Tax writers to IRS: We promise AMT fix
Leaders of Senate and House tax committees promise they'll get an AMT patch passed by the end of the year and urge the IRS 'to plan for those changes.'
NEW YORK (CNNMoney.com) -- With just days to go before the IRS starts printing its 2007 tax forms, top tax writers on the Hill promised a temporary fix to the Alternative Minimum Tax (AMT) by year-end.
Last week, the IRS warned that if Congress does not act by early November, up to 50 million taxpayers could see serious delays in the processing of their returns and their refunds when they file their 2007 taxes.
Congress has been considering passing a one-year "patch" that would prevent the AMT from hitting roughly 21 million new taxpayers this tax season. Having to pay the AMT - a tax originally intended for the very wealthy - automatically means a higher tax bill.
The average increase for those 21 million filers would be $2,000 unless a patch is passed, according to Treasury Department estimates.
Congress is considering a patch that would temporarily increase AMT income exemption levels and allow for certain personal credits normally disallowed in computing AMT liability.
In a letter dated Oct. 30, top members of the Senate Finance Committee and House Ways and Means Committee said that they anticipate the exemption levels for 2007 would be $44,350 for individual filers and $66,250 for married couples filing jointly.
Without a patch, the 2007 exemption amounts would be 33,750 for individual filers and $45,000 for joint filers.
The higher the exemption level, the less likely you'll be subject to AMT, because the exemption level represents that part of your income that will be shielded from consideration when you calculate your AMT liability.
How to pay for AMT reform is a major sticking point among Democrats and Republicans. AMT produces significant tax revenue for the government and a patch that shields people means that that revenue won't be collected. The estimated hit over 10 years: $50 billion.
On Thursday, the House Ways and Means Committee will take up a bill calling for a temporary AMT fix introduced by its chairman, Charlie Rangel (D-NY). That bill also calls for one-year extensions on over 30 different tax breaks. The total cost of the patch plus those breaks exceeds $70 billion.
Whether or not the IRS will add a note to its 2007 forms reflecting the lawmakers' promise this week is unclear, since a promise is not legally binding and no single lawmaker can ever guarantee passage of a law.
And a promise can't prevent the delays the IRS predicts will occur if lawmakers can't get a patch signed into law in the next week or so.
In letter to the leadership of the House Ways and Means and Senate Finance committees on Wednesday, the IRS said it still estimates "that enactment of an AMT patch in December could delay processing of returns for as many as 50 million taxpayers and could delay issuance of approximately $75 billion in refunds."