Enacted in 1969, the alternative minimum tax was originally intended to ensure that the nation's wealthiest taxpayers paid at least some income tax.(Photo: Thinkstock)
It's beginning to look a lot like a particularly miserable federal tax-filing season.
Millions of U.S. taxpayers could become subject to the federal
alternative minimum tax and face delays in filing their tax returns -
and collecting refunds - unless Washington leaders resolve their
down-to-the-wire fiscal cliff impasse.
Enacted in 1969, the
alternative minimum tax was originally intended to ensure that the
nation's wealthiest taxpayers paid at least some income tax. The levy
takes effect at a specific income level, and isn't indexed to account
Instead, the Internal Revenue Service counts on
Congress to enact an annual "patch" that spares millions of additional
lower-income earners from higher levies under the alternative minimum
tax. But this year's fiscal cliff standoff has so far left the higher
tax threat unpatched.
"This means that, absent enactment of a
new patch in the near future, nearly 30 million additional taxpayers
will become subject to the AMT on their 2012 income tax returns," Acting
IRS Commissioner Steven Miller wrote last week to Rep. Sander Levin,
D-Mich., the ranking minority member of the House Ways and Means
Significantly, the 2012 exemption ceilings for the
alternative minimum tax "are much lower," wrote Miller: $45,000 for
joint filers and $33,750 for single taxpayers.
Absent a fiscal
cliff deal by year's end, which remains possible, the IRS would have to
reprogram its computers to account for lack of action on the
alternative minimum tax. The complexity and scope of the changes
necessary could leave the IRS unable to accept tax returns well into
"Most taxpayers may not be able to file their 2012 tax
returns until late in March of 2013, or even later," warned Miller, who
estimated that as many as 100 million of the projected 150 million total
federal tax returns could be affected.
Such a delay would
mean similarly late refunds for many filers. The IRS issued nearly 119.9
million refunds during fiscal year 2011 for individual income tax
returns, the tax agency's data show.
"Since Congress is still
considering changes to the tax law, we continue to closely monitor the
situation. We intend to issue guidance by the end of the year on
appropriate withholding for 2013," the IRS said in a statement just
before the agency closed for the Christmas holiday.
are anxiously waiting for definitive news, Brian O'Laughlin, manager of
government relations for the American Payroll Association, said hours
before Christmas Eve. But for many large payroll processors, the first
January 2013 paychecks have already been completed using 2012
If those rates change, as is widely
anticipated in any fiscal-cliff agreement, employers could have to
withhold more taxes later in January or further into 2013 to cover any
shortfall and spare employees from larger tax bills or penalties when
the workers file 2013 federal tax returns.
"It's definitely aggravating and frustrating," said O'Laughlin.