Nearly half of U.S. taxpayers would be unable to file their 2012 returns — or receive their refunds — until at least late March if Congress fails to enact legislation by the end of this year to restrain the alternative minimum tax, the head of the Internal Revenue Service said Tuesday.
In a letter to Sen. Orrin G. Hatch (R-Utah), acting IRS Commissioner Steven T. Miller said the agency made “a risk-based decision” not to reprogram its computer systems to account for the expiration of legislation that limits the reach of the alternative minimum tax to about 4 million households each year.
Since that legislation expired in December, the AMT is in line to affect about 33 million households in the 2012 tax year, the letter said — hitting about 28 million of those families with an unexpectedly large tax bill.
If Congress passes new legislation before the end of the year, Miller wrote, everything will be fine. “The IRS would likely be able to open the 2013 tax filing season with minimal delays for most taxpayers,” he wrote.
“However, if there is no AMT patch enacted by the end of the year,” Miller wrote, “there would be serious repercussions for taxpayers.”
“Without an AMT patch, about 28 million taxpayers would be faced with a very large, unexpected tax liability for the current tax year (2012),” he continued. “In addition, in order to allow time for the IRS to make the programming changes necessary to conform our processing systems to reflect expiration of the AMT patch and the credit ordering rules, the IRS would, at minimum, need to instruct more than 60 million taxpayers that they may not file their tax returns or receive a refund until the IRS completes the necessary systems changes.
“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. 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.”
Hatch is the senior Republican on the Senate Finance Committee. Miller wrote the letter in response to inquiries from Congress about the impact on the IRS of the year-end “fiscal cliff,” which threatens to dramatically change tax policy on several fronts, including the AMT.
In the past, Congress has repeatedly provided the agency with “bipartisan, bicameral assurances that Congress was working expeditiously to enact a patch,” Miller wrote. This year, however, political wrangling over taxes, primarily the expiration of the George W. Bush-era tax cuts, has prevented negotiations over legislation to limit the AMT.
If the AMT is not patched, those hit with the tax could see an average increase of $3,700 in their 2012 tax bills, according to estimates by the nonpartisan Tax Policy Center.