WTF is this AMT nonsense? (taxes)
 

I went to go see a tax professional today. At first, he added up my profits for the year 2005 and got a total of about $30K. He told me I'd have to pay approximately $2400 in taxes. That sounded nice, but I told him that that was the wrong way to do it.

He then did it the right way, adding up my wins ($60K, Form 1040 - Other Income) and deducting my losses ($30K, Line 22 of Schedule A, NOT Line 27 as some of the threads here have indicated). Well, it ended up that I'd have to pay about $5400. WTF, $3K MORE? He said the difference was in the AMT (Alternative Minimum Tax), which ended up to be about $2k. WTF? Is this right?

Not only that, we haven't even gotten to state taxes. I read in an old thread that my entire winnings of $60K (without taking deductions) is going to be taxed. If that is true, I'm going to owe another $3700, meaning I'm paying $9K on $30K winnings. Seriously.... if all this is right, I find little reason to even play poker at all.

Re: WTF is this AMT nonsense? (taxes)
 

do you live in illinois?

Re: WTF is this AMT nonsense? (taxes)
 

New York.

Re: WTF is this AMT nonsense? (taxes)
 

I talked to my CPA and was told the AMT only applied if you were doing some tax sheltered type of investments or similar things the IRS deems as 'shady.' I'm claiming a net of $72K from poker (so my total winning sessions are much higher) but I'm not required to pay it.

Re: WTF is this AMT nonsense? (taxes)
 

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do you live in illinois?

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I live in IL, what a bitch

Re: WTF is this AMT nonsense? (taxes)
 

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I talked to my CPA and was told the AMT only applied if you were doing some tax sheltered type of investments or similar things the IRS deems as 'shady.' I'm claiming a net of $72K from poker (so my total winning sessions are much higher) but I'm not required to pay it.

[/ QUOTE ]

You're filing as a professional? Does anyone know how much I'll be paying if I file as a pro? Can I file as a pro if I'm a student?

Re: WTF is this AMT nonsense? (taxes)
 

DDBEAST; That is not true. Millions of people are getting hit by the AMT. They did not index it for inflation.

Re: WTF is this AMT nonsense? (taxes)
 

Funny, I just learned about this in school, from my lecture notes:

AMT (Alternative Minimum Tax)

2nd tax code. Less generous/few deductions.

Originally designed to “catch” roughly 150 people who earned very high income but paid no taxes.

2005: 4 million people are covered by the AMT.
2006: 19 million people will file under the AMT!

NOT INDEXED FOR INFLATION !!!!

Re: WTF is this AMT nonsense? (taxes)
 

The person did your tax return wrong. Gambling losses are not miscellaneous itemized deductions that are subject to the 2% limitation. Line 27 is the correct location for gambling losses. You can instruct him to look at the instuctions for Schedule A. Gambling losses are specifically listed as one of the items for line 27.

The reason that you are getting hit with AMT is that line 22 is not allowed for AMT purposes, but line 27 is allowed. It makes a big difference when you live in a high tax state, such as NY.

NY allows your gamling losses as a state itemized deduction. Your losses are large enough that you will not have a problem itemizing for NY.

I really hope that you weren't paying much to this guy to have your tax return prepared because his knowledge seems to be a little light on taxes in general.

Re: WTF is this AMT nonsense? (taxes)
 

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I went to go see a tax professional today. ... but I told him that that was the wrong way to do it.

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1) The fact that you have to tell him, that would make me nervous.

I then asked a accountant who works for a high powered NYC area firm –

“the tax seems high. . . .but is there other income . .. and the amt doesn't make sense if the total income is the 60,000

the amt doesn't make sense if the total income is the 60,000 and there has to be other items affecting the amt.

unless it is calculating self employment tax on the winnings - - - ???
”

I know this does not help. But it is what I got back.

Re: WTF is this AMT nonsense? (taxes)
 

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The person did your tax return wrong. Gambling losses are not miscellaneous itemized deductions that are subject to the 2% limitation. Line 27 is the correct location for gambling losses. You can instruct him to look at the instuctions for Schedule A. Gambling losses are specifically listed as one of the items for line 27.

The reason that you are getting hit with AMT is that line 22 is not allowed for AMT purposes, but line 27 is allowed. It makes a big difference when you live in a high tax state, such as NY.

NY allows your gamling losses as a state itemized deduction. Your losses are large enough that you will not have a problem itemizing for NY.

I really hope that you weren't paying much to this guy to have your tax return prepared because his knowledge seems to be a little light on taxes in general.

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This is correct. I am constantly amazed how often "tax professionals" are wrong about tax information. Most info is relatively easily found if you put in a little time. If you are interested in not doing your own taxes, why not just buy TurboTax? It'll cost you $70, take you an hour, and you can be pretty sure the calculations are right.

