Amt

[oceanlovin'ea]

I have a return I have prepared and the client was hit with AMT. He had a large income because he took all his money out of his 401K. He didn't itemize deductions.

He just had his w-2, 401K distribution, and social security. He has 5 exemptions, himself and his wife, 2 children and his mother.

I hardly ever have anyone with AMT. I will have to explain this to him. His tax rate is already 33% so why is he hit with AMT?

Don't mean for this to be a "dumb" question but since this is not something I encounter often when I do, I have to go over and over it in my head again to understand. I could see if he had large itemized deductions or large losses that reduced his taxable income but he doesn't. It is just a straightforward return.

Thanks.

Linda, EA

[Kram BergGold]

Here is the answer to the question you should have asked

Linda,
Whenever you encouter AMT you have to try to itemize. The standared deduction is not allowed for AMT. So they will save taxes just by claiming charity or interest or medical and if this really helps maybe they will get some credit for taxes paid. I guess if AMT was small this is not true but before you call it a day try itemizing.