Do I need to calculate Alternative minimum tax?

Question

I am a full-time employee at an organization. For the past two years, my financial case is incredibly straight forward.

(1) For 2017 as well as 2018, I was single with no dependants.

(2) I took the standard deduction for 2017. I intend to take the standard deduction for 2018 as well.

(3) Apart from the standard deduction, I have absolutely no other deduction for either of the years. Not even 401K contributions.

(4) For both years, my taxable income was more than 80k$.

I used Sprint tax for my 2017 taxes and it didn't calculate any alternative minimum tax. If it did, I didn't get any form back from it.

This year, for 2018 I decided to do my taxes by myself. I noticed that in the instructions for Alternative minimum tax it says that if your income is more than 70k for single filling, you have to work through the form 6251. Now if I do this for 2018 alone, considering the fact that I haven't done it for the year 2017 will I get in trouble with the IRS?

Also, do I need to calculate my AMT amount? I have absolutely no other deductions other than standard deductions. One of my colleagues who makes exactly the same amount of salary as I do, used turbo tax and even he also didn't end up having to pay any AMT.

Answer 1

The Alternative Minimum Tax is called "minimum" for a reason. It only affects you if it ends up being more than your tax burden without it. If, as you say in the comments, your Alternative Minimum Tax is "significantly less than my regular tax," then you won't owe any AMT, and there generally is no need to attach Form 6251 to your tax return.

The Form 1040 instructions for line 45 tell you that if you are single and your income is more than $70,300, you need to check whether or not the AMT will apply to you. There is a worksheet in the Form 1040 instructions to see whether or not you will need to actually complete the Form 6251. The worksheet may tell you that you don't even need to complete Form 6251. But even if you do have to complete the Form, you might not need to send it in.

According to the Form 6251 instructions, you only need to send your Form 6251 in with your tax return if you meet the following conditions:

Who Must File

Attach Form 6251 to your return if any of the following statements is true.

1. Form 6251, line 7, is greater than line 10.

2. You claim any general business credit, and either line 6 (in Part I) of Form 3800 or line 25 of Form 3800 is more than zero.

3. You claim the qualified electric vehicle credit (Form 8834) or the credit for prior year minimum tax (Form 8801).

4. The total of Form 6251, lines 2c through 3, is negative and line 7 would be greater than line 10 if you did not take into account lines 2c through 3.

Answer 2

AMT was invented to target people that have high special deductions or other extreme cases, and would be able to avoid normal taxes with that.

Very rarely will you have to pay AMT if you are an employee, your income comes through a W2, and you don't have large deductions from other sources. You can just ignore it until your situation changes gravely.

Answer 3

The AMT exemption rose from $54,300 in 2017, to $70,300 in 2018. As long as your income didn’t rise dramatically, nor did your itemized deductions, I’d think it’s safe to say that you would not be subject to AMT in ‘18 if not subject to it in ‘17.

That said, I’m a big fan of having tax software do the math for you, eliminate the chance of math errors, and be used as a planning tool for the next year. It’s ~$50 well spent.