SU Corporate Tax Decisions & Alternative Minimum Tax Strategies Essay

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Assume for a moment that you own a tax practice and the majority owner of Hastings Printing, Corporation (your client), informs you that she has recently heard about the alternative minimum tax (AMT) and wants you to be sure to check if that tax can save the owner of the company money on her personal tax return. Respond to that statement and discuss your thoughts on the reasons for, and the appropriateness of, this AMT.

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Please do the discussion and response each posted down below.

Postes 1

Hi Class,

“An alternative minimum tax (AMT) places a floor on the percentage of taxes that a filer must pay to the government, no matter how many deductions or credits the filer may claim,” (Probasco, 2021).

I had to laugh at this question a little bit because I work for a nonprofit who is a fiscal sponsor for other nonprofit organizations and this brought to mind how many people confuse what exactly nonprofits and fiscal sponsors do. Like Professor Kreuze said in our first seminar, the IRS is actually pretty fair about tax laws; however, NONE of them are designed to give you “an out” on paying taxes that are owed. There is also no magic way to earn money, as many people confuse having a fiscal sponsor with; and nonprofits have to have money from some source (donations or program service revenue or a combination of both) to survive and continue to operate.

The alternative minimum tax (AMT) was designed to create a minimum tax because, as most filers do (and should do to maximize their income), there are many deductions and credits out there that could feasibly deplete one’s taxable income otherwise. Very basically, the IRS has to collect taxes to operate our government and many necessary life functions. If everyone finds every deduction possible and they are legal deductions, the IRS won’t make any money. Therefore, the AMT was established as a way of ensuring that could not happen. It will not help Ms. Hastings Printing with saving tax dollars!

Posted 2

Alternative Minimum Tax (AMT) was designed to ensure Americans (and businesses before TCJA 2017 repealed AMT for businesses) pay their fair-share of taxes even if they’re able to claim a lot of deductions and credits (What is AMT?, 2021). AMT is not an alternative to your standard income tax calculations, unless the AMT calculations are more – then you have to pay more taxes. In no way does AMT SAVE a tax payer money.

In this case, Mrs. Hastings (assumed last name since she own’s the business), is misunderstanding what AMT is and she’ll probably feel relieved to know she doesn’t need or want to pay AMT. During the tax return preparation process, we will look at her joint income (if married) and determine if we need to run the AMT calculations. The 2021 exemption for joint filers is $144,600 ($73,600 for single). (2021 Tax Brackets, 2020) If her joint income exceeds this amount, we will recalculate her taxes via the AMT rules and assess whether she’ll owe more tax via AMT or standard tax calculations, at which point she’ll be required to pay whichever is more.

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