Shulman Urges Congress to Fix AMT and Extender Issues Before Year End

IRS Commissioner Doug Shulman urged Congress to pass tax legislation before the start of the next tax season. Shulman focused on the alternative minimum tax (AMT) patch and the extension of various income tax incentives for individuals.

In identically worded letters to House Ways and Means Committee Chairman Sander Levin, D-Mich., Senate Finance Committee Chairman Max Baucus, D-Mont., House Ways and Means Ranking Member Dave Camp, R-Mich., and Senate Finance Ranking Member Chuck Grassley, R-Iowa, Shulman said the IRS is reprogramming its computer systems to reflect a $47,450 AMT exemption for individuals and a $72,450 exemption for married taxpayers. Under current law, the amounts are $33,750 and $45,000, respectively; however, in earlier correspondence, the chairs and ranking members of the congressional tax-writing committees had urged the IRS to plan for the higher amounts, which they are pushing to have enacted. Shulman warned that if this legislation is not passed by the end of the year, the IRS computers will have to be reprogrammed to reflect the current law, which may delay filing for the estimated 21 million affected taxpayers.

Shulman also wrote that the IRS has not reprogrammed its computers to reflect any anticipated extension of currently expired individual tax incentives (such as the additional real property tax deduction for taxpayers who claim a standard deduction). He described as “unprecedented and daunting” the prospect of opening the tax filing season and then having Congress retroactively change the AMT exemption and/or extend the expired provisions. IRS computer systems would have to be reprogrammed and new forms and instructions published, delaying the processing of refunds for affected taxpayers. Taxpayers who had already filed would need to file amended returns.

Congress has been in “lame duck” session since November 15, but has so far failed to make progress on the AMT or extenders issues, or on other pending tax items, such as the scheduled sunset of the 2001 tax cuts, the reinstatement of the estate and generation-skipping transfer taxes, or the expanded Form 1099 information-reporting requirements instituted by the health care reform legislation.