The AMT Strikes Yet Again!
Well, our wonderful Congress did a few last-minute tweaks to the Alternative Maximum Tax a couple of months ago, rather than dispensing with it altogether as should have been done at least a decade ago. So, until it's gone, it looks like this will be an annual rant of mine.
In last year's version of this rant, I mentioned that it turns out that the AMT is even worse than I realized the previous year. But can it get any worse? Are you kidding? Of course it can!
Let's revisit the dinner party for 20 that I hypothesized in last year's rant: You had to pre-pay for 30 steak dinners when you only needed 20; the restaurant refunded you for 5 dinners immediately and for 3 more a few months later. If you do the math, he still owes you for two dinners that you never got but had to pay for a long time ago. So you and your spouse decide to go out for a nice dinner, and you wind up at the same restaurant. When you're finished, the restaurant owner presents you with a bill for the full amount of the meal. You say, "Why not credit the dinner refunds you owe me against this bill?" The owner responds, "Oh, no, those were for steak dinners! You had fish tonight, so it doesn't apply."
Why did I add such an odd turn to the dinner party story? Because that is precisely what is happening to my taxes yet again!
To review, the AMT forced me in spring of 2005 to pay tax on income imputed to me in 2004 but which I had not yet received. In spring of 2006, computing 2005 taxes made it obvious that the previous imputed income was overstated so I got to recapture the tax overpayment. But not all of the overpayment; some rolled over to 2006 taxes. What I was ranting about last year was that 2006 taxes still didn't let me recapture all of it, but rolled some still further.
It's now February 2008, and I'm doing my 2007 taxes. The labyrinthian tax instructions say that I owe $1572 of AMT for 2007. But they still owe me $715 for AMT overpayment three years ago. So I should have to pay $857, right? No, only in a world that actually makes sense. But in the world of our marvelous tax code, there are certain activities that trigger the AMT, and there are certain activities that trigger AMT recapture credits. Apparently, in 2007 I did a few from the first group but none from the second. So the entire $715 credit has to roll over to 2008 taxes next year, and the entire $1572 AMT is in the tax bill that I have to pay by April 15 of this year.
So next year the feds will still owe me $715 for taxes that I paid four years earlier, taxes on income that never existed at all! Will I ever get any interest on that four-year (or possibly even longer) loan? Again, that would only be in a world that actually makes sense. But will the insanity ever cease?
In last year's version of this rant, I mentioned that it turns out that the AMT is even worse than I realized the previous year. But can it get any worse? Are you kidding? Of course it can!
Let's revisit the dinner party for 20 that I hypothesized in last year's rant: You had to pre-pay for 30 steak dinners when you only needed 20; the restaurant refunded you for 5 dinners immediately and for 3 more a few months later. If you do the math, he still owes you for two dinners that you never got but had to pay for a long time ago. So you and your spouse decide to go out for a nice dinner, and you wind up at the same restaurant. When you're finished, the restaurant owner presents you with a bill for the full amount of the meal. You say, "Why not credit the dinner refunds you owe me against this bill?" The owner responds, "Oh, no, those were for steak dinners! You had fish tonight, so it doesn't apply."
Why did I add such an odd turn to the dinner party story? Because that is precisely what is happening to my taxes yet again!
To review, the AMT forced me in spring of 2005 to pay tax on income imputed to me in 2004 but which I had not yet received. In spring of 2006, computing 2005 taxes made it obvious that the previous imputed income was overstated so I got to recapture the tax overpayment. But not all of the overpayment; some rolled over to 2006 taxes. What I was ranting about last year was that 2006 taxes still didn't let me recapture all of it, but rolled some still further.
It's now February 2008, and I'm doing my 2007 taxes. The labyrinthian tax instructions say that I owe $1572 of AMT for 2007. But they still owe me $715 for AMT overpayment three years ago. So I should have to pay $857, right? No, only in a world that actually makes sense. But in the world of our marvelous tax code, there are certain activities that trigger the AMT, and there are certain activities that trigger AMT recapture credits. Apparently, in 2007 I did a few from the first group but none from the second. So the entire $715 credit has to roll over to 2008 taxes next year, and the entire $1572 AMT is in the tax bill that I have to pay by April 15 of this year.
So next year the feds will still owe me $715 for taxes that I paid four years earlier, taxes on income that never existed at all! Will I ever get any interest on that four-year (or possibly even longer) loan? Again, that would only be in a world that actually makes sense. But will the insanity ever cease?
Labels: Tax Rant
posted by Steve | 2:31 PM
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