April 10th, 2009 |  Print This Post |  Email This Post

It’s common knowledge that we have to pay our taxes as we earn our income. For employees, taxes are withheld from each paycheck, while self-employed folks are required to make quarterly estimated tax payments. But what about the AMT?

Not-so-common knowledge is that the AMT also must be paid throughout the year – if you wait until April 15, 2010 to pay your 2009 AMT, you could be subject to significant underpayment penalties.

Employees – the withholding tables your employer uses do not include any estimate for the AMT. If you want this withheld, you have to make the computation yourself and request an additional amount withheld from each paycheck. With only 9 months left in the year, you already have some catching up to do.

Self-employeds – your quarterly estimates must include your expected AMT liability. With 1st quarter estimates due next Wednesday, April 15, you have some quick calculating to do to avoid risking an underpayment penalty.

How do you know whether you will be paying the AMT in 2009? Some use the “same as last year” approach, but this is inexact and carries the underpayment risk. You can forecast your income and expenses for the year and then do an AMT calculation based on this forecast, or you can use an “annualization” approach. IRS Form 1040-ES, available on their web site, walks you through the steps involved.