Alternative Minimum Tax (AMT)

 The Alternative Minimum Tax or AMT was designed in the 1960’s to prevent the very rich from using deductions, credits and other shelters to avoid paying taxes, but it’s income thresholds did not rise with inflation.  Taxpayers are not hit by the AMT based upon income alone.  The number and type of deductions and credits they take also help determine whether they will be forced into the AMT taxation system.  Because of rising incomes, the tax’s bite is expected to expand to more than 30 million households in 2010.  In 2006, the AMT affected 3.8 million mostly well-off households.

 On December 19, 2007, Congress passed the Tax Increase Prevention Act of 2007 to forestall the impact of AMT on 2007 taxes.

 The legislation changed the tax exemption amounts for all taxpayers and continued to allow nonrefundable personal credits to offset the AMT.  This is only a “patch” on the AMT system, one which will need to be addressed by Congress in 2008.

 The AMT and AMT-related tax calculation affects 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.

 What this all means is that in all likelihood there will be a delay in the IRS’s ability to process your tax return for 2007.  The delay could range from three to seven weeks during the months of January and February.  This should not delay the preparation of the return; only the processing.  If you are anticipating a refund, the refund may be delayed by the IRS until the return can be processed.

 As your trusted tax professional, know that I am fully informed and will work diligently to have your return prepared and ready to file with the IRS at the earliest opportunity.

 If you have any questions or concerns regarding this matter, please do not hesitate to contact me.