How is the AMT for individuals different from or similar to AMT for corporations?

Let us see how from AMT for individual is similar to AMT for corporation, the corporate AMT works is like the individual AMT and is similarly intended to ensure that profitable corporations pay at least some federal income tax.

Generally the corporate AMT is calculated using a different rules than the regular corporate income tax, and it applies a 20 percent tax rate to an alternative definition of taxable income. In general, the AMT applies an alternative tax rate to a more broadly defined measure of income and a more narrowly defined set of deductions.

The basic rule of AMT is to require all taxpayers to compute their “regular tax” liability and also their “alternative minimum tax liability.” They compute their AMT liability under rules that adjust taxable income upward by eliminating or reducing the tax benefits of certain expenditures or of deriving income from certain sources. Taxpayer must pay the greater of his/her regular tax or AMT.

following are Levels of Tax Law:

Tax law will come at you at three levels.

(1) Statute and regulation reading, discernment of precise rules and their limits, application of these rules to specific situations;

(2) Consideration of whether Code provisions are consistent with stated policies;

(3) Consideration of the role of an income tax in our society.

Generally the AMT is a parallel tax system that operates in the shadow of the regular tax, expanding the amount of income that is taxed by adding items that are tax-free and disallowing many deductions under the regular tax system .

• To figure out whether you owe any additional tax under the Alternative Minimum Tax system, you need to fill out Form 6251.
• If the tax calculated on Form 6251 is higher than that calculated on your regular tax return, you have to pay the difference as AMT in addition to the regularly calculated income tax. It can result in you paying hundreds or even thousands of dollars in additional taxes.

Why would one has to pay AMT

The simplest way to see why you are paying the AMT, or how close you came to paying it, is to look at your Form 6251 from last year.

• Compare the Tentative Minimum Tax to your regular tax to see how close you were to paying the AMT.
• Look for entries on lines 1-27, which adjust your taxable income for AMT purposes.

following things you can do to plan ahead for the (AMT)Alternative Minimum Tax:

1. You should use tax-planning software such as TurboTax during the year to minimize your overall tax liability.
2. Study Form 6251 each time you prepare your tax return to see how close you are to paying the AMT. Evaluate how close your Tentative Minimum Tax (line 34) was to your regular tax (line 35).
3. You should check last year’s return for any general business credits that are being carried forward. If there are some, they may be due to the Tentative Minimum Tax limit.
4. If you exercise stock options during the year, see Incentive Stock Options above for guidance on how the timing of the subsequent sale of stock can affect your AMT liability.