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Letter to the editor

Stalled tax bill may delay refunds

Taxpayers may have to wait to file if a deal on the alternative minimum tax isn't made soon.

WASHINGTON - Silena Davis had counted on an early tax refund to pay for getting her teeth fixed. Now, because Congress has dawdled all year on a tax bill, she and millions of other early filers may have to wait extra weeks for refunds that last year averaged $2,291.

The IRS is looking hard at delaying the start of its filing season, set to kick off on Jan. 14, if Congress fails to pass legislation in the next two weeks. At issue is how to handle what could be a dramatic increase in the number of people facing a higher alternative minimum tax.

If there is a delay and it extends into mid February, it would slow nearly 38-million refunds worth about $87-billion, the IRS Oversight Board predicts.

The board, an independent advisory group, said in a recent report to lawmakers that it is "gravely concerned about the serious risks" to the filing season if Congress does not make timely changes to the tax. They include more mistakes by both taxpayers and the IRS and more people failing to pay taxes because of uncertainty about what they owe.

The alternative minimum tax was passed in 1969 and was aimed at about 155 very wealthy families who used deductions to avoid paying any federal income tax. The AMT disallows certain deductions and credits. It was not adjusted for inflation; as a result, over the years it has hit a growing number of middle-income taxpayers.

More than 4-million were subject to it in the 2006 tax year. Congress' Joint Committee on Taxation estimates that, without a fix, about half of taxpayers with adjusted gross incomes in the $75,000-$100,000 range will be affected by the AMT this year.

Congress in recent years has approved one-year fixes to stop the tax from expanding. Legislation this year has stalled in a dispute between majority Democrats and the White House. The stumbling block is whether some taxes should rise to offset the cost of correcting the AMT.

People who file returns under the current AMT law would have to file an amended return if the law were changed.

Some disruption already is taking place. As Congress was leaving for its Thanksgiving break with no deal in sight, the IRS was going to press with the forms for the 2007 tax year. The agency has postponed printing the AMT form and 11 others affecting smaller tax issues that Congress has promised to deal with but has not.

Aides on the tax-writing committees said they were unaware, at this point, of any suggestions to extend the April 15 filing deadline if the filing season is contracted because of the AMT dilemma.

Fast facts

Refund dilemma

Delayed filing season: The IRS is looking hard at delaying the start of its filing season, set to kick off on Jan. 14, if Congress fails to pass a tax bill in the next two weeks. So far, extending the April 15 filing deadline is not under consideration.

Why the delay: The majority Democrats and the White House are at odds over whether some taxes should rise to offset the cost of reducing the number of people paying the alternative minimum tax.

Delay's impact: If a delay extends into mid February, it would slow nearly 38-million refunds worth about $87-billion, the IRS Oversight Board predicts.

[Last modified December 2, 2007, 00:58:57]