Computing your taxes is never fun once, let alone twice, but that's what some business owners must go through to see if they are required to pay an alternative minimum tax. The federal government established the AMT to negate efforts by wealthy taxpayers to minimize their taxes.

To compute AMT, you must plug your tax numbers into a specific formula that disregards common deductions and other tax treatment. An individual or business must pay AMT when that liability is more than what their regular taxes would be in that year.

Consider the following alternative minimum tax information:

1. AMT calculations are done using IRS Form 6251, and AMT has its own rules for deductions.

2. A flat tax, the AMT is usually applied at 20% for corporations.

3. Introduced in 1969, the AMT was originally considered to impact only the wealthy. But it now affects more people since the government has failed to adjust it properly for inflation increases.

Action Steps
The best contacts and resources to help you get it done

Download the appropriate alternative minimum tax information and forms

Much information can be found online, including the necessary Form 6251. You'll also want to read through criteria used to determine whether you may be liable for AMT.

I recommend: Get commonly requested tax forms and instructions from the Internal Revenue Service. Or log onto Intuit for all the information you need and links to forms.

Calculate your AMT amount

You must figure your taxes twice. There's no getting around it. First, you must figure your tax liability under regular tax rules and regulations. Then, use Form 6251 to calculate your tax liability using the rules for AMT. Hope for the regular tax calculation to be higher, because then you don't owe any AMT. However, if your regular tax calculation is lower, you must pay the difference between the two as your AMT.

I recommend: Run the tax assistant wizard for individuals and businesses concerning the AMT from the IRS. Check out the simple AMT chart provided by H&R Block.

Consult with an alternative minimum tax provider

It may be best to get advice from a professional on determining if you should complete the AMT worksheet when preparing your taxes. If the IRS finds that you owe the tax, you'll be fined with interest. Not paying AMT can also bring on an audit.

I recommend: The firms of Clifton Gunderson and The Fulp Company Accounting and Tax Consultants can provide you with expertise on your business income tax needs. They can also advise you on some ways you can minimize your tax burden and perhaps avoid the AMT altogether.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Review this alternative minimum tax list of warning signs indicating you may have to pay the tax: if your income exceeds $100,000; if you have exorbitant exemptions, significant itemized deductions, large capital gains or incentive stock options; if you own or invest in a business.