According to a report in the Wall Street Journal, the Internal Revenue Service warned lawmakers to get to work on finalizing tax policy questions about the alternative minimum tax in order to avoid a drop off the fiscal cliff.
Interim Chief IRS Chief Steven T. Miller warned that if the Alternative Minimum Tax is not patched as it has been in previous years, there may be detrimental consequences for taxpayers. In his letter, Miller reminds lawmakers that the exemption amount for the Alternative Minimum Tax “is not indexed to inflation.” The result of this has been a series of “patches” enacted by Congress to make sure the alternative minimum tax is not intentionally expanded to taxpayers on the lower end of the income scales.
Miller also indicated that the IRS has maintained its systems as though the AMT patches would be enacted as they have been in the past. If the patches are not enacted by Congress, the IRS would have to make significant system updates in the coming year to accommodate the change. He says because the changes would be substantial, many taxpayers would not be able to file their returns until March 2013, or perhaps later.
Taxpayers may be surprised at the higher tax levels as a result of new AMT liability, as well as the significant delays in the issuance of refunds.
The amount of taxpayers affected by delays and higher tax levels would not insignificant. While Miller estimated that more than 60 million taxpayer would be prevented for filing their returns while systems were reprogrammed, he now estimates that 80 to 100 million of the 150 million total returns the IRS expects will be filed in the in the coming year may not be filed as a result of the failure to patch the AMT .
Interim Chief provided the information as a call to action to lawmakers whose focus is tax policy.Segal, Cohen & Landis, LLP 9100 Wilshire Blvd., Ste. 601E Beverly Hills, CA 90212 (310) 285-3999