IRS warns that fiscal-cliff plunge could delay up to 100 million tax filings

posted at 1:51 pm on December 20, 2012 by Ed Morrissey

The expiration of the annual AMT patch hasn’t exactly been ignored in the fiscal cliff debate, but it gets a lot less attention than due from its potential impact.  Currently, under the annual “patch” that gets applied to the precursor of today’s proposed “Buffett Rule” keeps only 4 million people in the Alternative Minimum Tax by indexing the original law to inflation, which Congress neglected to do in 1969.  Without it, 30 million middle-class households will have to recalculate their tax liabilities for 2012, resulting in a paperwork nightmare that the IRS warns might prevent most taxpayers from filing while waiting for Washington to do its job and budget properly:

With fiscal cliff negotiations slowing to a near-halt, the IRS is warning that absent a deal, up to two-thirds of U.S. taxpayers will have to wait next year to file their returns.

In a letter to the top House and Senate tax writers from both parties, acting IRS Commissioner Steven Miller said that between 80 million and 100 million taxpayers won’t be able to file on time. That’s up from a November estimate, in which he told lawmakers that around 60 million taxpayers might have trouble filing.

Most taxpayers wouldn’t be able to file their returns until at least the end of March, Miller said.

Even the IRS won’t be prepared, thanks to their reliance on the usual cycle of annual fixes passed easily by Congress:

Miller said the IRS has programmed its computers to assume that Congress will agree to a last-minute patch, as it has in previous years. But if a deal doesn’t come together, Miller said that millions of Americans will have to wait for the IRS to alter its programs.

“If an AMT patch is not enacted by the end of this year, the IRS would need to make significant programming changes to conform our systems to reflect the expiration of the patch,” Miller wrote.

Many lawmakers have suggested that they could address the AMT in early January if Washington falls off the fiscal cliff. But Miller said that even that scenario creates problems.

“If Congress were to enact a new AMT patch, the time and substantial expense necessary for the IRS to reprogram its systems to reflect expiration of the patch would ultimately be wasted,” he wrote.

What is the AMT? Congress passed it in 1969 under the concern that the wealthy weren’t paying their fair share in taxes.  Taxpayers at a certain level of income are required to calculate their taxes with and without the AMT, and have to pay the higher of the two outcomes; originally, though, the wealthy had to pay both AMT and the regular tax.  If that sounds familiar, you’ve probably spent a lot of time listening to Warren Buffett. This is exactly the same concept as the Buffett Rule, if not the same exact mechanism.

If Congress keeps passing patches, why don’t they just fix the AMT for good?  Ah, well, that gets tricky — because it would have to get scored as a massive revenue reduction on paper, and a tax cut only once.  It’s akin to the Medicare doc-fix patches that get applied each year, too.  By keeping the AMT in its present form, Congress can manipulate CBO scoring (and the White House can do the same at the OMB) in order to make their budget proposals look better,  just as Obama kept the Medicare provider reimbursement reductions in ObamaCare for their cost-cutting impact on the ledger while Democrats pushed the doc-fix bill separately that negated that same impact.

The correct solution would be a systemic reform of our tax code to eliminate all of these gimmicks for good.  No one wants to fix the AMT without a large-scale reform of the tax code, though, so don’t expect the AMT trap to disappear soon.  The fiscal cliff will mean a deep plunge for the middle class in at least two ways now, unless Congress delinks the AMT patch from the overall negotiations.  And unless that’s accomplished soon, the IRS is looking at an enforcement nightmare this spring.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

The middle class needs to be hammered, by Obama.

He hates you.

Schadenfreude on December 20, 2012 at 1:52 PM

Obama won’t care… he and the LSM will just blame the Republicans…

Khun Joe on December 20, 2012 at 1:53 PM

Already get hammered by AMT, so what do I care? I’m pretty sick of being among the few American subjects who has to hold up this whole house of cards.

besser tot als rot on December 20, 2012 at 1:55 PM

The federal government now has a reason to act – because it now affects their ability to collect revenue.

Only the stupid would allow revenue to be thrown away like that… oh, wait.

Turtle317 on December 20, 2012 at 1:56 PM

Maybe if we are lucky, we won’t have to file until 2020.

they lie on December 20, 2012 at 1:56 PM

So? I won.
–Obama

Gatsu on December 20, 2012 at 1:57 PM

AMT: The chemical weapon of class warfare.

BobMbx on December 20, 2012 at 1:58 PM

Is the ” I thought the Mayans would be right” check box on the 1040 long form or short form?

viking01 on December 20, 2012 at 2:01 PM

IRS warns that fiscal-cliff plunge could delay up to 100 million tax filings

Funny, the IRS does this and it’s A-Ok… If a private citizen tried it, it would be called blackmail and extortion.

