Tax relief is in sight more than to 20 million Americans who faced a tax hike because they would have qualified for the Alternative Minimum Tax when filing their 2007 tax return.
Currently, four million Americans pay the AMT. That number would have soared had tax relief not been addressed by Congress.
However, e-filing delays may now be a reality, according to Hector Velazquez with Liberty Tax Service. President Bush is expected to sign the Temporary Tax Relief Act of 2007 that extends the current AMT thresholds with a temporary one-year "patch."
Because this legislation comes so late in the year, e-filing and paper processing of tax returns for everyone may not start until February, Velazquez said. Some IRS instruction manuals are outdated because the IRS publication deadline passed. IRS computers must be reprogrammed, and 12 IRS forms are affected by the AMT including those for child and dependent care credits.
The resulting delay could be up to seven weeks. And the result could postpone tax refunds for 15 million taxpayers, including lower and middle class taxpayers who normally file early.
"Our tax offices are ready to jump-start your return free of charge using your W-2 and tax documentation so your return can be filed as soon as the IRS starts processing returns," said John Hewitt, CEO and founder of Liberty Tax Service. "The IRS has pledged to do everything possible to revise forms and update their software as soon as possible, and keep the public updated. Be aware of scams and unscrupulous claims by any preparation service claiming to process your return before the first acceptance date of the IRS."
The irony of the AMT is that it was established by the Tax Reform Act of 1969 to close some loopholes for America's wealthiest individuals and ensure that they paid their share of federal income taxes. Because the AMT has never been indexed for inflation, more and more middle-class taxpayers have qualified to pay it every year, often losing deductions for state and local taxes, other deductions, and some tax benefits for having children.