September 2023 Client Profile

The Taylor brothers have enjoyed the good fortune of seeing their family heating and cooling business grow steadily. But that growth has sparked concerns about being liable for alternative minimum tax (AMT) in 2023.

Small businesses that qualify for small-business corporation status avoid the AMT’s potential liability and the administrative burden of calculating the tax. The Taylors can use the following gross-receipts test to see if their business qualifies. A small-business corporation is defined as having a three-year average annual gross receipts not exceeding $5 million for its first tax year and not having three-year average annual gross receipts exceeding $7.5 million for any later year.

More simply, the Taylors don’t need to worry about being liable for AMT as long as their business’s average gross receipts for all three tax-year periods ending before the current tax year are $7.5 million or less. For additional details or questions, they should contact their professional advisor.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.