Tax Help – IRS Processing AMT Patch Returns
The Internal Revenue Service is now processing five tax forms affected by legislation involving the Alternative Minimum Tax (AMT).On Monday, IRS systems began to accept and process returns that include the five affected forms. After several days of processing, the IRS has confirmed all systems are working properly.
In late December, the IRS announced it would delay processing of several tax forms. For the vast majority of taxpayers, the filing season this year began on time. But for any taxpayer whose return included any of the five affected forms, filing opened on Feb. 11.
Taxpayers who use the five forms can now file their tax returns as normal.
The affected forms are:
- Form 8863, Education Credits
- Form 5695, Residential Energy Credits
- Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers;
- Form 8396, Mortgage Interest Credit
- Form 8859, District of Columbia First-Time Homebuyer Credit
Approximately 13.5 million taxpayers will use these forms this year. Altogether, the IRS expects to receive nearly 140 million individual tax return submissions this year.
The IRS has worked closely with the software industry and tax practitioners during the reprogramming process to minimize disruptions for taxpayers and the tax community.
For more information, see Alternative Minimum Tax –– How It Affects Filing Season 2008.
Tax Debt Help – The AMT for 2007
The tax professional community has awaited the action of Congress to forestall the impact of the AMT on 2007 taxes. Yesterday Congress passed and the President has indicated he plans to sign the bill titled the “Tax Increase Prevention Act of 2007.”
The bill has two particular items of interest to AMT:
First, the tax exemption amount is changed to:
- $66,250 for Married Filing Joint taxpayers;
- $33,125 for Married Filing Separate taxpayers; and
- $44,350 for all other taxpayers.
Second, the nonrefundable personal credits that offset the AMT in 2006 will continue to offset the AMT for 2007.
This AMT “patch” stipulated that payment for such would be retroactive in 2008, during consideration of legislation that would extend three dozen popular tax provisions set to expire December 31.
Of the Congressional comments, Dennis Cardoza, House Member from California, said it best, “If George Washington had looked across the river and seen all those redcoats and turned tail, we would not have the country we have today. Sometimes you just have to do what is right.”
IR-2007-202
The Internal Revenue Service announced it will immediately begin the final reprogramming steps for its income-tax processing systems to prepare for the upcoming tax season following the final passage of the Alternative Minimum Tax “patch”.
“Our people will do everything they can to quickly update our systems for this major change and make this filing season as smooth as possible for everyone,” said Linda Stiff, IRS Acting Commissioner. “Our goal is to process tax returns accurately and to issue refunds to taxpayers as quickly as possible.”
The AMT and AMT-related tax calculations affect a number of core IRS processing systems that will need to be updated. The IRS is continuing to aggressively explore options for the 2008 filing season in order to minimize the impact of processing delays on taxpayers.
To help the tax professional and software communities prepare for the upcoming filing season, revised copies of the 12 tax forms impacted by the AMT legislation will be posted to irs.gov within 72 hours after the AMT patch is signed into law.
S. Raines, Sr. Financial Advisor/Tax Preparer
Tax Debt Help – IRS Implementing AMT Patch
WASHINGTON — The Internal Revenue Service announced it will immediately begin the final reprogramming steps for its income-tax processing systems to prepare for the upcoming tax season following final passage of the Alternative Minimum Tax “patch” Wednesday by the House.
“Our people will do everything they can to quickly update our systems for this major change and make this filing season as smooth as possible for everyone,” said Linda Stiff, IRS Acting Commissioner. “Our goal is to process tax returns accurately and to issue refunds to taxpayers as quickly as possible.”
The AMT and AMT-related tax calculations affect a number of core IRS processing systems that will need to be updated. The IRS is continuing to aggressively explore options for the 2008 filing season in order to minimize the impact of processing delays on taxpayers. Additional details will be available to the public as soon as plans are finalized.
To help the tax professional and software communities prepare for the upcoming filing season, revised copies of the 12 tax forms impacted by the AMT legislation will be posted to IRS.gov within 72 hours after the AMT patch is signed into law.
As more details on the AMT situation develop, the IRS encourages taxpayers to visit www.irs.gov for more information.
S. Raines, Sr. Financial Advisor/Tax Preparer
Tax Debt Help – “The AMT and the 2007 Filing Season”
Although both the U. S. House of Representatives and the United States Congress have passed the AMT “patch” for 2007, the bills have yet to be reconciled.
The Senate-passed bill would leave a trillion-dollar hole in the federal budget over 10 years. The bill would spare the middle-class households touched by AMT an average of $2,000-per-family increase on 2007 income taxes and would ensure that refunds of as much as $75 billion would be distributed without delay.
The House-passed bill would be paid for mainly by forcing managers of private equity “buyout” firms and hedge funds to pay ordinary income tax rates on the millions of dollars they earn each year. Currently, much of those earnings are counted as capital gains and taxed at 15 percent, rather than at the 35 percent income tax rate paid by the nation’s highest earners.
What this all means to the tax professional:
The IRS is anticipating the AMT “patch” for 2007 however they cannot change the IRS programming for AMT until the act is passed and signed into law by President Bush.
After the law passes, the IRS will require a minimum of seven (7) weeks to reprogram their computers.
The challenge is to modify a program allowing some returns to be processed while restricting those returns which would be affected by the AMT.
Two potential options are:
1. Programming in stacking order to process returns that are unaffected by the AMT or
2. Not processing until the reprogramming is complete.
While IRS is uncertain of the date the legislation might pass as well as the particulars of the legislation, they are certain that:
the tax deadline of April 15 will not be extended.
Any potential delay will affect paper filed returns as well as e-filed returns.
The AMT was designed in the 1960s to prevent the very rich from using deductions, credits and other shelters to avoid paying taxes, but its income thresholds did not rise with inflation. Taxpayers are not hit by the AMT based on income alone. The number and type of deductions and credits they take also help determine whether they will be forced into the alternative taxation system. Because of rising incomes, the tax’s bite is expected to expand to more than 30 million households in 2010. Last year, the AMT affected 3.8 million mostly well-off households.
S. Raines, Sr. Financial Advisor/Tax Preparer
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