Ask a Business Expert

A: AMT is a separate tax designed to ensure that all taxpayers pay at least some income tax — including those who are otherwise able to escape regular income tax through large write–offs. The AMT is highly complicated and confusing. For AMT purposes, income is adjusted by adding back certain tax preference items, adding or subtracting special adjustments, and subtracting an AMT exemption amount. Special AMT tax rates apply — then taxpayers pay regular tax or AMT, whichever is greater. C corporations have their own AMT system — but small corporations (those with average annual gross receipts in the prior three years of $5 million or less) are exempt from corporate AMT. Owners of pass–through entities (partnerships, LLCs, and S corporations) include their share of business tax preferences and adjustments on their personal returns. Alert: Congress is considering revisions to AMT (including complete repeal of the corporate AMT) so stay alert for legislative developments. To see if you're subject to the AMT, see the instructions to IRS Form 6251, Alternative Minimum Tax — Individuals, or IRS Form 4626, Alternative Minimum Tax — Corporations, downloadable at www.irs.gov.