WTF is this AMT nonsense? (taxes)

[duk]

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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.

[frommagio]

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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.

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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.

[BigBiceps]

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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 !!!!

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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.

[frommagio]

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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.

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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.

[Paul B.]

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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?

[duk]

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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.

[Gramps]

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...

[LozColbert]

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.

[APerfect10]

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]

[broiler]

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.