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If Congress fails to patch the alternative minimum tax before year-end, the start of the 2013 filing season will be delayed, according to Acting IRS Commissioner Steven Miller.

IRS Warns Failure To Patch AMT Will Delay 2013 Filing Season

  • 12/5/2012

IRS Warns Failure To Patch AMT Will Delay 2013 Filing Season

If Congress fails to patch the alternative minimum tax (AMT) before year-end, the start of the 2013 filing season will be delayed, Acting IRS Commissioner Steven Miller recently told Congress. However, it is unclear if the delay would be short or long, and how many taxpayers would be impacted, Miller cautioned in a November 13 letter to the leaders of the House and Senate tax writing committees.

Congress has routinely patched the AMT in recent years to prevent its encroachment on middle income taxpayers. The most recent patch, which provided for increased exemption amounts and use of the nonrefundable personal credits against AMT liability, expired after 2011.

Comment: The House and Senate have already approved patches for 2012 in competing tax bills. In the Senate, the Middle Class Tax Cut Act (Sen. 3412) would set the AMT exemption amounts for individuals at $50,600 and at $78,750 for married couples filing a joint return. The House approved the same exemption amounts for 2012 in the Job Protection and Recession Prevention Act (HR 8). If no patch is passed, the AMT exemption amounts are $33,750 for individuals and $45,000 for married couples filing a joint return for 2012. 

Miller told lawmakers that the IRS is leaving its core processing systems "as is" in the expectation that Congress will patch the AMT for 2012. If no AMT patch is approved by the end of the year, the IRS would be forced by law to start operating the 2013 filing season based on the expiration of the AMT patch rather than allow the higher exemption amounts under the expectation that Congress would eventually approve them in early 2013.

The IRS would need to instruct more than 60 million taxpayers that they may not file their returns or receive a refund until the agency reprograms its processing systems.

"Because of the magnitude and complexity of the changes, it is entirely possible that these taxpayers would not be able to file until late March 2013, if not even later," Miller cautioned. He said approximately 33 million taxpayers would pay AMT if no patch is enacted for 2012. This is about 28 million more taxpayers who would pay AMT than if the exemption amounts were increased as in the past, Miller explained.

Tax extenders

Many popular but temporary tax incentives — known as tax extenders — expired after 2011, and unless they are extended, cannot be claimed on 2012 returns. For individuals, the expired extenders include the state and local sales tax deduction, the higher education tuition deduction, and the teachers’ classroom expense deduction. For business, the expired extenders include the research tax credit, the employer wage credit for activated military reservists, and special expensing rules for film and television productions.

Miller told lawmakers that reprogramming the IRS’s processing systems for the tax extenders is not as complex as reprogramming for the AMT. When Congress last extended the extenders in 2010, the start of the 2011 filing season was delayed by four weeks for approximately 9 million affected taxpayers, Miller noted. The overall risk to the 2013 filing season would be "manageable," Miller said.

Comment: In 2011, the IRS began processing itemized Forms 1040 and other forms delayed by late legislation (the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010) on February 14, 2011.

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