SWalker on December 20, 2012 at 2:01 PM

What a timely Cass Sunstein -like ‘push’ by the Treasury Dept.

‘That’s a nice tax return you have there. Would be a real shame for it to get messed up.’

/goddamned marxicrat thugs

rayra on December 20, 2012 at 2:01 PM

One of the media’s jobs is to keep people informed, right?

I would bet 95% of the people have no idea what the AMT is and what the implications are.

Good job.

jjjdad on December 20, 2012 at 2:01 PM

AMT allows blue states to transfer the burden of all their favorite social programs to the rest of the country by means of a credit on their federal return. I hope it doesn’t get “fixed” so those folks can understand the true cost of all those lovely state taxes they seem to keep voting for.

worldtvlr on December 20, 2012 at 2:04 PM

If the IRS busts out their shotguns, most of those filings will be on time, I reckon.

/

Christien on December 20, 2012 at 2:04 PM

Just yesterday as the rat-eared wonder was figuratively standing on those 20 tiny caskets and attacking the GOP for not giving him everything he wanted with regard to the fiscal cliff the notion of fairness came up again.

Well, I say the more people who feel the pain the fairer the system must be right? Why should only millionaires and billionaires be asked to pay a little bit more. I say go down to the dregs of society and demand that even parasites like the Obamaphone lady be taxed on her welfare and disability payments.

Happy Nomad on December 20, 2012 at 2:04 PM

The correct solution would be a systemic reform of our tax code to eliminate all of these gimmicks for good.

Hell will freeze over first.

GarandFan on December 20, 2012 at 2:06 PM

Is the ” I thought the Mayans would be right” check box on the 1040 long form or short form?

viking01 on December 20, 2012 at 2:01 PM

Heh! Both- but you’ll have to wait until January before the TurboTax update is available.

Happy Nomad on December 20, 2012 at 2:07 PM

Let’s pretend that ‘Plan B’ is going to prevent those taxpayers from blaming us for this, alright?

It makes me feel better even though it’s total nonsense.

blue13326 on December 20, 2012 at 2:08 PM

IRS warns that fiscal-cliff plunge could delay up to 100 million tax filings

STARVE THE BEAST (legally)

dominigan on December 20, 2012 at 2:09 PM

Man, 2013 sure is sizing up to be one giant cluster effer of a year. I am beginning to have the slightest cynicism about the Mayans being right tomorrow fade to all out hope that they are right – haha.

rsherwd65 on December 20, 2012 at 2:11 PM

The middle class needs to be hammered, by Obama.

He hates you.

Schadenfreude on December 20, 2012 at 1:52 PM

Sadly true. (The hammering)

Seems a bunch of the middle class hasn’t caught on

Obama is assuming when the M.C. gets hammered they will blame the GOP. Boehner helped a lot on that front by agreeing to a tax increase only. Obama is already using that stupidity in his speeches to assert the GOP agrees with him the cause of our problems is the rich
.
His strategy: when the M.C. gets hammered, they will get mad at the rich.

Hammering hasn’t worked to straighten out heads in Greece. In France so far it worked on Depardieu.

Romney got just under 50 percent. That is better than the soviet union. His 50 like guns. That too is a plus. The ‘Let’s all get along’ swing Obama voters went back to obama because of Christie. Romney lost the Reagan blues who no longer trust the GOP, but got the Reagan blues who still have jobs.

I need a hammer, and a test selection from each group to see how they will bounce.

Because the upper GOP has made it known it is squishy on the rich, yet pro amnesty (anti unemployed Reagan blues), it will be hard to get some of the missing voters back to the GOP, even with a hammer.

The hammer would work best at the RNC, but those guys are cushioned from reality

entagor on December 20, 2012 at 2:13 PM

As I recall, the AMT will hit blue states disproportionately. Color me cynical, but are we saying that’s a bad thing? Actually, I am all for those who voted Democrat to truly enjoy the fruits of their decisions. As it is, the whole write off of state taxes is a gift to blue states. So, as to the AMT, let that one stand. Obama and the left needs the tax revenue.

