WASHINGTON - Failure by Congress to act on the alternative minimum tax by year's end will lead to "significant" delays in tax filing and a strain on taxpayers, said Steven Miller, the IRS's acting commissioner.
The alternative minimum tax, or AMT, is part of the current fiscal negotiations in Congress. Leaving it untouched would immediately affect taxpayers, because its reach would be expanded for returns for tax year 2012.
Without action by Congress, the parallel tax system would affect 32.4 million households in 2013, up from 4 million in 2010, according to the Congressional Research Service. It would increase tax collections by $92 billion, shrinking or erasing many taxpayers' expected refunds.
"Taxpayers and the IRS need to know what the tax provisions are for 2012, so that you know what you owe and we know how to process your return in January," Miller said at a tax conference Thursday in Washington.
Also, the IRS' computer systems have been programmed assuming that Congress will act this year to prevent the AMT's expansion, leading to a delay in the agency's ability to accept tax returns if lawmakers do nothing.
Because of the tax's structure, which limits the benefit of the state and local tax deduction, it tends to have a disproportionate effect in high-tax states such as California, New York and New Jersey. The number of AMT payers in New York would rise to 3.9 million from about 493,000, and the number in California would reach 5.9 million, up from about 746,000, according to the Congressional Research Service.
Congress created the forerunner to the AMT in 1969 in response to news that 155 high-income taxpayers owed no income taxes.
Taxpayers must calculate their liability under the AMT and the regular tax and pay whichever is greater. The AMT has an exemption that isn't indexed for inflation permanently, leading Congress to enact so-called patches that prevent the full reach of the tax from taking effect.
Lawmakers in both parties want to prevent the AMT's expansion. The issue has been caught up in the disagreement on other budget issues, such as whether to extend tax cuts for top earners.