Tax Planning Advice: Minimize Clients' AMT Exposure, or Do You?—Tim Speiss

One mechanism EisnerAmper might use is deferring where possible: in 2011, pushing off as much of 2011 taxes as possible into 2012, for example. Another possible strategy, depending on what 2012 bodes (“2012 looks like it’s going to be an AMT liability year”), is trying to accelerate state and local deductions into 2011 if that would help. “Often, even if you’re an AMT in both years, by trying to manage deductions so that you reduce your total tax liability would be a strategy.”

Speiss makes another point: “The AMT is not horrible. When you think about it, you’re paying an AMT tax rate of 28%; that’s still far less than a 35% ordinary income tax rate.”

He says EisnerAmper educates its clients that the AMT is not necessarily a catastrophe. “If you manage your affairs so you can be an AMT and not the ordinary rate of 35%, that could be a very good strategy. Suppose you knew in 2011 that you were going to be in the 35% tax regime, and also that you were going to be in a 35% tax rate in 2012, you might look at your state income tax payments and pay them out while purposely trying to put yourself in a AMT rate because your tax total tax liability would be less than the 35% amount.”

Speiss says that this kind of strategizing utilizes old-fashioned numbers crunching and looking at various scenarios, three or four per client. It is necessary to consider all of the taxpayer’s income over two or three years. The goal is to devise an income recognition and deduction payment scenario that gives the least tax liability in the two years.

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