Six Facts About the Alternative Minimum Tax

ABA Tax Accounting - The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for 2011.

1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax.

2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

3. You may have to pay the AMT if your taxable income for regular tax purposes, plus any adjustments and preference items that apply to you, are more than the AMT exemption amount.

4. The AMT exemption amounts are set by law for each filing status.

5. For tax year 2011, Congress raised the AMT exemption amounts to the following levels

·         $74,450 for a married couple filing a joint return and qualifying widows and widowers;

·         $48,450 for singles and heads of household;

·         $37,225 for a married person filing separately.

6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents' tax rate has increased to $6,800 for 2011. If you have any questions about this or preparing any tax returns for prior years or for this filing season, please contact us:

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

Abatax81@gmail.com

Direct 612-282-3200

Toll free 866-936-0430 

Hiring New Employees

Small Business Tax Accounting Payroll Services

Eligibility for employment.   You must verify that each new employee is legally eligible to work in the United States. This will include completing the U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification.

New hire reporting.   You are required to report any new employee to a designated state new hire registry. Many states accept a copy of Form W-4 with employer information added.

W-4 request.   Ask each new employee to complete the 2012 Form W-4.

Name and social security number.   Record each new employee's name and number from his or her social security card. Any employee without a social security card should apply for one. ABA Tax Accounting can assist you! For a Free Consultation call or email:

ABA Tax Accounting

Amare Berhie, Senior Tax Advisor

Abatax81@gmail.com

612-282-3200

Toll free 866-936-0430

www.abataxaccounting.com

Tax Credits Available for Certain Energy-Efficient Home Improvements

ABA Tax Accounting – The IRS would like you to get some credit for qualified home energy improvements this year. Perhaps you installed solar equipment or recently insulated your home? Here are two tax credits that may be available to you:

1. The Non-business Energy Property Credit -  Homeowners who install energy-efficient improvements may qualify for this credit. The 2011 credit is 10 percent of the cost of qualified energy-efficient improvements, up to $500.

2. Residential Energy Efficient Property Credit This tax credit helps individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines.

Not all energy-efficient improvements qualify so be sure you have the manufacturer’s tax credit certification statement, which can usually be found on the manufacturer’s website or with the product packaging.

If you have any questions about this or preparing any tax returns for prior years or for the 2012 filing season, please contact us:

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

Direct 612-282-3200

Toll free 866-936-0430

www.abataxaccounting.com/CustomJ.htm

Casualty losses

Tax Preparation Services – ABA Tax Accounting

Casualty losses - Many taxpayers experienced family, business and personal losses from hurricanes, tropical storms, wild fires, floods, and other natural disasters in 2011.  For federal tax purposes, a casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a hurricane, tornado, fire, or other disaster.

Casualty losses are generally deductible in the year the casualty occurred. However, if you have a casualty loss from a federally-declared disaster, you can choose to treat the loss as having occurred in the year immediately preceding the tax year in which the disaster happened. This means you can deduct a 2011 loss on your 2011 return or amended return for that preceding tax year (2010).   If you have any questions about a casualty loss, please contact our office. If you have any questions about this or preparing any tax return for prior years or for the 2012 filing season, please contact us:

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

Direct 612-282-3200

Toll free 866-936-0430

www.abataxaccounting.com/CustomJ.htm

Tax Preparation Services - Standard Deduction vs. Itemizing

Tax Preparation Services – ABA Tax Accounting

Standard Deduction vs. Itemizing: Seven Facts to Help You Choose

Each year, millions of taxpayers choose whether to take the standard deduction or to itemize their deductions. The following seven facts from the IRS can help you choose the method that gives you the lowest tax. 

1. Qualifying expenses - Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. If the total amount you spent on qualifying medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions is more than your standard deduction, you can usually benefit by itemizing.
2. Some taxpayers have different standard deductions - The standard deduction amount depends on your filing status, whether you are 65 or older or blind and whether another taxpayer can claim an exemption for you. If any of these apply, use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions.
3. Limited itemized deductions - Your itemized deductions are no longer limited because of your adjusted gross income.
4. Married filing separately - When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.
5. Some taxpayers are not eligible for the standard deduction - They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.
6. Forms to use - The standard deduction can be taken on Forms 1040, 1040A or 1040EZ. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.
7. Standard deduction amounts -Your standard deduction is based on your filing status and is subject to inflation adjustments each year. For 2011, the amounts are:
   
   • Single     $5,800
   • Married Filing Jointly   $11,600
   • Head of Household   $8,500
   • Married Filing Separately  $5,800
   • Qualifying Widow(er)  $11,600

If you have any questions about this or preparing any tax return for prior years or for the 2012 filing season, please contact us:

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

Direct 612-282-3200

Toll free 866-936-0430

www.abataxaccounting.com/CustomJ.htm