IRS Acting Commissioner Steven T. Miller warned Congress on Wednesday that if lawmakers fail to extend the traditional alternative minimum tax patch, up to 100 million American taxpayers could be affected, and most taxpayers might not be able to file their tax returns until late March 2013 or later.
Steven T. Miller
Miller sent a letter to leaders of the House Ways and Means Committee warning of the trouble ahead. He has warned Congress in the past about not patching the AMT, but he has increased his estimates for how many taxpayers could be affected (see IRS Warns AMT Could Affect 60 Million Taxpayers Unless Patched).
“In my previous letter, I estimated that more than 60 million taxpayers might be prevented from filing their tax returns while we are reprogramming our computers,” he wrote. “As we consider the impact of the current policy uncertainty on the upcoming tax filing season, it is becoming apparent that an even larger number of taxpayers —80 to 100 million of the 150 million total returns expected to be filed—may be unable to file.”
Without enactment of a new patch in the near future, he warned, “nearly 30 million additional taxpayers will become subject to the AMT on their 2012 income tax returns.”
House Ways and Means Committee ranking member Sander Levin, D-Mich., concurred with the warning. “There could be no clearer warning that failure to act on the fiscal cliff will throw the 2013 tax filing season into chaos,” he said in a statement. “The consequences of inaction would be enormous. Extending the AMT patch will prevent needless delays and tax increases on millions of middle-class Americans.”
Miller warned about a delayed start to tax season unless Congress fixes the AMT and resolves other pressing tax matters.
“If an AMT patch is not enacted by the end of this year, the IRS would need to make significant programming changes to conform our systems to reflect the expiration of the patch,” he wrote. “In that event, given the magnitude and complexity of the changes needed, I want to reiterate that most taxpayers may not be able to file their 2012 tax returns until late in March of 2013, or even later.”
Miller noted that the most recent AMT patch, and the exemption amounts of $74,450 for joint filers and $48,450 for single taxpayers, expired at the end of 2011. For 2012, the current-law AMT exemption amounts are much lower: $45,000 for joint filers and $33,750 for single taxpayers.
Miller also warned that the unpatched AMT could lead to delays in tax refunds and higher taxes for many taxpayers. “This situation would create two significant 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,” he wrote. “Moreover, if Congress were to act at some point next year to enact a new AMT patch, the time and substantial expense necessary for the IRS to reprogram its systems to reflect expiration of the patch would ultimately be wasted.”
Miller noted that the IRS might need to limit filing by those who might be potentially affected. “The IRS cannot process the returns of any taxpayers whose return characteristics do not allow us to differentiate them from those whose tax liability would be altered by the AMT expiration,” he pointed out. “This means that there are certain forms and schedules we could not accept from any taxpayer—even those who ultimately may not have additional AMT liability. Similarly, returns of any taxpayers whose income levels may subject them to the AMT could not be processed.”
He added that it might not be possible even to process some returns that are clearly not subject to or affected by the AMT. “Allowing only some taxpayers to file as we reprogram could substantially increase the risk of fraud and error in initial filings as well as create the potential for a large number of amended returns,” he noted. “We continue to work diligently to review scenarios and to assess the impact of these factors on the 2013 filing season.”
7 Comments
What do tax preparers do about their employees if Tax Season doesn't start until March? Put them on hold and hope they're still around by March or pay them to come and sit and wait for the season to start? Or maybe pay them to come in and explain to the clients, who will never understand, why they aren't going to see any money in the foreseeable future. Now there's a thought, since I can't explain it myself! Dump it on the employees like the IRS is dumping it on the preparers. I'm beginning to think it's all a plot to put us out of business and after thirty years it's getting to the point where I'm almost ready to go. We're at the bottom of the food chain in the greater scheme of things and all we can do is try to deal with the outrage and disbelief when the information from the powers that be changes daily and hope nobody tries to kill us. Unfortunately in the current climate I can see us becoming targets as frustration levels rise and it ain't a pretty thought to contemplate. May the force be with us!
Posted by: anitamartinez | December 23, 2012 3:30 PM
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I see why "unknown" remains so. FYI: Dell did not write/program your tax software. Am I correct in assuming that you wrote your own tax software and/or have actually been a professional programmer on both PC's and Main Frames? :-(
Why Congress doesn't permanently change the AMT and automatically adjust it for inflation as other items are proves beyond all reasonable doubt that they are a-holes who don't give a damn about their constituents, except of course, their donors. Who's to blame, I haven't heard of any member to make that suggestion. Or a President of a Secretary of the Treasury.
And the dodos, US, keep voting them in. While other "tax tweaks" come and go, the AMT is a crisis mode setter.
Posted by: tego@verizon.net | December 22, 2012 5:15 PM
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Maybe the best approach is to file a paper return ignoring the AMT and let the IRS go crazy with letters to taxpapers requesting - I don't know what Then mail copies to the chairmen of the tax committies of Congress
Then they will go crazy with more bags of letters than John Wayne had in Miracle on 34th St.
Posted by: Janosik | December 20, 2012 8:38 PM
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This is a setup!
They want us to believe that they have not been working on revisions that will take 3 months because they bet on Congress to change the laws. This has to be a terrible case of malfeasance because I can't believe these people are that stupid. How long would your treasurer remain employed if he did not change procedures to conform with board directives, based on he thought they would change their minds. I did not give any thought to Doug's departure, other than I was glad to see him go. I now understand, he did want to stay around to get the axe. - THIS WAS A SETUP INSTITUTED LAST YEAR TO FORCE CONGRESS INTO EXTENDING THE AMT RULES
I've been doing this for 35 years and I wake up more and more feeling like I'm trapped in an institution were the inmates are in charge.
Posted by: WCSCPA | December 20, 2012 12:32 PM
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We have two tax codes, one for income and another for Estates. The study of Estate Taxes reveals a work of tax art, while income tax is a compilation of unrelated disconnected ideas.
We need to develop laws that are not created out of fear and greed. Income is income and expense is expense. Laws focused on their definition and not how to get another minor deduction, is what we need. Our Modern Banking system can provide us with the numbers and classifications needed for separating income and expense from the other transactions, leaving us to simply work on the application of the law. Anthony P Cappiali, CPA, MS in Taxation
Posted by: Anthonycappblumcom | December 20, 2012 8:47 AM
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It is ridiculous to have something in the tax law that has to be extended every year. It should be permanent and then require Congress to act if they want to change it.
It is also ridiculous that this applies to 2012 income and it is not corrected with only a few days left in 2012.
My feelings apply also to the tax laws that are passed with expiration dates. The only purpose I can see for this is that it gives Congress some face time on TV due to the manufactured crisis. It also allows them another opportunity to give favors to their donors.
Posted by: imacpa | December 20, 2012 8:41 AM
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It takes me approximately 15 seconds to change the programming in my canned tax software to reflect the AMT exemption amount for 2012 and 2013. Shows you the difference between private and public systems. PS- My Dell cost under $600.00
Posted by: Unknown | December 20, 2012 8:30 AM
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