Tuesday, May 5, 2009


The tax professional community was truly pleased when the annual dreaded Alternative Minimum Tax (AMT) “patch” was passed as part of ARRA 2009 in February. We would not have to wait until the last minute to see if many more of our clients would be falling victim to the dreaded alternative tax – or be faced with unnecessary delays in processing tax returns next tax filing.

The only downside is that early passage of the patch meant that Congress would not be dealing with the issue of doing away completely with, or substantially reforming, the dreaded ATM in 2009. Once again Congress took the easy and lazy way out. We can only hope that when the Tax Code is completely rewritten in 2010, as many of us expect it will, the dreaded AMT is finally put to rest.

As has been the custom with the annual AMT patches the exemption amounts are slightly increased. For 2009 the exemption amounts are –

· $70,950 for married couples filing a joint return and surviving spouses,
· $46,700 for Single, and Head of Household, filers, and
· $35,475 for married taxpayers filing separate returns.

The fix also extends and expands the ability of taxpayers to claim personal tax credits against the dreaded AMT.

CCH reports that the 2009 patch will keep about 26 Million taxpayers from falling victim to the dreaded AMT.

ARRA 2009 also excludes from taxable income up to $2,400 of unemployment compensation benefits received in 2009 only. Surprisingly there is no income limitation and no phase-out based on AGI or MAGI. So if you receive $2,200 in unemployment benefits in 2009 these benefits are totally tax-free. If you receive $3,000 in benefits only $600 will be taxed.

Historically unemployment compensation was always exempt from federal income tax. It first became partially taxable in 1979 and eventually became fully taxable, regardless of one's level of income. When it was first taxed my mentor Jim Gill and I said to each other, “the next thing you know they are going to start taxing Social Security.” And guess what – Social Security benefits became partially taxable in 1984!

The “stimulus bill” also increases the Earned Income Credit, the biggest federal welfare program, for working families with three or more children and extends the availability of the credit for married couples by increasing the beginning point of the phase-out for tax years 2009 and 2010. Also increased for tax years 2009 and 2010 is the “refundable” portion of the Child Tax Credit. So look for increased tax fraud on 2009 and 2010 returns.


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