Categories: Demographics, Farm Leadership, Farm Taxes, Farm Trends
Tags: amt, farm bill
Part of the ongoing Alternative Minimum Tax (AMT) mess over the last several years involved the allowance of certain nonrefundable individual tax credits such as the adoption credit, the child and dependent care credit, the lifetime learning credit and other similar credits to be allowed to reduce AMT. In some years it was allowed whereas in other years it was not allowed or was only allowed on a retroactive basis.
In some years if a taxpayer had regular tax before these credits of $10,000 and AMT of $7,000, they could offset $10,000 of tax and potentially have zero tax liability. In other years, they could only offset $3,000 of regular tax and still be subject to the AMT of $7,000.
The new tax law passed at the beginning of the year now makes the more beneficial treatment permanent (at least as permanent as Congress will allow). This rules has been made effective as of January 1, 2012.
Therefore, along with the increase in the AMT exemption to reflect inflation, taxpayers can now offset AMT with nonrefundable personal credits that might not have been allowed under the old law.
On another subject that appears to be raising its head is that possible limitation of 2013 direct payments. Although Congress passed a one-year extension of the 2008 farm bill; with the upcoming fight over the debt ceiling and sequester issues, there is a distinct possibility that these direct payments will be reduced or eliminated. The possible savings in the current and future years may be too tempting for Congress to pass up. We will keep you posted.
Paul Neiffer, CPA
Categories: Farm Industry Trends, Farm Taxes
Tags: amt, amt extender, irs delay
Steven Miller, Acting Commissioner of the IRS wrote a letter dated November 13, 2012 to select members of Congress informing them on the possible delays in processing 2012 income tax returns if the AMT patch is not enacted.
Under current law, it is estimated that 28 million additional taxpayers will pay some Alternative Minimum Tax (AMT) for 2012 tax returns unless the AMT patch is enacted. If the patch is passed, then only about 5 million taxpayers would be subject to the tax.
Mr. Miller explained that the IRS is ASSUMING that Congress will pass the AMT extender bill before December 31, 2012 and if so, they will be able to process returns with minimal delay. However, if Congress does not pass an extender bill or waits until sometime in 2013 to pass it, he indicates that the IRS may not be able to process any returns affecting up to 60 million taxpayers including most farmers until late March, 2013.
The extension of the AMT patch is fairly easy to program into the system since it involves changing a few numbers. If the extender is not passed, then the IRS has to completely rewrite their code to handle the new ordering rule of many tax credits for AMT purposes and this is what would take the extra time.
As we have indicated in many other posts, you may want to consider making a required estimated tax payment on January 15, 2013 and then file your return by April 15. This could save you much time and aggravation, especially in 2013.
We will keep you posted.
Paul Neiffer, CPA