The Alternative Minimum Tax: So much for a smooth start to tax season
Filed under: Tax
As the year-end draws near, lawmakers still can't agree on potential changes to the tax code. The current issue is the Alternative Minimum Tax, AMT for short. The AMT was enacted nearly 40 years ago, and was intended to make sure that high-income taxpayers with lots of deductions still paid a minimum level of income taxes.
The problem is that the tax code hasn't kept up with inflation, and what was once considered "high income" is now applicable to some taxpayers in today's middle class.
Republicans want to change the AMT rules so they apply to higher income earners. Democrats are unwilling to change the rules unless they can collect those taxes elsewhere. Some say the "cost" of changing the AMT rules will be a $50 billion decrease in tax collections each year.
A delay in action by lawmakers may put taxpayers in a bind. The IRS needs about seven weeks from the time a law is changed to when the agency's computer systems are ready. This could cause a delay of refunds, and taxpayers who file their taxes early in 2008 may be forced to amend their returns.
If an agreement between lawmakers is not reached this week, IRS officials say they will encounter problems with the beginning of their tax season rush.
Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.
The problem is that the tax code hasn't kept up with inflation, and what was once considered "high income" is now applicable to some taxpayers in today's middle class.
Republicans want to change the AMT rules so they apply to higher income earners. Democrats are unwilling to change the rules unless they can collect those taxes elsewhere. Some say the "cost" of changing the AMT rules will be a $50 billion decrease in tax collections each year.
A delay in action by lawmakers may put taxpayers in a bind. The IRS needs about seven weeks from the time a law is changed to when the agency's computer systems are ready. This could cause a delay of refunds, and taxpayers who file their taxes early in 2008 may be forced to amend their returns.
If an agreement between lawmakers is not reached this week, IRS officials say they will encounter problems with the beginning of their tax season rush.
Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.
Reader Comments (Page 1 of 1)
12-06-2007 @ 9:30PM
Eric said...
I did a preliminary run through on my 2007 taxes a couple of days ago and it looks like I'm going to get clipped by the AMT. Pretty ridiculous, considering my wife and I aren't making six figures. We just both have somewhat standard professional jobs for people in their mid-late 20s.
Reply
12-06-2007 @ 11:41PM
Michael said...
Now you know why there are so many republicans. Too bad other factors causing a change of power will probably force us all to pay higher taxes over the next few years, even if they do fix this particular issue.
12-07-2007 @ 9:49AM
OINKJOHNSON2 said...
I think the AMT flap is much ado about nothing. While it is somewhat difficult to compute the AMT (that is, one has to effectively compute the tax due in two different ways), the marginal tax rate is not that onerous (25% or 26%).
Besides, unless there is something I am missing, the senators wailing about some poor guy, with a wife and two children, who earned $75,000 having to pay $2000 additional tax is simply ignorant. The AMT can not kick in at $75,000 AGI.
Let it expire; who cares?
Reply
12-18-2007 @ 4:54PM
Dave said...
I made $33,00 the year before and paid an additional $169 for the end of the year taxes. My income for 2007 went up $1200 and a quick check shows Ill owe $2600 over the same amount that I paid in 2006 so dont tell me not to worry about it.This is not right.
Reply