Text Script of Press Briefing October 23, 2007 - Alternative Minimum Tax
IRS Acting Commissioner Linda Stiff
Thank you for joining me today. There has been a lot of discussion in the press and on the Hill lately regarding the Alternative Minimum Tax. I'm going to refer to it as AMT from here on. And I'd like to take just a few minutes and discuss the tax-administration implications facing the taxpayers of this country and the IRS as a result of the AMT issues.
As tax administrators at the IRS, our goal is to deliver a successful filing season to the nation's taxpayers. That means two things to us that work at the IRS
- first, that we process tax returns in a timely manner;
- secondly, that we issue tax refunds to the millions of taxpayers who expect and deserve them.
Legislation enacted late in the year makes it increasingly difficult for us at the IRS to deliver a successful filing season, meaning that we're able to process tax returns timely and put the refunds in the hands of the taxpayers timely. The current situation involving the alternative minimum tax is adding increased risk to our ability to deliver a successful filing season this coming January.
Let me describe that situation for just a moment. The AMT was originally designed to ensure that higher-income taxpayers could not use popular deductions and credits to completely eliminate their tax liability. While the AMT was not indexed for inflation, the Congress has stepped in and enacted a series of temperary patches through the years to prevent middle and low-income taxpayers from being affected by the AMT. At the end of 2006, the latest AMT patch that Congress enacted expired.
As we stand here before you today, we don't have a patch for tax-year-2007 returns that are about to be filed in January. We are at a crucial point in the IRS for the upcoming filing season on this issue. Any changes made in November or December will lead to later processing of tax returns and major delays in our ability to issue tax refunds. Enactment of a patch, like we've experienced in prior years, in mid November, or even later in December, would delay processing and refunds for as many as 50 million taxpayers. That means that we wouldn't be able to process the tax returns of the 50 million in a timely manner.
This delay will affect lower-income, middle-income, and upper-income taxpayers. It will delay processing of tax returns. I want to slice the 50 million for you into two buckets, okay? It will delay processing of tax returns and payments of refunds for the 25 million taxpayers who would have been subject to the AMT without a patch. Last year there was four million taxpayers subject to AMT. If we don't have a patch, 25 million will be subject. If we get a patch in late November or December, we'll have to delay the refunds of that potential 25 million while we catch up.
Additionally, over and above that 25 million, there is potentially another 25 million taxpayers who could see delays in our processing of their returns and the receipt of their refunds. This is because a wide group of taxpayers, including taxpayers who claim the Child Tax Credit, the Child and Dependent Care Credit, and Education Credits are impacted by the AMT law. The AMT law affects not only taxpayers who are subject to AMT, but it affects taxpayers who claim those credits, the order in which they claim them, and the amounts which they'll be entitled to. All of these folks could be caught in the delay if we don't have a patch enacted before November and December.
Did we provide scenarios to everyone? It actually gives you an indication of what the taxpayers' individual experiences could be, both with patch and without the patch. Now, having said that that's the taxpayer impact, as tax administrators, we need to be in a position to administer the filing season and administer the laws as they exist on the books at the point in time of January 14, which is when we will initiate the filing season for next year. A major challenge for us will involve the reprogramming of IRS return processing system. If a patch is enacted, the IRS must reprogram, test, and integrate the changes into our complex computer programs and systeMs. We estimate that will take us 12 to 13 weeks from the time a bill is signed into the law. You can do the math. If the law or the patch is not enacted until mid-to-late December, the IRS systems will not be ready to process tax returns that have AMT or any of the 11 credit forms that I described earlier, affecting these 50 million taxpayers until mid-to-late March. The IRS would have to delay receipt of the electronically filed returns. Taxpayers filing paper -- We would have to shelve those returns and hold them until our systems were able to do the processing. One other important point -- If, for some reason, the Congress doesn't enact a patch, it will mean that 21 million more people than last year are going to be hit by the AMT.
That will have a dramatic effect on a variety of individuals, turning expected tax refunds into tax bills. You've got the four examples in front of you that give you a sense of the impact from a taxpayer perspective.
Now, before I close and open up for question, I want to assure everyone that the IRS stands ready to work quickly and swiftly to administer the law and implement any legislation enacted by the Congress. We will work hard. We will do everything we can to get it right and minimize burden on taxpayers. We will do everything within our power to ensure that the filing season is delivered, returns are processed, and refunds are in the hands of taxpayers promptly.
Thank you, and if you have any other follow-up questions, feel free to call our press office at (202) 622-4000.
Audio File: Alternative Minimum Tax - IRS Acting Commissioner Linda Stiff - 02/22/08, 7 minutes long. The audio file will open in Windows Player, and you will be able to pause, fast forward, rewind, mute, and control the volume from the interactive player.
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