IRS to Congress: 100M Tax Returns Could Be Delayed Without AMT 'Patch'

IRS to Congress: 100M Tax Returns Could Be Delayed Without AMT 'Patch'Up to 100 million taxpayers, representing two-thirds of all returns, would not be able to file their income tax papers until “late in March of 2013, or even later,” unless Congress takes action related to the Alternative Minimum Tax, or AMT.
That’s according to Internal Revenue Service Acting Director Steven Miller, who warned members of the House and Senate this week in a letter outlining the ramifications of inaction.
The IRS computer systems are not ready to handle the AMT without the needed provision.
Congress needs to enact a “patch” that would adjust the AMT for inflation. Congress has regularly passed AMT patches that raises the exemption levels.
Lawmakers have not done so this year as most of their attention is focused on the overall package to avoid the “fiscal cliff” of expiring tax cuts.
The patch makes a huge difference.
Without it, $45,000 for joint filers and $33,750 for single taxpayers is exempt from the AMT. But adjusted for inflation, those levels would jump to $78,750 and $50,600 in 2012, according to bills in the House and Senate.
In his letter, Miller said: “This means that, absent enactment of a new patch in the near future, nearly 30 million additional taxpayers will become subject to the AMT on their 2012 income tax returns. As I stated in my letter dated November 13, 2012, the IRS has maintained the programming of its systems assuming that the AMT will be patched as it has been in previous years.”
The situation would create two huge problems: lengthy delays of tax refunds and unexpectedly higher taxes for many taxpayers, “who will be unaware that they are newly subject to AMT liability,” Miller said.
The AMT originated in 1969 as an alternative tax to ensure that the wealthiest taxpayers don’t avoid paying their share of taxes.
But the tax was not adjusted for inflation. In recent years, Congress has enacted temporary fixes to keep the AMT from affecting taxpayers who aren’t considered wealthy. The most recent fix was passed in December of 2010 for 2010 and 2011 tax filers.
Indeed, the AMT is an “alternative” tax that is calculated at the same time as your regular taxes. Whichever tax is greater, you must pay that.
Taxpayers who fall under the AMT pay an average of $2,000 in additional federal income taxes than they would without this alternative tax.

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