Congress routinely adjusts the AMT to spare millions of middle-income taxpayers from steep tax increases. But the fix for 2012 is caught up in negotiations over the year-end "fiscal cliff" of automatic tax increases and spending cuts.
If Congress doesn't fix the AMT retroactively to the beginning of 2012, the tax would hit an additional 28 million filers, increasing their taxes by an average of $3,700. Millions of others would face filing delays because the annual fix affects their tax credits.
The last adjustment expired at the end of 2011, and the IRS assumed Congress would adjust the tax again when it set up its computer systems for the upcoming filing season, acting IRS Commissioner Steven T. Miller said in a letter to Congress. It would take until late March at the earliest for the agency to re-work its computers, he said.
This scenario would leave taxpayers a small window to meet the April 15 filing deadline. The IRS, however, would not comment on any proposal to extend the filing deadline, agency spokesman Terry Lemons said.
The AMT was first enacted in 1969 to ensure that wealthy people can't use tax breaks to avoid paying any federal taxes. The tax, however, was never adjusted for inflation, so Congress routinely patches it to keep it from hitting middle-income families.
In a November letter to lawmakers, Miller said 60 million filers could face filing delays, if the AMT is not addressed. On Wednesday, he said 80 million to 100 million filers could face delays. The number grew because of millions of taxpayers ultimately may not pay the AMT but will have to do calculations to make sure.
"That up to 100 million American households could be impacted according to the IRS demonstrates the urgency in which Congress and the White House must reach a reasonable, balanced solution to stopping the fiscal cliff," said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee. "The alternative minimum tax simply has to be permanently fixed."
Hatch and other Republicans said the AMT issue provides a good reason to vote for House Speaker John Boehner's plan to extend expiring tax cuts for everyone who makes less than $1 million. Boehner said his proposal is a backup plan in case stalled talks with President Barack Obama fail. The bill, which is scheduled for a vote in the House on Thursday, would permanently patch the AMT.
"It gives us 100 million more reasons to pass the Republican plan now," said Rep. Dave Camp, R-Mich., chairman of the tax-writing House Ways and Means Committee.
Obama said Boehner's bill is a poor alternative to serious discussions about a comprehensive deficit-reduction package. Lawmakers from both political parties expect the AMT to be adjusted in any comprehensive deal, if one can be reached.
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