Case Study: Minimal Income But Lots of Tax
Business Need or Problem
A contractor who was working with another advisor was in a situation where they knew that they were not making a significant economic profit on several big jobs but were being told by their service provider that they owed a very significant amount of tax.
GreerWalker identified that the issue was that the Company’s tax preparer had the Company using an accounting method that created a significant difference between its regular taxable income and its Alternative Minimum Tax (AMT) taxable income. This significant AMT preference item in turn created a large current tax liability. GreerWalker filed an application to change accounting methods on behalf of the client and worked with the National Office of the IRS to get IRS consent to the change.
The change in accounting method eliminated the tax/AMT difference which resulted in a more reasonable and logical tax liability for the Company’s owners.