Tax Tip: What You Need to Know About the Alternative Minimum Tax
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robynmac/iStock/Thinkstock(NEW YORK) — The alternative minimum tax affects some 23 million higher-income taxpayers, but do you know what it means for you?
“The alternative minimum tax is a tax that was put into effect a number of years ago, and it’s designed to make sure that most people pay at least some tax,” says Internal Revenue Service spokesman Eric Smith.
The idea first came about in 1969, when the Treasury secretary announced more than 150 high-income households hadn’t paid a dime in taxes. Those households had taken advantage of benefits and deductions to the point they brought their tax liability to zero.
Under the alternative minimum tax, those households now have to pay, though on a non-graduated rate.
“When you think of alternative minimum tax, think of the whole idea that people have been proposing for years and years called a flat tax,” says Tom Wheelwright, CEO and founder of CPA firm ProVision.
“It’s a flat rate. It’s not graduated rate like we do for the regular income tax.”
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