Since the tax rates are now lower for many people, a spotlight is being thrown on the Alternative Minimum Tax (AMT).
What is the AMT? It's a flat 26 to 28 percent tax created to prevent the wealthy from avoiding paying all of their taxes due to too many deductions. Taxpayers calculate their regular tax bill, as well as the AMT and pay whichever amount is higher.
What is different this year?
With tax brackets reducing for most Americans, the AMT could impact more taxpayers than ever. Could you be affected?
The experts at TurboTax point out that the new tax laws increase the AMT exemption for married persons filing a joint return by $4,000 and for all other taxpayers by $2,000. That means for years 2001 through 2004, the exemption amount would be $49,000 for joint filers and surviving spouses and $35,750 for all other filers.
For those who need help determining whether they need to pay, visit the AMT calculator at www.turbotax.com.
Here are a few valuable tips to make the most of your tax savings after Jan. 1.
Contribute to retirement accounts. If you haven't already funded your retirement account, do it by April 15, 2002. That's the deadline for any kind of IRA deductible. If you have a Keogh or SEP, you can wait until your extension deadline to put the money into those accounts.
Make sure to get all the deductions you're legally entitled to. Many taxpayers aren't aware, for example, that they can deduct vehicle registration fees and student loan interest.
Organize and plan ahead for next year. Tax time is a great time to get your finances in order. Save receipts and records of charitable donations and stock sales.
Use tax preparation software products like TurboTax or an online service such as TurboTax for The Web that help you through your tax preparation by handling all tax law changes for you.
File your return electronically. It's fast, easy, more accurate and you'll get your refund back in as little as 10 days-compared to six weeks for returns filed by mail.
For more information, visit www.turbotax.com or through the "Get Tax Smart" tax education program with Springboard consumer credit management at www.credit.org.
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