April 19, 1989
Alternative Minimum Tax Changes
The Internal Revenue Service today advised taxpayers how to
amend their 1987 individual income tax returns because of
retroactive changes in the alternative minimum tax computation. The
IRS also explained how some taxpayers who have to amend last year's
tax returns can avoid paying interest on the additional tax.
The IRS said that in June it will mail notices to taxpayers
affected by the changes to advise them of the need to file amended
returns, but taxpayers do not need to wait to amend their returns
until receiving the notices.
The alternative minimum tax (AMT) ensures that taxpayers pay a
minimum of tax even though they qualify for various tax deductions
and credits that could otherwise greatly reduce their tax.
According to the IRS, the Technical and Miscellaneous Revenue
Act of 1988 (TAMRA) requires taxpayers to add the value of personal
exemptions back into taxable income when computing alternative
minimum taxable income. TAMRA became law in October 1988, making
this provision retroactive to 1987 tax returns and increasing the
The IRS alerted taxpayers in the instructions to the 1987 Form
6251, "Alternative Minimum Tax - Individuals," to the pending
legislation and cautioned that, if it passed, they would be required
to add back their personal exemptions in computing AMT. However,
the change was not enacted until after the filing deadline had
Some taxpayers anticipated that the pending legislation would
be approved and filed 1987 returns adding back the value of the
exemption when computing AMT. Since the IRS must process returns
according to the existing law, the agency corrected these returns
and refunded the overpayments. The IRS said that these taxpayers
must now amend their returns and pay the additional tax, but will
not be charged interest if they follow special instructions.
These taxpayers should file amended returns -- Form 1040X,
"Amended U. S. Individual Income Tax Return" -- and pay any tax due
by Nov. 1, 1989. Taxpayers who qualify for the interest waiver
should write "AMT INTEREST WAIVER" in the upper left corner of the
Form 1040X and attach a copy of the originally filed Form 6251.
Taxpayers should file the amended returns at the Service Center
where they filed their original 1987 returns.
Taxpayers who did not add back the value of the personal
exemptions when figuring their original AMT must also amend their
1987 returns. Interest will be charged on these returns and
taxpayers may wish to file as soon as possible to avoid additional
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