Wolf Howling on December 20, 2012 at 2:17 PM

This past year I paid my 2011 Taxes. 2 Months later I received a BILL from the IRS for $10.00 and a letter informing me that the INTEREST on the amount I owed from the time they sent out my initial tax notice until the time they cashed my check increased, leaving a balance of $10. So I sent them another check for $10. 2 Weeks Ago I got another BILL – this time for $9.46 and another letter telling me the INTEREST on what I owed had increased from the time they sent that last letter until they cashed my last payment of $10. So I sent back a check for $.946 and a letter telling them that I REFUSED to pay another D@MN DIME! I asked them if they sent me a REFUND CHECK ‘late’ would they pay ME the INTEREST on that amount for being late? H#ll, most of Obama’s Cabinet Nominees never paid taxes – Charlie rangel was caught TWICE trying to defraud the IRS/Govt & failed to pay taxes until caught — he never paid late fees, a FINE, or Interest on the $1 million PLUS he owed!

In light of this news…and the fact that Obama just instituted the largest tax increase in U.S. history, I think we should all send the IRS a bill for the interest on our refunds if we get them late!

easyt65 on December 20, 2012 at 2:19 PM

Actually dealing with the underlying problems of the “Doc Fix” and the AMT would require Congress to do some real legislative work, something that they have seen recently only in the rear-view mirror.
This is why all legislation should have either a five, or ten-year Sunset Clause, so that our illustrious leaders on The Hill will be forced to do the job that the Constitution demands of them, and their constituents think they’re electing them to do.

Another Drew on December 20, 2012 at 2:20 PM

Starve the beast.

a capella on December 20, 2012 at 2:20 PM

GERONIMOOOOOOOO!

Ladysmith CulchaVulcha on December 20, 2012 at 2:21 PM

In France so far it worked on Depardieu.

entagor on December 20, 2012 at 2:13 PM

Wow, ya just know that had to have taken the French government by surprise. Who could have ever imagined a Frenchman getting his ass kicked… And then running away… o_O

SWalker on December 20, 2012 at 2:21 PM

Obama hates all of you!!!

Mr. Arrogant on December 20, 2012 at 2:21 PM

Is the ” I thought the Mayans would be right” check box on the 1040 long form or short form?

viking01 on December 20, 2012 at 2:01 PM

Heh! Both- but you’ll have to wait until January before the TurboTax update is available.Happy Nomad on December 20, 2012 at 2:07 PM

Gosh, they’ve configured Turbotax in Mayan already? You gotta love capitalism for its efficency.

Don L on December 20, 2012 at 2:22 PM

This will be a real cluster.
Just a guess, but many of the quick filers are expecting something back. Thus the prompt filing. Later filers tend to owe or have others preparing for them.
Might be a rather large portion of the middle class in a grumbly mood.

Jabberwock on December 20, 2012 at 2:23 PM

Wolf Howling on December 20, 2012 at 2:17 PM

Correct, the AMT disallows deductions for state and local income taxes so it hits people in California and New York much harder.

Ted Torgerson on December 20, 2012 at 2:23 PM

Gosh, they’ve configured Turbotax in Mayan already? You gotta love capitalism for its efficency.

Don L on December 20, 2012 at 2:22 PM

Oh great, another excuse for Turbo Timmy to not pay his taxes… He can’t add in English, who the hell is going to doubt him when he claims he can’t add in Mayan??? o_O

SWalker on December 20, 2012 at 2:24 PM

Whatever.

We are all just along for the ride.

 

I twist the truth, I rule the world, my crown is called deceit
I am the Emperor of Lies, yet still you grovel at my feet.
I rob you and I slaughter you, your downfall is my gain
And still you play the sycophant while you revel in your pain.
All my promises are mortal lies, all my love is earthly hate
I am the supreme politician — and I decide your fate.

.

SD Tom on December 20, 2012 at 2:26 PM

AMT allows blue states to transfer the burden of all their favorite social programs to the rest of the country by means of a credit on their federal return. I hope it doesn’t get “fixed” so those folks can understand the true cost of all those lovely state taxes they seem to keep voting for.- worldtvlr on December 20, 2012 at 2:04 PM

Better yet, many of the blue states have high state income taxes. Do away with the exemption for state income taxes.

As a former CPA I can say that our current income tax code is incomprehensible. And, then on top of it being incomprehensible, each year the idiots in Congress fiddle with it enough to make it even ever more incomprehensible. And, if you somehow screwup, God help you.

I had to testify at a Federal Tax Trial in Atlanta about three years ago. I did not prepare the person’s individual return, but did prepare a trust return that which had income the defendant should have reported on his return. I don’t know if the taxpayer/defendant reported the minor amount of income or not. Damned it I know why I was even there. The judge even questioned why I was subpoenaed. The judge has yet to make his decision in the very complicated case. I follow the case on the Internet.

SC.Charlie on December 20, 2012 at 2:29 PM

We need AMT freeloader patch. IF you go into 47% it puts you back into the 53%. No more freeloading, I call it the Obama voter patch.

