AMT question

[Bigdawg]

DW and I are over the limit and are suppose to participate in AMT. What I do instead is check "married but at the higher single rate" and also withhold additional $ each month. Is that acceptable? The IRS is getting their fair share (and a little extra) every month. I miscalcualted a bit last year and received some cash back. I have adjusted withholding so should be right on for 2017. So the question is: Will I get in trouble for not sending in quarterly AMT payments despite withholding plenty each month?

 

[Blue Collar Guy]

I owe the AMT every year. Its not a separate tax, its part of the federal. When you set up your quarterly payments it was figured in, If you have substantially more income this year then last, you might owe a few bucks. I get slapped around in penalties every year, this is the first time Im sending in quarterly payments, Im trying to avoid last years 544 in penalties.

 

[Ready]

Me too. It's just a way for the government to make sure high earners don't get to take too many deductions. There is no requirement to pay anything quarterly.

 

[JoeWras]

I'm confused. Are you talking Alternative Minimum Tax? Or Estimated Quartly Payments? Or both?

If you are talking estimated payments, and you somehow instead made the payments happen on a regular basis through payroll withholding, you are OK.

Not sure what you mean by quarterly amt payments. If AMT is causing you to have to withhold more, what you are doing is fine.

 

[Bigdawg]

I'm confused. Are you talking Alternative Minimum Tax? Or Estimated Quartly Payments? Or both?

If you are talking estimated payments, and you somehow instead made the payments happen on a regular basis through payroll withholding, you are OK.

Not sure what you mean by quarterly amt payments. If AMT is causing you to have to withhold more, what you are doing is fine.

This. Thanks JoeWras.

 

[audreyh1]

DW and I are over the limit and are suppose to participate in AMT. What I do instead is check "married but at the higher single rate" and also withhold additional $ each month. Is that acceptable? The IRS is getting their fair share (and a little extra) every month. I miscalcualted a bit last year and received some cash back. I have adjusted withholding so should be right on for 2017. So the question is: Will I get in trouble for not sending in quarterly AMT payments despite withholding plenty each month?

If you pay 90% of what you owe including the AMT by withholding in 2017, I think you will be OK.

Otherwise, if you are short, you will pay penalty on a hopefully small difference.

The only way to be sure is to withhold enough that it matches last years total taxes, times 110% if your income is >$150K. You can change your withholding and catch up during the year I think.

 

[Blue Collar Guy]

If you pay 90% of what you owe including the AMT by withholding in 2017, I think you will be OK.

Otherwise, if you are short, you will pay penalty on a hopefully small difference.

The only way to be sure is to withhold enough that it matches last years total taxes, times 110% if your income is >$150K. You can change your withholding and catch up during the year I think.

+1

 

[gerntz]

I owe the AMT every year. Its not a separate tax, its part of the federal.

I would describe it more as a parallel system to the regular income tax system & whichever causes the government the most benefit, you pay. Since overwhelmingly most don't owe more by the AMT version, overwhelmingly most don't even know about it.

 

[Bigdawg]

If you pay 90% of what you owe including the AMT by withholding in 2017, I think you will be OK.

Otherwise, if you are short, you will pay penalty on a hopefully small difference.

The only way to be sure is to withhold enough that it matches last years total taxes, times 110% if your income is >$150K. You can change your withholding and catch up during the year I think.

Just hard to pin it all down. 2013 was last year active duty. 2014 first year out of the service working as contractor-taxes went way up. 2015 took 8 months off-taxes way down again. 2016 raise and back to work for the full year-taxes way up. 2017 selling 2 properties both at a loss-?? 2018 selling one property at a huge gain-?? So many ups and downs. Final ER sometime between now and 2020-?? Roller coaster. It's all positive it is just that I would hate to have to pay the irs a penalty.

 

[JoeWras]

Just hard to pin it all down. 2013 was last year active duty. 2014 first year out of the service working as contractor-taxes went way up. 2015 took 8 months off-taxes way down again. 2016 raise and back to work for the full year-taxes way up. 2017 selling 2 properties both at a loss-?? 2018 selling one property at a huge gain-?? So many ups and downs. Final ER sometime between now and 2020-?? Roller coaster. It's all positive it is just that I would hate to have to pay the irs a penalty.

Yeah, I know, the penalty stinks. Follow audrey1's advice and make whatever you are doing be 110% of last year, and there's no possible penalty. Doing that through payroll withholding is OK.

I've flipped back and forth between having extra from my check each pay period, and in other years paying estimated quarterly payments. The estimated payments gives you flexibility. For example, if you have a large gain on a property in the final quarter of the year, you can pay it that quarter. BUT, it is also easy to botch up. By doing it with your paycheck, it is automatic. BUT, you may way overpay if you use the 110% rule.

You'll just have to find your way on this. In this minimal interest environment, I haven't cared too much for overpaying, so I've been pretty conservative. Last year I just rolled over my overpayment (unfortunately large) right on my tax form and it is essentially my estimated payments for this year. With interest rates now finally rising (see other threads), I'm going to try to cut it closer and not give the IRS/USA a free loan.

 

[audreyh1]

I would describe it more as a parallel system to the regular income tax system & whichever causes the government the most benefit, you pay. Since overwhelmingly most don't owe more by the AMT version, overwhelmingly most don't even know about it.

His point is that it is all paid as one thing, there is no separate payment for the AMT. Withholding or estimated taxes has to include any additional amount due to AMT.

 

[gerntz]

His point is that it is all paid as one thing, there is no separate payment for the AMT. Withholding or estimated taxes has to include any additional amount due to AMT.

Yes, that's why I wrote what I wrote.

There are two separate systems, regular & AMT, that are calculating your taxes & you pay the higher one. The "AMT effect" is when you pay more than the regular system only demands, but the whole amount you pay not just the differential, is AMT. That's why it's call Alternative, not something like Additional.

 

[kaneohe]

Yes, that's why I wrote what I wrote.

There are two separate systems, regular & AMT, that are calculating your taxes & you pay the higher one. The "AMT effect" is when you pay more than the regular system only demands, but the whole amount you pay not just the differential, is AMT. That's why it's call Alternative, not something like Additional.

Actually, I think it should be called Additional which would be less confusing.
Most folks, including myself, think about the AMT the same way as you do.
However , the technical IRS name for what we think of as AMT is really TMT
(tentative minimum tax). And the IRS definition of AMT is the difference
between TMT and regular tax (the additional tax).

You can verify this from forms 1040 p.2 and 6251.

 

[JoeWras]

Actually, I think it should be called Additional which would be less confusing.
Most folks, including myself, think about the AMT the same way as you do.
However , the technical IRS name for what we think of as AMT is really TMT
(tentative minimum tax). And the IRS definition of AMT is the difference
between TMT and regular tax (the additional tax).

You can verify this from forms 1040 p.2 and 6251.

True. Leave it up to IRS and Congress to confuse the daylights out of everything.

I've had discussions with people at w*rk who are on a quest to do everything and anything to get out of AMT. I ask why, and they really don't know. They just "heard it was really, really bad."



I mean, it isn't fun or anything, and sometimes you should be smart to avoid it in certain circumstances (state tax withholding is one good complication to think about), but this all-out quest to rid oneself of AMT any any cost is just blindsided thinking. Maybe I should tell them to quit and get rid of income streams.

Note to OP: not talking about you, I'm talking about co-w*rkers.