Re: WTF is this AMT nonsense? (taxes)
 

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[ QUOTE ]
I went to go see a tax professional today. ... but I told him that that was the wrong way to do it.

[/ QUOTE ]

1) The fact that you have to tell him, that would make me nervous.

I then asked a accountant who works for a high powered NYC area firm –

“the tax seems high. . . .but is there other income . .. and the amt doesn't make sense if the total income is the 60,000

the amt doesn't make sense if the total income is the 60,000 and there has to be other items affecting the amt.

unless it is calculating self employment tax on the winnings - - - ???
”

I know this does not help. But it is what I got back.

[/ QUOTE ]

AMT is a lot more complicated than that - unfortunately, your 'second opinion' accountant from a high-powered NYC firm is also talking crap.

AMT is a completely parallel tax system. Technically, everybody needs to calculate their taxes under both systems - if it's a big enough difference, you need to pay AMT. It's that simple. Originally designed for very high rollers, it has not been indexed for inflation, so unfortunately, an increasing number of "normal folks" are being caught.

Some of the things that can drive you into AMT: lots of income, large deductions (high-tax states), etc. Under AMT, you pay a flat rate on all income, and you lose your deductions. It's pretty nasty, really.

Remember Bush's tax cut of a few years back, how "everybody who pays taxes received a tax cut"? Well, it was true - for everybody except those citizens who were in AMT.

The club is getting bigger all the time.

Re: WTF is this AMT nonsense? (taxes)
 

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2005: 4 million people are covered by the AMT.
2006: 19 million people will file under the AMT!

NOT INDEXED FOR INFLATION !!!!

[/ QUOTE ]

First of all, it is not 2006 taxes yet, it is 2005 taxes.

Second of all, this great increase in more people being affected by AMT is due to the expiration of the increased exemption amount from the 2001 tax cut, and is not due to inflation.

Re: WTF is this AMT nonsense? (taxes)
 

[ QUOTE ]
[ QUOTE ]

2005: 4 million people are covered by the AMT.
2006: 19 million people will file under the AMT!

NOT INDEXED FOR INFLATION !!!! [/quote
First of all, it is not 2006 taxes yet, it is 2005 taxes.

Second of all, this great increase in more people being affected by AMT is due to the expiration of the increased exemption amount from the 2001 tax cut, and is not due to inflation.

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Sorry, but this is simply pure ignorance. The rising tide of AMT is caused directly by the fact that the original AMT limits were not indexed to inflation, and have not been revisited. The 2001 tax cut did not affect AMT at all.

May you soon experience the joy of AMT, and may you then know the truth.

Re: WTF is this AMT nonsense? (taxes)
 

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The person did your tax return wrong. Gambling losses are not miscellaneous itemized deductions that are subject to the 2% limitation. Line 27 is the correct location for gambling losses. You can instruct him to look at the instuctions for Schedule A. Gambling losses are specifically listed as one of the items for line 27.

The reason that you are getting hit with AMT is that line 22 is not allowed for AMT purposes, but line 27 is allowed. It makes a big difference when you live in a high tax state, such as NY.

NY allows your gamling losses as a state itemized deduction. Your losses are large enough that you will not have a problem itemizing for NY.

I really hope that you weren't paying much to this guy to have your tax return prepared because his knowledge seems to be a little light on taxes in general.

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Alright, so if my losses are on Line 27, I don't have to pay the AMT amount?

Re: WTF is this AMT nonsense? (taxes)
 

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Alright, so if my losses are on Line 27, I don't have to pay the AMT amount?

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Probably, but use this to be sure.

Re: WTF is this AMT nonsense? (taxes)
 

Hopefully the House and Senate will stop spending their time trying to ban internet gambling, and will focus their efforts instead on amending AMT before it hits a bunch of upper-middle class families that the original law in no way intended to affect...

Re: WTF is this AMT nonsense? (taxes)
 

Ah yes. The AMT. Started by Democrats, kept around by Democrats despite Republicans' best efforts to kill it.

I feel your pain on the state taxes. I moved to Texas, where there is no state income tax. Awesome.

Re: WTF is this AMT nonsense? (taxes)
 

Not to get OT but how are you only having to pay $2400 on $30K of winnings? Thats less than 7%... Clue me in [img]/images/graemlins/smile.gif[/img]

Re: WTF is this AMT nonsense? (taxes)
 

If you move your losses to line 27 then you will probably not have to pay the AMT amount. I don't know what else you have on your tax return, so I wouldn't say this for certain.

Also, your regular tax might go down because of the 2% limitation of the deductions on line 22. The change to line 27 will increase your itemized deductions slightly and have a corresponding decrease in your regular tax liability.

Re: WTF is this AMT nonsense? (taxes)
 

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I talked to my CPA and was told the AMT only applied if you were doing some tax sheltered type of investments or similar things the IRS deems as 'shady.'

