How is the AMT for individuals different from or similar to AMT for corporations
ID: 2414979 • Letter: H
Question
How is the AMT for individuals different from or similar to AMT for corporations?
Note: For tax classes, please get acquainted with the IRS’ resources (www.irs.gov). The tax code is the authoritative source for taxes.The AMT is a parallel tax system that operates in the shadow of the regular tax, expanding the amount of income that is taxed by adding items that are tax-free and disallowing many deductions undShow More
Class: Clearly, Tax Freedom appears very theoretical. Do you find any usefulness for businesses? What is the impact of tax incentives on the Tax Freedom Day?
Explanation / Answer
first of all let us understand the meaning of AMT
alternative minimum tax =AMT
How is the AMT for individuals different from or similar to AMT for corporations?
Let us see how from AMT for individual is similar to AMT for corporation, the corporate AMT works is like the individual AMT and is similarly intended to ensure that profitable corporations pay at least some federal income tax.
Generally the corporate AMT is calculated using a different rules than the regular corporate income tax, and it applies a 20 percent tax rate to an alternative definition of taxable income. In general, the AMT applies an alternative tax rate to a more broadly defined measure of income and a more narrowly defined set of deductions.
The basic rule of AMT is to require all taxpayers to compute their “regular tax” liability and also their “alternative minimum tax liability.” They compute their AMT liability under rules that adjust taxable income upward by eliminating or reducing the tax benefits of certain expenditures or of deriving income from certain sources. Taxpayer must pay the greater of his/her regular tax or AMT.
following are Levels of Tax Law:
Tax law will come at you at three levels.
(1) Statute and regulation reading, discernment of precise rules and their limits, application of these rules to specific situations;
(2) Consideration of whether Code provisions are consistent with stated policies;
(3) Consideration of the role of an income tax in our society.
Generally the AMT is a parallel tax system that operates in the shadow of the regular tax, expanding the amount of income that is taxed by adding items that are tax-free and disallowing many deductions under the regular tax system .
Why would one has to pay AMT
The simplest way to see why you are paying the AMT, or how close you came to paying it, is to look at your Form 6251 from last year.
following things you can do to plan ahead for the (AMT)Alternative Minimum Tax: