Wednesday, December 12, 2007

More AMT pain

Rather than accept the Senate AMT patch, Ways and Means Chair Charles Rangel has introduced a new set of offsets for a new House version of the patch, Tax Notes reports ($). Reformed tax rules for carried interests are no longer included, but much of the rest will look familiar. The extenders have been dropped, but a $2.87 billion expansion of the child tax credit has been added.

According to Tax Notes, there was supposed to be a vote last night, but I don't see any sign that it happened. There are also rumors that the AMT patch legislation might get coupled to Medicare legislation to make a Senate filibuster harder for Republicans to sustain.

In all my years of observing the tax legislative process, I've never seen anything like this.

Meanwhile, the IRS has announced that its usual date to start processing returns, January 15, will be pushed well into February. There had been hope that non-AMT returns could be processed on time, but IRS lacks any systems or processes to identify and separate such returns. I think that the delay warning assumes an AMT patch is enacted—if time runs out, and we impose the AMT on another 25 million taxpayers in coastal states, there shouldn't be any reason for IRS delay. But their announcement is ambiguous on that point. They may have halted reprogramming the computers until they know which tax rules will apply.

Even though the start date could be delayed, IRS has rejected the idea of extending the April 15 filing deadline. That means returning processing time will be severely compressed.

They are hoping that a big increase in electronic filings will help to bail them out.

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