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The Bloomberg BNA Federal Tax Blog is a forum for practitioners and Bloomberg BNA editors to share ideas, raise issues, and network with colleagues about federal tax topics. The ideas presented here are those of individuals and Bloomberg BNA bears no responsibility for the appropriateness or accuracy of the communications between group members.

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Friday, November 16, 2012

Is the Fate of the AMT the Key to the Beginning of Tax Season 2013?

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 While the nation’s attention has been focused on the so-called “fiscal cliff” and its impact on taxpayers – and with good reason – less visible has been the practical impact on tax practitioners who must prepare their clients’ individual returns and taxpayers themselves. For return preparers, the key to whether filing season will unfold smoothly may be almost exclusively tied the fate of the Alternative Minimum Tax (AMT).

In a November 13, 2012 letter to Congress, IRS Acting Commissioner Steven T. Miller addressed the consequences to IRS operational planning if the current uncertainty regarding the AMT and extenders is not resolved. Consistent with past practice, the IRS currently has left its core processing systems “as is,” meaning that if Congress enacts an AMT patch (including both increased exemption amounts and special tax credit ordering rules), the IRS likely will be able to begin the 2013 filing season with minimal delays. Miller explained, however, that if Congress does not enact an AMT patch by the end of 2012, the IRS will be forced to operate the 2013 filing season based on the expiration of the patch, which would cause “serious repercussions for taxpayers.”

For some perspective, Miller noted that when Congress acted in mid-December of 2010 to extend certain expiring tax provisions, the IRS made the necessary changes to its forms and systems and delayed the beginning of the 2011 filing season by four weeks for approximately 9 million taxpayers. In contrast, Without an AMT patch, approximately 28 million taxpayers would face a very large, unexpected tax liability for 2012. Also, to allow time for the IRS to make the necessary programming changes, it would need to instruct more than 60 million taxpayers that they could not file their tax returns or receive a refund until the IRS made the necessary changes. Commissioner Miller further indicated that it was “entirely possible that these taxpayers would not be able to file until late March 2013, if not even later.” Tens of millions of these taxpayers would unexpectedly have to pay additional income tax for 2012, leaving them with a balance due return or a much smaller refund than expected. For millions of other taxpayers, refunds would be delayed.

Lastly, Miller cautioned that, because the AMT patch already expired at the end of 2011, there was no ability to consider a partial year extension of the AMT because by the end of 2012, it already would have lapsed for an entire year.

Ken Savell, J.D, LL.M.
IRS Practice and Procedure Group
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