ACCOUNTING

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As a tax preparer, one of your clients without tax liability is reviewing his taxes before submission and is surprised at how much tax he has to pay. He questions you about why he didn’t receive the education credit.

  • Based on his situation and his taxes, there are 2 things you need to explain to him:
    • His taxes are as high as they are because of the Alternative Minimum Tax (AMT).
    • He did not receive the education credit because it is a nonrefundable tax credit. Explain the difference between refundable and nonrefundable tax credits.

Once you have explained these things, he states that he thinks it is not fair that so many middle-class Americans are paying the AMT. You discuss with him the following:

  • In your opinion, is it fair that most middle-class taxpayers are paying the AMT?
  • Should the AMT be phased out? Why or why not?
  • How do you think Congress could make the AMT more fair for the majority of middle-class America?

 

 

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