Enrolled Agent Continuing Education Aids in Explaining the AMT

The Alternative Minimum Tax (AMT) sneaks up on unsuspecting taxpayers who then need advice about how to avert it in the future. This requires having some understanding of how the tax works and why only some taxpayers are subject to it. Fortunately, enrolled agents can take advantage of these situations as opportunities to expand their tax practices.

People want experts to explain particularly complex tax subjects. By promoting the knowledge you retain from enrolled agent continuing education, you certainly qualify as an expert to the public.

The AMT is a separate tax system from regular income tax. Under the AMT, tax is calculated according to a distinctive set of rules regarding income and deductions. When the tax determined using AMT rules is higher than tax assessed under the regular tax system, taxpayers owe the additional amount.

The ethics CPE of tax professionals teaches you to assess all tax payable, including any for the AMT.

Any taxpayer owing tax due to the AMT who doesn't pay is liable for penalties and interest. An enrolled agent should calculate potential AMT for all taxpayers with income above ,000 having a lot of personal exemptions or deductions.

An enrolled agent studies the AMT process in a CPE course. The AMT is calculated by completing IRS Form 6251, which adds disallowed deductions and extra income to the regular income tax calculation. Some of the likely situations where taxpayers owe AMT involve exercising of incentive stock options, ownership of a vacation property, and holding extensive investment interests.

The AMT disallows deduction of interest on home equity loans. Also disallowed under the AMT is investment interest expense that exceeds investment income other than interest and dividends.

Items counted as income under the AMT but not the regular tax system include the market gain on incentive stock options, interest earned on private activity bonds, and gains on the sale of qualified small business stock.

Because the AMT is a completely different tax system, it affects carry forward losses and basis. Therefore, an enrolled agent is valued for maintaining records a taxpayer will eventually require. For example, stock acquired by exercising incentive stock options may have a different basis under the AMT when sold. The AMT also reduces the deduction of passive activity losses and thus the loss carried forward to the time of property disposition.

These situations create long-term relationships between taxpayers and enrolled agents in order to accurately make future AMT adjustments.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Deploy Your Enrolled Agent Continuing Education as a Restaurant Industry Expert

Every restaurant you enter represents an opportunity to expand your business as an enrolled agent. Owners of restaurants have plenty of tax issues that they're seldom prepared to address. They need tax professionals with the highest level of expertise. That's what the enrolled agent designation represents. You can start on the road to helping them by conveying that enrolled agents are the only tax practitioners specifically licensed by the IRS.

To demonstrate your particular competence for the restaurant industry, relay to prospective clients your knowledge about tip income. This is a common tax accounting headache for restaurant owners that you learn from your enrolled agent continuing education.

Employees who receive more than per month in tips are required to report the total to their employers.

This situation most often occurs in the restaurant industry, but is also applicable to other types of businesses. A restaurant owner must adjust income tax withholding on the wages of employees who report tips. In addition, an employer is responsible for withholding and remitting Social Security and Medicare taxes on the tip income of workers.

Any uncollected taxes on reported tip income are withheld from future paychecks.

However, a worker can give money to an employer at any time during the year to cover required taxes. The employee's W-2 indicates any Social Security and Medicare taxes for tip income that was not collected. If this happens, your tax CPE teaches you to make an adjustment on the employer's quarterly payroll report for the uncollected amount. The worker is then liable for uncollected payroll taxes. But businesses are still responsible for the employer share of Social Security and Medicare taxes plus other taxes associated with payroll.

Information covered in your enrolled agent CPE allows you to help a restaurant owner with the payroll issues incurred from employee-reported tip income. Employers use Form 4137 to disclose the tip income reported by employees. A recent revision to this form requires the employer's tax ID number. This permits the IRS to engage in collection of the employer part of Social Security and Medicare taxes on reported tip income.

You enrolled agent training is especially important when restaurant employees report total tip income that's less than 8 percent of gross receipts for the business. This requires allocating the deficient amount among the W-2s of all employees. A system of reporting allocated tips is usually based upon each employee's share of total hours or gross receipts.

Restaurants have a special requirement of reporting tips annually on Form 8027. One of these forms is required for each location where more than 10 people are employed working a total of more than 80 hours per day.

These big demands of restaurants related to payroll and tipping of employees are just right for enrolled agents to address. The business owners benefit and your tax practice grows from a focus on such high level use of your enrolled agent expertise.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.