Oil Can on December 20, 2012 at 2:34 PM

This is just another piece of fallout from the Republicans’ decision 18 months ago to kick the can one more time.

Ojesus is getting to have his cake and licking the icing off the plate.

Fools.

hillbillyjim on December 20, 2012 at 2:35 PM

GERONIMOOOOOOOO!

Ladysmith CulchaVulcha on December 20, 2012 at 2:21 PM

.
That reminds me … yesterday I saw the video of the Golden Eagle grabbing the toddler, for the first time.

That video linked to many other videos relating to Golden Eagles, so I watched a few of those.
There were two different videos showing the eagles grabbing and yanking small (baby) mountain goats off of their ledges, causing them to fall a looong way to a violent death. Then the eagle would go down to the body, and feed.

I wonder if we could somehow use the video clips of those little goats falling, to illustrate the “Fiscal Cliff”?

listens2glenn on December 20, 2012 at 2:35 PM

entagor on December 20, 2012 at 2:13 PM

Oh, it’s simpler and worse than all that, good one.

Obama despises the middle class. They are in the way of his ultimate Utopian pipe dreams.

He wants them all unemployed and poor, dependent on the thuggery.

Starve the Looters, in turn the Moochers.

Schadenfreude on December 20, 2012 at 2:38 PM

“If an AMT patch is not enacted by the end of this year, the IRS would need to make significant programming changes to conform our systems to reflect the expiration of the patch,” Miller wrote.

Sounds like the IRS uses the same programmers that ignored the Y2K scenario back in the 70′s & 80′s.

KS Rex on December 20, 2012 at 2:40 PM

easyt65 on December 20, 2012 at 2:19 PM

I predict an audit in your future.

KS Rex on December 20, 2012 at 2:47 PM

One of the media’s jobs is to keep people informed, right?

jjjdad on December 20, 2012 at 2:01 PM

You’re a comedian, right?

besser tot als rot on December 20, 2012 at 2:47 PM

As I recall, the AMT will hit blue states disproportionately. Color me cynical, but are we saying that’s a bad thing? Actually, I am all for those who voted Democrat to truly enjoy the fruits of their decisions. As it is, the whole write off of state taxes is a gift to blue states. So, as to the AMT, let that one stand. Obama and the left needs the tax revenue.

Wolf Howling on December 20, 2012 at 2:17 PM

Yeah. Leave the AMT. Actually, once the AMT hits everyone, it will essentially be a flat tax and then we can have a debate about setting what the AMT (flat tax) should be.

besser tot als rot on December 20, 2012 at 2:49 PM

Are we talking about 2012 taxes or 2013? Are the Obama Tax hikes happening retroactively to 2012?

txhsmom on December 20, 2012 at 3:01 PM

Gross President

Schadenfreude on December 20, 2012 at 3:01 PM

why don’t they just fix the AMT for good?

Because to a majority of stupid, sometimes referred to as the American people, if we don’t fix it, then there’s nothing wrong.

Get it?

MNHawk on December 20, 2012 at 3:09 PM

Flat tax, poverty floor, allowance for family size, end all tax credits, keep primary home mortgage interest deduction and charitable deductions but otherwise s**tcan Treasury Regs in their entirety.

Next problem?

ConservativeLA on December 20, 2012 at 3:10 PM

What isn’t being adequately noted about this AMT cliff is informing people that just about *everyone* making over about $40K/year will lose ALL of their home mortgage deduction and most other deductions, too.

Obama is going to create a crisis so he can swoop in and save the day like Mighty Mouse.

crosspatch on December 20, 2012 at 3:12 PM

SC.Charlie on December 20, 2012 at 2:29 PM

I’d wager that many people in Blue States are already AMTer’s (they have to get paid more just to be able to afford the housing costs). Eliminating the deductions for state income tax and real estate taxes won’t impact them at all since they don’t get the deductions anyway.

I doubt that allowing the AMT “patch” to expire is going to catch as many new “members” as is estimated (certainly not with the 47% that don’t pay any taxes now unless they avoid taxes by having 14 children).

This is simply a scare tactic being used by Obama to push whatever agenda he has in mind.

teejk on December 20, 2012 at 3:14 PM

What? That engine of efficiency that is called the U.S. government can’t get it right? They won’t get it right regardless of what happens. I’m still in the “let it burn” phase.

Cindy Munford on December 20, 2012 at 3:18 PM

Senate majority leader Harry Reid, a Democrat, made his “fiscal cliff” position clear in a press conference today. “We are not going to do anything,” said Reid.

And home they went.

