Does your incorporated business pay alternative minimum tax [AMT]? If so, there is a 93 percent chance you have been overpaying your taxes by an average of $11,000 a year according to the Treasury Inspector General.
The Office of the Treasury Inspector General for Tax Administration was created in 1999 to oversee the IRS. One of the duties of the Treasury Inspector General is to study and report the efficiency of the tax payment system, particularly the accuracy of tax collection efforts. Many of the studies conducted by the office reveal starting results, particularly when it comes to businesses overpaying their taxes.
As part of this oversight, the Treasury Inspector General is reporting that many small business corporations are incorrectly paying AMT. The AMT was enacted in the late 1990s, but proved to be a huge burden on small businesses. The tax was confusing and the paperwork was incredibly complex. An amendment was subsequently added to give small business corporations relief from the AMT. Section 55(e) of the Internal Revenue Code now contains language exempting small business corporations from paying the AMT.
Small business corporations can claim an exemption from the AMT if gross revenues average $5 million or less for the initial three years of business. Thereafter, the business can continue to claim the exemption as long as revenues average $7.5 million or less of each subsequent three year period.
According to the Inspector General, companies that fail to claim an exemption to the AMT are overpaying taxes by an average of $11,638 each year. 93 percent of small business corporations qualify for the exemption. Since the IRS has no duty to notify taxpayers of overpayments, many small business corporations have no idea they are overpaying taxes and are due refunds.
All taxpayers have the right to file amended tax returns for the past three calendar years. If you failed to claim the AMT exemption, you may be due a refund totaling over $33,000.