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.
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.
“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.”
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
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