Tax Law (Questions About Taxes)/IRS form 3800 carryforward requirements
QUESTION: Federal 1040 sole proprietor Schedule C filer, high income, always triggers AMT. I started a 401k for my small business in 2014 and had >$1000 in startup costs qualifying toward form 8881 $500 credit forwarded to form 3800. However, business income is $150k too high, so credit for TY2014 is zero. If I carryforward the credit year by year for the 20 years allowed, I don't ever anticipate credit being allowed due to AMT TMT limiting credit to zero. So in year 21 I can take a "deduction" (not sure where or how) for this unused credit. If I elect NOT to ever take this credit, I save $231 on my taxes this year (by expensing $500 of these costs, which is not allowed if credit taken), which probably exceeds the savings from the present year discounted value of a $500 tax credit 21 years from now. If course, if my business income goes down, I might qualify to take the carryforward credit sooner.
Here is my question: There is no way this credit is worth my time or trouble if every year for the next 21 years I have to first file an amended prior year tax return to show that I cannot take a carryback, then file another form 3800 with attached statements from tax year 2014 to take a carryforward year after year after year until I can take this future credit. Is this all necessary to take a carryforward several or many years into the future? Or am I ignorant and do I only need to file one additional future form 3800 in the year I finally qualify to take the TY2014 credit, and get to omit all the intervening year form 3800's and amended prior year returns?
Thanks for any assistance.
ANSWER: If you make 150k and are in amt...
Either uou live in ct. Mass. Nj.nh. NY or California with high state tax
And you can (and should) hire a cpa.
I have no doubt I can lower your taxes. Regardless of where you live.
Make a new question and mark it private. I will give you my contact info
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QUESTION: No response necessary.
Thanks for taking the time to look this over. Sorry it is so complex. I appreciate your offer to offer your professional services. I may have not made this clear - I do not make $150k, I make $150k above the AMT triggering threshhold. I would have to make $150k less to avoid the AMT. You are correct, I live in CA. Since writing, I have learned that since I would never qualify to apply to a prior year, I would never have to file an amended return. I also learned that I would indeed have to file a Form 3800 every year for the next 20 years in order to take the deduction in year 21, assuming no change in income and yearly AMT. I decided that the value of the $500 taken 21 years from now is not worth foregoing $231 in additional expenses this year or the extra form 3800 I would have to file for the next 20 years, and decided not to pursue the credit.
I do appreciate you taking the time to review my question.
No response necessary.
Thanks for your offered professional services, which I will respectfully decline at this time.
There are plenty of strategies which could narrow the amt band - especially if you are a schedule c. I have three off the top of my head which might help. the first chat is free.
Make a new question and mark it private and I'll provide you with my contact information. Creative (but legal) is my middle name.