Although both the U. S. House of Representatives and the United States Congress have passed the AMT “patch” for 2007, the bills have yet to be reconciled.
The Senate-passed bill would leave a trillion-dollar hole in the federal budget over 10 years. The bill would spare the middle-class households touched by AMT an average of $2,000-per-family increase on 2007 income taxes and would ensure that refunds of as much as $75 billion would be distributed without delay.
The House-passed bill would be paid for mainly by forcing managers of private equity “buyout” firms and hedge funds to pay ordinary income tax rates on the millions of dollars they earn each year. Currently, much of those earnings are counted as capital gains and taxed at 15 percent, rather than at the 35 percent income tax rate paid by the nation’s highest earners.
What this all means to the tax professional:
The IRS is anticipating the AMT “patch” for 2007 however they cannot change the IRS programming for AMT until the act is passed and signed into law by President Bush.
After the law passes, the IRS will require a minimum of seven (7) weeks to reprogram their computers.
The challenge is to modify a program allowing some returns to be processed while restricting those returns which would be affected by the AMT.
Two potential options are:
1. Programming in stacking order to process returns that are unaffected by the AMT or
2. Not processing until the reprogramming is complete.
While IRS is uncertain of the date the legislation might pass as well as the particulars of the legislation, they are certain that:
Any potential delay will affect paper filed returns as well as e-filed returns.
The AMT was designed in the 1960s to prevent the very rich from using deductions, credits and other shelters to avoid paying taxes, but its income thresholds did not rise with inflation. Taxpayers are not hit by the AMT based on income alone. The number and type of deductions and credits they take also help determine whether they will be forced into the alternative taxation system. Because of rising incomes, the tax’s bite is expected to expand to more than 30 million households in 2010. Last year, the AMT affected 3.8 million mostly well-off households.
S. Raines, Sr. Financial Advisor/Tax Preparer
My StumbleUpon Page
No comments:
Post a Comment