Millions face higher taxes soon without fix; big package of tax breaks already expired
A married couple with two young children and a $100,000 income could face a tax increase of more than $6,600, if they live in a state that doesn't have a state income tax. Most of that increase — about $4,015 — would come from the AMT. The AMT would also reduce their tax credits and they would lose a deduction for paying state and local sales taxes.
The AMT is expensive to fix. A two-year adjustment passed by the Senate Finance Committee last summer would save middle-income taxpayers a total of $132 billion in 2012 and 2013, according to the Joint Committee on Taxation, the official scorekeeper for Congress. The bill addressed many of the tax breaks that expired for 2012, and the committee passed it with bipartisan support. But the full Senate never considered it.
The AMT adjustment also includes a rule that affects the way tax credits are calculated for millions of taxpayers, even if they don't have to pay the AMT, the IRS said. These taxpayers may not necessarily face a tax increase, but there could be delays in processing their returns.
Congress has always adjusted the AMT in the past, and the IRS is preparing as if lawmakers will do so again, acting IRS Commissioner Steven T. Miller said in a recent letter to members of Congress. If Congress doesn't address the AMT, about 60 million taxpayers, nearly half of all individual filers, would have to wait until late March — if not later — to file their returns while the IRS reworks its systems, Miller said.
"Essentially, IRS has said it will be chaos — chaos! — trying to make it work," said Rep. Sander Levin of Michigan, the ranking Democrat on the tax-writing House Ways and Means Committee.
Follow Stephen Ohlemacher on Twitter: http://twitter.com/stephenatap
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