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    #1

    Amt

    I did client's tax return. He sold his rental property and had big gain.
    I used ATX software. May be software is wrong or I might not have used it correctly?

    MFJ
    1040 Line 13 gain = 144000

    AGI = 251000
    Taxable income = 227000
    AMT = $0 per ATX software.

    IRS is saying that it should be $1645!

    Is there way I can help my client?

    Thanks!
    Tags: None
    #2
    More Info

    We can't really know without further details. If you look at the mechanics, there is no AMT without the components that create it - excess depreciation, tax preferences, and certain itemized deductions. You haven't given us enough information to choose sides.

    One puzzling aspect of your question, however. How the IRS calculated an AMT. Their only information had to come from items on the face of the return. You would not have populated such things as tax preferences and excess depreciation into AMT or the software would have followed up. These items are more subtle and not essential to file a return unless a form 6251 is required. So most likely IRS is using certain itemized deductions from Schedule A. These would have been the easiest for ATX to calculate.

    My initial guess is that IRS is correct and there is a "hole" in the ATX programming. But get a full understanding of the problem before capitulating your clients' money to the IRS. Come back with details - makes for lengthy posts, but its the off-season and there are plenty of folks willing to help.

    Comment

      #3
      It's an ATX problem

      The ATX software does NOT automatically open a 6251 form unless you explicitly add some item that requires special AMT processing (like municipal bond interest that could be from a private activity bond). Without a 6251 form open it does not calculate the AMT under the more common circumstances, such as high income with high state taxes, large miscellaneous deductions, or a large family.

      ATX has said that they will fix this problem for the 2006 tax year by adding an option to open a 6251 form for ALL 1040 returns.

      http://techkb.atxforms.com/TSTKB.nsf/0/c2e9f420dce02f13852571d2004e234c?OpenDocument

      Comment

        #4
        Well... I have used ATX since they started selling programs and I have never had a problem with form 6251 not opening when there was AMT calculation needed. True, there was a time when the form was "late" opening and you could actually print or e-file without the calculation because the preparer did not save or go thru the "check return for errors" procedures. I was not aware that the problem still existed in year 2005.

        For the benefit of those that might consider switching to ATX software, this is great software but it is not appropriate if you expect a secretary or inexperienced person to dump tax numbers in the program and you only glance at the results. It is best for input by experienced tax preparers that know where and how to prepare a tax return.

        Comment

          #5
          capital gains

          I was surprised by this the first time it happened: pg 2 of the 6251 does the calculation of AMT when there is a capital gain present - and essentially what can happen with a big gain is that the 15% tax 'uses up' all the regular tax and most or all other dollars are subject to the AMT rate. I know that's not a good technical explanantion, but I bet it's pretty close to what happened here.

          Comment

            #6
            Originally posted by abby
            I was surprised by this the first time it happened: pg 2 of the 6251 does the calculation of AMT when there is a capital gain present - and essentially what can happen with a big gain is that the 15% tax 'uses up' all the regular tax and most or all other dollars are subject to the AMT rate. I know that's not a good technical explanantion, but I bet it's pretty close to what happened here.
            That happened to me years ago using Pro Series. I didn't realize I had to activate something to get the program to do the page 2, and IRS sent an adjustment letter as a result.

            Pro Series has since fixed that so that it does the page 2 automatically if there are capital gains.

            Comment

              #7
              Wow are saying that with ATX you have to click a special box or something for it to process a form or make a calculation?

              If so this is why I use Lacerte and why I tell everyone it may be expensive but well worth the money.In lacerte if you enter in on sch d the cap gain sale it automatically calculates the gain and any applicable amt that is required. It populates the forms and then you can go and check the calculations and make sure all the figures look good.

              Comment

                #8
                E-filed?

                Was the return e-filed or paper? If the return was paper and the input of the "A" by the IRS was wrong, ie "property tax" was keyed as "state and local income tax" that could trigger the AMT. Log onto e-services and get a record of the return to insure the IRS input matches yours.
                In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
                Alexis de Tocqueville

                Comment

                  #9
                  Originally posted by Snaggletooth
                  We can't really know without further details. If you look at the mechanics, there is no AMT without the components that create it - excess depreciation, tax preferences, and certain itemized deductions. You haven't given us enough information to choose sides.

                  One puzzling aspect of your question, however. How the IRS calculated an AMT. Their only information had to come from items on the face of the return. You would not have populated such things as tax preferences and excess depreciation into AMT or the software would have followed up. These items are more subtle and not essential to file a return unless a form 6251 is required. So most likely IRS is using certain itemized deductions from Schedule A. These would have been the easiest for ATX to calculate.

                  My initial guess is that IRS is correct and there is a "hole" in the ATX programming. But get a full understanding of the problem before capitulating your clients' money to the IRS. Come back with details - makes for lengthy posts, but its the off-season and there are plenty of folks willing to help.
                  Thanks! This is the first time I am handling AMT. Client did return on Turbotax and I did on ATX. We got the same answer. Upon further review, it seems like IRS did not take into consideration difference between AMT and reg tax on disposition of property - about (20,000). This will help. AMT was on a 40 year SL dep for a residential prop. that was sold where as reg dep was on 27.5 years. This coincides with your comment - "How the IRS calculated an AMT. Their only information had to come from items on the face of the return"

                  I am planning to write letter to IRS with dep schedule showing AMT vs Reg dep on disposed of property

                  I will give you more detail as I get it and also let you know the result.

                  Comment

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