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American Morning

Discussing Alternative Minimum Tax

Aired February 09, 2004 - 09:26   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


BILL HEMMER, CNN ANCHOR: It's the AMT, the alternative minimum tax. And if you haven't heard of it before, don't worry. Those three words are throwing a big scare into taxpayers and that's why we are told you should worry now. It's supposed to target the wealthiest Americans, but millions of middle class families are now being forced to pay the tax, which wipes out personal exemptions.
The dread AMT is the topic of a "Business Week" cover story.

And Lauren Young of "Business Week" magazine here with some advice that will help you avoid this.

Good morning to you.

LAUREN YOUNG, "BUSINESS WEEK": Hi, Bill.

HEMMER: What is the AMT, if you can give us a one-on-one quickly without too much complication.

YOUNG: Alternative minimum tax. You lose many of your valuable exemptions and deductions, including state and local income taxes.

HEMMER: How do you lose this?

YOUNG: Well, basically it's this parallel universe. That's what we call it. And depending on what your income level is, as you said, three million people this year, it's very middle class, upper middle class. It's going to be about 33 million people by 2010.

HEMMER: So you anticipate this just growing and growing.

You have a few tips that we can take us through here now for candidates who might be at higher risk for that.

The first one is do you live in a high tax state.

YOUNG: That's right.

HEMMER: Such as what?

YOUNG: New York and California, for example. Our examples in the story are people mainly from New York and California, because the state and local income taxes in both of those states are so high. And what happens is you lose being able to deduct that from your overall tax return.

HEMMER: The other issue here, does your spouse make as much as you? Equal incomes?

YOUNG: Right. Say there's a couple, about $100,000 each, a nurse and a doctor or something -- well, a doctor might make more. But $100,000 each. They're going to pay about $1,500 if they're eligible for the AMT this year if they have about four kids. So that's a lot of money.

HEMMER: You mention a hundred grand as your family income, between $100,000 and $500,000. You say originally this was a tax on the rich anyway.

YOUNG: Right. It was originally for about 150 millionaires in 1969, never indexed to inflation.

HEMMER: The other thing to look out for, any unusual extra income this year.

YOUNG: Bonuses, stock options, if you won a lawsuit, any additional income that's going to bump you over into a new tax bracket.

HEMMER: Your magazine calls this a stealth tax growing like the monster from the tax lagoon. Sounds nefarious.

YOUNG: Well, Washington was built on a swamp, right? And it's coming from Washington. I mean this is something that gives the federal government, it's going to give them about a trillion dollars in revenues by 2010. So it's very hard to get rid of it because that's very valuable money.

HEMMER: A few tips here for side-stepping it.

Time your 2004 bonus differently. How so? Front loading or not?

YOUNG: Actually, it's better if you can front load it this year. You know, this is, again, for 2004, taxes, it's good sometimes to do that. But this is something that you definitely want to talk to a tax professional about.

HEMMER: Two other things quickly. Consult your CPA before cashing your stock options and delay property tax payments.

What does that have to do with it?

YOUNG: Sometimes if you delay the property taxes, you can actually reduce your overall state and local income. So it can actually keep you out of that category.

HEMMER: You have 10 seconds here before we get the opening bell on Wall Street.

Why is this in the tax law today able to hit, you project, in six years, millions of Americans?

YOUNG: Trillions of dollars in tax revenues. It keeps Washington afloat. The president actually had the chance to get rid of this and so far what we're seeing is that he's going to just kind of let it sit where it is for right now.

HEMMER: All right, here's the opening bell, right on cue.

The Dow Jones Industrials starting today, 10,593, up about 97 points on Friday. A decent day last week for the Dow 30. The blue chips, the NASDAQ market side, we start today 2,064, up about 45 points on Friday. We'll see which way we go today.

Lauren Young, thanks, from "Business Week" magazine.

YOUNG: Thank you.

HEMMER: Nice to see you here.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired February 9, 2004 - 09:26   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: It's the AMT, the alternative minimum tax. And if you haven't heard of it before, don't worry. Those three words are throwing a big scare into taxpayers and that's why we are told you should worry now. It's supposed to target the wealthiest Americans, but millions of middle class families are now being forced to pay the tax, which wipes out personal exemptions.
The dread AMT is the topic of a "Business Week" cover story.

And Lauren Young of "Business Week" magazine here with some advice that will help you avoid this.

Good morning to you.

LAUREN YOUNG, "BUSINESS WEEK": Hi, Bill.

HEMMER: What is the AMT, if you can give us a one-on-one quickly without too much complication.

YOUNG: Alternative minimum tax. You lose many of your valuable exemptions and deductions, including state and local income taxes.

HEMMER: How do you lose this?

YOUNG: Well, basically it's this parallel universe. That's what we call it. And depending on what your income level is, as you said, three million people this year, it's very middle class, upper middle class. It's going to be about 33 million people by 2010.

HEMMER: So you anticipate this just growing and growing.

You have a few tips that we can take us through here now for candidates who might be at higher risk for that.

The first one is do you live in a high tax state.

YOUNG: That's right.

HEMMER: Such as what?

YOUNG: New York and California, for example. Our examples in the story are people mainly from New York and California, because the state and local income taxes in both of those states are so high. And what happens is you lose being able to deduct that from your overall tax return.

HEMMER: The other issue here, does your spouse make as much as you? Equal incomes?

YOUNG: Right. Say there's a couple, about $100,000 each, a nurse and a doctor or something -- well, a doctor might make more. But $100,000 each. They're going to pay about $1,500 if they're eligible for the AMT this year if they have about four kids. So that's a lot of money.

HEMMER: You mention a hundred grand as your family income, between $100,000 and $500,000. You say originally this was a tax on the rich anyway.

YOUNG: Right. It was originally for about 150 millionaires in 1969, never indexed to inflation.

HEMMER: The other thing to look out for, any unusual extra income this year.

YOUNG: Bonuses, stock options, if you won a lawsuit, any additional income that's going to bump you over into a new tax bracket.

HEMMER: Your magazine calls this a stealth tax growing like the monster from the tax lagoon. Sounds nefarious.

YOUNG: Well, Washington was built on a swamp, right? And it's coming from Washington. I mean this is something that gives the federal government, it's going to give them about a trillion dollars in revenues by 2010. So it's very hard to get rid of it because that's very valuable money.

HEMMER: A few tips here for side-stepping it.

Time your 2004 bonus differently. How so? Front loading or not?

YOUNG: Actually, it's better if you can front load it this year. You know, this is, again, for 2004, taxes, it's good sometimes to do that. But this is something that you definitely want to talk to a tax professional about.

HEMMER: Two other things quickly. Consult your CPA before cashing your stock options and delay property tax payments.

What does that have to do with it?

YOUNG: Sometimes if you delay the property taxes, you can actually reduce your overall state and local income. So it can actually keep you out of that category.

HEMMER: You have 10 seconds here before we get the opening bell on Wall Street.

Why is this in the tax law today able to hit, you project, in six years, millions of Americans?

YOUNG: Trillions of dollars in tax revenues. It keeps Washington afloat. The president actually had the chance to get rid of this and so far what we're seeing is that he's going to just kind of let it sit where it is for right now.

HEMMER: All right, here's the opening bell, right on cue.

The Dow Jones Industrials starting today, 10,593, up about 97 points on Friday. A decent day last week for the Dow 30. The blue chips, the NASDAQ market side, we start today 2,064, up about 45 points on Friday. We'll see which way we go today.

Lauren Young, thanks, from "Business Week" magazine.

YOUNG: Thank you.

HEMMER: Nice to see you here.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com