More than 30 million households could be impacted by the Alternative Minimum Tax (AMT) if Congress refuses to fix it this year, The Hill reports. “An AMT patch simply has to get done by the beginning of January, and both sides know it,” said a Democratic congressional aide.
Complicating the task is the acrimonious discussion over the Bush tax rates. Democrats want to cap the rates for families making up to $250,000, while Republicans want to extend the rates to all who pay taxes.
If legislators can’t move beyond these tax rates, AMT action could be pushed off to 2013, which could mean millions of taxpayers would be filing amended returns—a headache of colossal proportions for the IRS. “Taxpayers begin to file their returns in January,” said a tax lobbyist. “It would be a tax administration nightmare if Congress waited until 2013 to address the 2012 AMT patch.”
Because AMT was never indexed for inflation, Congress has to “patch” it to help middle-class families avoid paying the minimum tax. The last congressional patch expired Dec. 31, 2011. “The AMT patch ensures that Congress must come back and do something, but I’m not certain that addressing the patch gives one side or the other any leverage regarding the other major ‘cliff’ issues,” said the tax lobbyist. (NACS: www.nacsonline.com)