Schadenfreude on December 20, 2012 at 3:19 PM

Are we talking about 2012 taxes or 2013? Are the Obama Tax hikes happening retroactively to 2012?

txhsmom on December 20, 2012 at 3:01 PM

2013. Only CA is making their new taxes retroactive for 2012.

besser tot als rot on December 20, 2012 at 3:23 PM

I’m still in the “let it burn” phase.

Cindy Munford on December 20, 2012 at 3:18 PM

Me too. Problem is that with the cliff, it won’t burn. January will see the Democrats get credit for cutting taxes on the 98%, while the GOP get’s pegged with fighting for the 2%. Once Clinton tax rates are in place, the entire argument changes from “making tax rates permanent” to “cutting taxes.” Is the GOP going to oppose cutting taxes for 98% of the people? I find it highly unlikely.

besser tot als rot on December 20, 2012 at 3:26 PM

Gross President

Schadenfreude on December 20, 2012 at 3:01 PM

The silence on this one is deafening. I couldn’t believe my ears when he sank so low. I obviously gave him credit for humanity which isn’t there.

hillbillyjim on December 20, 2012 at 3:31 PM

Need an alternative minimum president.

Ronnie on December 20, 2012 at 3:39 PM

besser tot als rot on December 20, 2012 at 3:23 PM

Thank you.

txhsmom on December 20, 2012 at 4:10 PM

Need an alternative minimum president.

Ronnie on December 20, 2012 at 3:39 PM

That would be Joe Biden… He’s the alternative minimum to the minimum president we currently have.

psrch on December 20, 2012 at 4:26 PM

As log as it delays the increase on middle class tax payers.

Bmore on December 20, 2012 at 4:47 PM

So long as………

Bmore on December 20, 2012 at 4:47 PM

I’d wager that many people in Blue States are already AMTer’s (they have to get paid more just to be able to afford the housing costs). Eliminating the deductions for state income tax and real estate taxes won’t impact them at all since they don’t get the deductions anyway.

teejk on December 20, 2012 at 3:14 PM

Nope. Not even close. According to Tax Policy Center stats, only 5% of high tax states pay AMT and only 2% of low tax states pay it. Let it expire any the true cost of those taxes will hit the residents of those states big time.

worldtvlr on December 20, 2012 at 5:15 PM

As log as it delays the increase on middle class tax payers.

Bmore on December 20, 2012 at 4:47 PM

.
That’ll be enough unbridled optimism out of you.

listens2glenn on December 20, 2012 at 6:03 PM

Miller said the IRS has programmed its computers to assume that Congress will agree to a last-minute patch, as it has in previous years.

So the federal government assumes that the law will be ignored?

Anyone else having a Captain Renault moment?

malclave on December 20, 2012 at 6:27 PM

LET. IT. BURN!

Rather we went over the fiscal cliff than watch the Republican party try and push a PELOSI PLAN B deal.

Varchild on December 20, 2012 at 7:02 PM

Nope. Not even close. According to Tax Policy Center stats, only 5% of high tax states pay AMT and only 2% of low tax states pay it. Let it expire any the true cost of those taxes will hit the residents of those states big time.

worldtvlr on December 20, 2012 at 5:15 PM

the AMT generally kicks in for those with high state income taxes, high real estate taxes, high personal exemptions and miscellaneous deductions usually caused by investing in pass-through entities. Reagan pretty much shut down the other reasons that the law was meant to address.

I’ll stand by my statement…those already in it won’t leave, expiration is not going to catch too many more.

teejk on December 20, 2012 at 7:32 PM

I’ll stand by my statement…those already in it won’t leave, expiration is not going to catch too many more.

teejk on December 20, 2012 at 7:32 PM

I agree with the first half of your statement but strongly disagree with the second half.

Not sure what the rules are here for direct linking to another site, but if you look on the Tax Policy Center web site for the AMT section, then click on report T12-0175 entitled Characteristics of AMT Taxpayers with and without AMT Fix grouped by tax law 2011-2013, you’ll find that if the AMT is allowed to stand unfixed, it goes from hitting between 2-5% to between 20-30% of filers depending on whether or not the state is class as high, medium or low.

I don’t see how you can argue against that increase in filers. And given as you say that that AMT specifically excludes deductions for state and local taxes, how can it not skew towards touching more high tax states such as California and New York?

worldtvlr on December 20, 2012 at 10:00 PM

…lets not pay anything until the Senate passes a bdget!
…oh wait!…they owe me!…years!

KOOLAID2 on December 20, 2012 at 10:41 PM

Delay 100 million tax filings? And only half the 370 million people people paying taxes? Seriously? What are they doing over there? Anything?
I can hardly wait until they administer healthcare.

NoPain on December 21, 2012 at 8:23 AM