with getting those federal tax laws written which will result in delaying the 2012 tax season. A Barron?s article titled Tax Refund Delays Could Trigger Recession reports on how the tax issue surrounding the delayed refunds could actually send our already weak economy into recession in 2013.

As I stated in a previous post, without a ?patch? by Congress to the Alternative Minimum Tax (AMT), 33 million or 1 in 5 taxpayers will see their tax liabilities increase. The re-calculation of these tax liabilities means that the IRS will be forced to delay tax refunds for those who normally spend their refund checks in the first few months of the year.

IRS Commissioner, Steve Miller in early December confirmed the likelihood of the refund delays and voiced his concerns of the following:

• 60 million taxpayers may have to wait until late March or later to file tax returns and receive a refund.
• Recalculation of taxes will be a software nightmare for the IRS computer systems.
• 28 million taxpayers will unexpectedly be hit with a very large tax liability.

According to the Barron?s article, IRS refunds amounted to $212.8 billion for 75.3 million taxpayers in first quarter of 2012 with each check averaging $2,826. Delaying these refunds to the second quarter means that money is helping to stimulate the economy.? This lack could throw the country into recession. To add insult to injury, Barron?s pointed two financial impacts beginning in 2013 that makes the first quarter tax shock scenario even more frightening:

• The end of the payroll-tax holiday ? This alone is estimated to reduce take-home pay by an average of $30 billion per quarter.
• The rise in rates for the 2% of taxpayers, estimated to be worth about $25 billion per calendar quarter.

Considering all the factors, it?s easy to see why economists are afraid of what first quarter tax shock could do to the economy.

But as some who resolves IRS issues every day, I advocate taxpayers prevent any and all IRS tax issues before they occur. If you believe you are facing a 2012 Alternative Minimum Tax (AMT) liability increase, get proactive! Here are some steps you can take that can limit your exposure and help soften the blow:

• Don?t have a high number of personal exemptions (large families).
• Decrease your miscellaneous deductions.
• Make sure you don?t have high medical expenses.
• Consider moving out of states with high state income and real property taxes such as California, New York and Illinois.
• Trim unreimbursed employee business expense.
• Exercise incentive stock options.
• Accelerate income into 2012 and defer expenses to 2013. Rates for the highest tax bracket will rise to 44.3% (39.6 + the 3.8% Medicare surtax) from 35%.

Note: All of the aforementioned will not be deductible in computing the AMT.

These considerations are not a substitute for consulting with your tax professional. Your tax expert can help you plan a tax strategy to avoid IRS tax problems should politicians not find a consensus in the next 14 days. However the situation unfolds, it remains abundantly clear, taxpayers need to plan ahead and prepare for changes to their tax liabilities so they aren?t surprised come tax time.

More Tax Help, IRS News and Tax Relief Tips:

1. Delinquent and Unfiled Tax Returns? 8 Steps to Resolving Them
2. Ask the Certified Tax Specialist ? Small Business Back Taxes
3. Finding Tax Help for IRS Tax Debt
4. IRS Tax Levy-Avoid Them At All Costs
5. Tax Resolution Services Offers Returning Veterans Free Tax Advice

Tags: alternative minimum tax, AMT, income tax relief, irs problems, IRS tax problems, tax attorney, tax expert, tax professional, tax refund, tax relief, Tax Tips

This entry was posted on Tuesday, December 18th, 2012 at 4:11 pm and is filed under 365 Ways to Keep the IRS at Bay, Ask the Expert, Expert Help From Tax Attorney, Tax Relief News, Tax news and tips, income tax relief, tax help, tax resolution. 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.

Source: http://www.taxresolution.com/blog/preparing-a-plan-for-alternative-minimum-tax-relief/

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