Intro to Corporate Taxes:

Protecting your Company from the Alternative Minimum Tax

Your client has to file form 4626 Alternative Minimum Tax if a corporation’s tentative minimum tax is more than their regular tax. The Form should be filed, according to the IRS, if:

  • The corporation's taxable income or (loss) before the net operating loss (NOL) deduction plus its adjustments and preferences total more than $40,000 or, if smaller, its allowable exemption amount, or
  • The corporation claims any general business credit, the qualified electric vehicle credit, the non-conventional source fuel credit, or the credit for prior year minimum tax.

Any corporation that is deemed "Small Corporation" doesn’t get hit with the alternative minimum tax.

For a corporation to qualify as a small corporation in the tax year 2000, that year needs to be it’s first year of operation plus:

  • It was treated as a small corporation exempt from alternative minimum tax for prior tax years beginning after 1997.
  • Its average annual gross receipts for the 3-tax-year period ending before its tax year beginning in 2000 did not exceed $7.5 million ($5 million if the corporation had only1 prior tax year).

The only escape that exists out of the alternative minimum tax is if your client is a small corporation. Other than that they have to file form 4626 and pay the taxes.