Taxes Blog

Finance Blogs » Taxes Blog » Millions could face AMT issues

Millions could face AMT issues

By Kay Bell ·
Thursday, December 13, 2012
Posted: 4 pm ET

The alternative minimum tax, commonly referred to as the AMT, is one part of the fiscal cliff that isn't getting a lot of widespread attention. It should.

Unless Congress acts soon to patch this parallel tax system, 60 million American taxpayers could be affected.

All those folks would have to at least fill out the extra AMT forms. About 28 million of them would have to pay the added tax.

The problem is that the AMT, created more than 40 years ago to ensure that wealthy taxpayers paid at least some tax, was not indexed for inflation. As taxpayer earnings have increased over the decades, more folks have hit the income level at which the AMT applies.

Rather than just adding a line to the AMT law saying that it would be indexed for inflation as in so many other tax-related laws, Congress has opted instead to patch the AMT each year or so.

The House and Senate essentially up the earnings threshold at which the AMT must be considered.

Lawmakers last did so in 2010 when they were fighting about the Bush-era tax cuts back then, the first time the laws were facing expiration. They patched the AMT back then for two years.

But here's the problem. Two years for Congress doesn't always mean two years in the future. That year, the AMT patch for 2010 hadn't been approved as the year was winding down. When Congress finally did OK the 2010 patch, barely in time for the coming tax-filing season, the members also approved an AMT patch for 2011.

So here we are with the 2012 calendar pages flipping by and no AMT patch for 2012 tax returns that must be filed next year.

We don't know what the AMT income exclusion levels will be, meaning we can't get an idea as to whether we might owe the Internal Revenue Service extra money when we file.

The uncertainty about the AMT also affects year-end tax moves. Some expenses that are deductible under the regular tax system aren't deductible when figuring an AMT bill. They include state and local income taxes, real estate taxes and miscellaneous itemized deductions.

If you're not going to be affected by the AMT, you can, for example, pay your property taxes in December, so you can deduct them on your itemized tax return. But if you will face the AMT, you won't get that deduction, so you can hold off and pay your property taxes by the 2013 due date.

The IRS also is affected. It has to wait for the AMT amounts for 2012 so it can reprogram its computers. And since that takes a while, it will delay processing of AMT-affected returns, possibly for months.

So thanks, Congress, for screwing around and possible screwing millions of taxpayers out of tax-saving moves now and tax dollars next filing season.

Want the latest news on taxes, tax reform prospects, filing deadlines, Internal Revenue Service alerts and tax-saving tips? Subscribe to Bankrate's free Weekly Tax Tip newsletter.

You also can follow me on Twitter @taxtweet.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
December 17, 2012 at 9:03 am

Jeus paid taxes, so we are exempt? but if the goverment used the monies to improve our country with some intellegent spending,I dont see the problem as long we are not OVER-TAXED and the goverment can the RICH a favor by taxing them a little more that way they wont have to hunt places to hide the money that they have stolen by not paying their share of taxes,God has a good memory of how used our money while here on earth tkink about IT!

December 17, 2012 at 8:45 am

I don't even know where to start with this issue and some of you people. There is PLENTY of money in the United States it is just in the hands of the few. This country was BUILT on taxes it is called paying your share.

December 17, 2012 at 8:44 am

Ths is why we don't need government. It has our country in a world of mess.

diane lord
December 17, 2012 at 8:29 am

the government is in a mess because they don't know how to budget and tighten their belts like we have to. bring me in there and i'll show them how to manage this country. it takes a middle class person to know how to do this. and the outcome is the middle class always gets the brunt of things. so unfair. they need to stop their BIG pay raises every year. they don't need it. they are already filthy rich. and then social security gets a measly 1.8 percent increase, while they get thousands. they created their own mess so get out of it fairly, and not by sticking it to middle class again. the rich can afford a tax hike. i'll tell you if i were rich i would not mind paying my fair share. may god bless you all in washington, d.c. and do the right thing.

Wade White
December 17, 2012 at 8:09 am

There they go again. Hitting the middle class with increases again at a time when reductions, not increases in our already over burdened budgets are at their worst. How long do you really think the tax payers are going to tolerate their stupidity ???

December 17, 2012 at 7:35 am

Common Cents!

There is in fact a basic solution to some of these issues. If a person is not a legal US citizen, you get nothing...... only tax paying legal citizens should receive these benefits .... in fact, you otherwise get sent home ASAP........ Bring the soldiers home ASAP... as my grandmother would say... charity begins at home..... take care of ourselves or our family before we do for someone else ... I certainly agree that those of us better off than most should contribute more to society, but the politics and entitlements are dumb, dumb, dumd... where is the common cents ......

December 17, 2012 at 5:49 am

and as president he is but learn this....every four years republicans try to convince poor people that they too are republicans

December 17, 2012 at 4:46 am


December 16, 2012 at 7:15 pm

Interesting that the AMT when it was first enacted impacted just 115 income tax filings. Now millions of tax payers are impacted. Does anyone besides me wonder why President Obama choose $250,000 as the new "super rich" class? Most people below that income level are saying; "yea they can aford it. It won't effect me". When the Federal Reserve gets through Monitizing the debt and the Federal Government runs up the national debt another six trillion dollars and inflation kicks in how many more people will then be impacted. You would think we would learn but we don't. This is just more of the same redistribtion of wealth.

December 14, 2012 at 2:30 pm

The President's failure to submit specific spending cuts to Congress (as he was required to do months ago), and the fact that he is playing a class envy game by not supporting the extension of the current tax rates to all tax paying Americans should demonstrate to all that he doesn't care about avoiding the so-called "fiscal cliff". The president obviously believes the government is entitled to whatever share of the economy he deems is appropriate.