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American Morning

Minding Your Business: Will the Stealth Tax Affect You?

Aired February 16, 2004 - 07:51   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.


JACK CAFFERTY, CNN ANCHOR: Not only is it Presidents Day, but it's also my favorite time of the year. It's almost tax time again, and this year Uncle Sam may have some surprises in store for some of us.
Andy Serwer is off today. Gerri Willis is "Minding Your Business."

The alternative minimum hosing, for a better word.

GERRI WILLIS, CNN FINANCIAL NEWS: That's right. You can think of it as the stealth tax.

CAFFERTY: Yes.

WILLIS: Yes, it's Uncle Sam getting his hand in your pocket yet again. A law passed in 1969 targeted millionaires, but now lots and lots of Americans are subject to this. You'll pay more under the alternative minimum than you pay under regular income tax.

CAFFERTY: How does it work?

WILLIS: Well, the way it works is that if you have big deductions, you live in a high-tax state, you are more likely to be subject to this tax. The way you figure out if you are subject to it, of course, you have another tax form entirely. It's not enough to have the 1040. You need the 6251. The easy way to figure this out if you really want to put it on automatic pilot...

CAFFERTY: Yes, which I do.

WILLIS: Absolutely. Get a software tax package. It will run both of the numbers for you. And if your alternative minimum tax calculation is higher than your regular income tax, then you have to pay the AMT.

CAFFERTY: I thought that -- didn't President Bush cut all of our taxes? What is with this thing?

WILLIS: Well, that's exactly the point. He cut the taxes. That means more people are falling into AMT. In fact, this year some 3.3 million people will be subject to it. That is up 800,000 from last year.

CAFFERTY: And in order to decide whether or not you have to pay this, you have actually to compute your taxes twice, right? WILLIS: That's right. But f you do it with the software package, it's automatic. It's really easy. I mean, that is really the simplest way to do it.

CAFFERTY: Or have your guy do it, your...

WILLIS: Your accountant, if you have an accountant.

CAFFERTY: ... person do it, right?

WILLIS: Absolutely.

CAFFERTY: This is only high-income people, and it's more likely to apply to people in certain states?

WILLIS: Not necessarily. Well, not necessarily high-income people. There are more and more people who are earning $50,000 a year, middle-income people who are going to be subject to this. If you live in a high-income state or if you have a lot of deductions, those are the big red flags.

CAFFERTY: So, the old idea of if I have a lot of deductions this will reduce my tax. What you're saying is that in the case of alternative minimum tax it will actually increase my tax.

WILLIS: That's right. (UNINTELLIGIBLE) your regular wisdom on its head, because the AMT just does everything differently. It's an entirely separate tax system from the regular old-fashioned income tax. Lots of people are going to be subject to this, unfortunately.

CAFFERTY: You know, it's a holiday. You're not supposed to come on national TV and depress everyone.

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 16, 2004 - 07:51   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN ANCHOR: Not only is it Presidents Day, but it's also my favorite time of the year. It's almost tax time again, and this year Uncle Sam may have some surprises in store for some of us.
Andy Serwer is off today. Gerri Willis is "Minding Your Business."

The alternative minimum hosing, for a better word.

GERRI WILLIS, CNN FINANCIAL NEWS: That's right. You can think of it as the stealth tax.

CAFFERTY: Yes.

WILLIS: Yes, it's Uncle Sam getting his hand in your pocket yet again. A law passed in 1969 targeted millionaires, but now lots and lots of Americans are subject to this. You'll pay more under the alternative minimum than you pay under regular income tax.

CAFFERTY: How does it work?

WILLIS: Well, the way it works is that if you have big deductions, you live in a high-tax state, you are more likely to be subject to this tax. The way you figure out if you are subject to it, of course, you have another tax form entirely. It's not enough to have the 1040. You need the 6251. The easy way to figure this out if you really want to put it on automatic pilot...

CAFFERTY: Yes, which I do.

WILLIS: Absolutely. Get a software tax package. It will run both of the numbers for you. And if your alternative minimum tax calculation is higher than your regular income tax, then you have to pay the AMT.

CAFFERTY: I thought that -- didn't President Bush cut all of our taxes? What is with this thing?

WILLIS: Well, that's exactly the point. He cut the taxes. That means more people are falling into AMT. In fact, this year some 3.3 million people will be subject to it. That is up 800,000 from last year.

CAFFERTY: And in order to decide whether or not you have to pay this, you have actually to compute your taxes twice, right? WILLIS: That's right. But f you do it with the software package, it's automatic. It's really easy. I mean, that is really the simplest way to do it.

CAFFERTY: Or have your guy do it, your...

WILLIS: Your accountant, if you have an accountant.

CAFFERTY: ... person do it, right?

WILLIS: Absolutely.

CAFFERTY: This is only high-income people, and it's more likely to apply to people in certain states?

WILLIS: Not necessarily. Well, not necessarily high-income people. There are more and more people who are earning $50,000 a year, middle-income people who are going to be subject to this. If you live in a high-income state or if you have a lot of deductions, those are the big red flags.

CAFFERTY: So, the old idea of if I have a lot of deductions this will reduce my tax. What you're saying is that in the case of alternative minimum tax it will actually increase my tax.

WILLIS: That's right. (UNINTELLIGIBLE) your regular wisdom on its head, because the AMT just does everything differently. It's an entirely separate tax system from the regular old-fashioned income tax. Lots of people are going to be subject to this, unfortunately.

CAFFERTY: You know, it's a holiday. You're not supposed to come on national TV and depress everyone.

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