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Your CPA is a moron and you should find another.

Re: WTF is this AMT nonsense? (taxes)
 

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Hopefully the House and Senate will stop spending their time trying to ban internet gambling, and will focus their efforts instead on amending AMT before it hits a bunch of upper-middle class families that the original law in no way intended to affect...

[/ QUOTE ]

Hopefully people will stop trying to shift conversations to another unrelated topic, based only on the similarity that they both fall under the poster's personal list of "things about the government that piss me off".

Re: WTF is this AMT nonsense? (taxes)
 

I live in Illinois. Please explain....

I'm going to see my CPA next week, am I in for a nasty suprise?

Re: WTF is this AMT nonsense? (taxes)
 

I'm paying like 5.5K on 12K winnings. [img]/images/graemlins/frown.gif[/img]

I'm living in Minnesota, and that is without the AMT. I rechecked the CPA's math and it all seems correct. [img]/images/graemlins/frown.gif[/img]

Re: WTF is this AMT nonsense? (taxes)
 

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I talked to my CPA and was told the AMT only applied if you were doing some tax sheltered type of investments or similar things the IRS deems as 'shady.' I'm claiming a net of $72K from poker (so my total winning sessions are much higher) but I'm not required to pay it.

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Your CPA is a moron. AMT has to do with the amount of deductions you have in relation to your income. It is a 100% objective quantative calculation.

I'm a CPA, haven't ever worked on personal taxes professionally in my career and I (censored) know this.

And if you're referring to H&R block or Jackson Hewitt as your "CPA", they aren't. Make sure you understand this people. Block/Hewitt folks go through a month long course. CPAs have to finish college, get a masters and pass an exam that is largely considered tougher than the BAR exams for lawyers and it second only to the medical board exams (but a distant second, I will concede)

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This is correct. I am constantly amazed how often "tax professionals" are wrong about tax information. Most info is relatively easily found if you put in a little time. If you are interested in not doing your own taxes, why not just buy TurboTax? It'll cost you $70, take you an hour, and you can be pretty sure the calculations are right.

[/ QUOTE ]

Best post on the subject. Anyone can learn to use TurboTax and you're much better off using that than going to Block/Hewitt, they are crooks and have no idea what they're doing most of the time.

Re: WTF is this AMT nonsense? (taxes)
 

In Virginia, you do not have to have a masters degree to be a CPA. Otherwise you are correct, and may be for other states. I have a close friend who is a CPA and she just had to have a college degree (undergrad) and pass the wicked hard exam.

Greg

Re: WTF is this AMT nonsense? (taxes)
 

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In Virginia, you do not have to have a masters degree to be a CPA. Otherwise you are correct, and may be for other states. I have a close friend who is a CPA and she just had to have a college degree (undergrad) and pass the wicked hard exam.

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You're right, there are a few states that still allow just an undergrad. They're shrinking fast. VA, MA, IN are a few of the only ones left.

Re: WTF is this AMT nonsense? (taxes)
 

I'm not really a tax "expert", but I am an accountant and know a decent amount about taxes. I think you should take your taxes to somebody else (more experienced)....this guy doesn't seem to know what he's doing very well.

I'd have to research it to be sure, but I'm pretty sure that the deductions for gambling losses are not included in the AMT calculation. Therefore, even if you have (hypothetically) $1,000,000 in wins and $9,950,000 in losses (for total income of $50,000), you should still not be hit with AMT.

But like I said I'm not really a tax expert, but I don't think your guy is either....I'd go to somebody else.

Re: WTF is this AMT nonsense? (taxes)
 

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I'd have to research it to be sure, but I'm pretty sure that the deductions for gambling losses are not included in the AMT calculation. Therefore, even if you have (hypothetically) $1,000,000 in wins and $9,950,000 in losses (for total income of $50,000), you should still not be hit with AMT.

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I'm just a lurker reading on this tax stuff.. but I just had to be a silly nitpicker here...

9 million dollars hypothetical loss against 1 million dollars in hypothetical wins, WOW! [img]/images/graemlins/wink.gif[/img]

* CalvinTy

Re: WTF is this AMT nonsense? (taxes)
 

My mistake....$950,000 in losses

Re: WTF is this AMT nonsense? (taxes)
 

AMT is your worst nightmare.

Re: WTF is this AMT nonsense? (taxes)
 

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I'd have to research it to be sure, but I'm pretty sure that the deductions for gambling losses are not included in the AMT calculation. Therefore, even if you have (hypothetically) $1,000,000 in wins and $9,950,000 in losses (for total income of $50,000), you should still not be hit with AMT.

But like I said I'm not really a tax expert, but I don't think your guy is either....I'd go to somebody else.

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Yes you aren't a tax expert, but I like the way you calculate net wins. [img]/images/graemlins/wink.gif[/img]