Tax Refunds Might Not Come in Time for Christmas Bills
Posted December 24, 2007 6:13 p.m. EST
Updated December 24, 2007 10:35 p.m. EST
Washington — Tax refunds might not come quickly enough to help millions of Americans pay for their Christmas bills after Congress passed a one-year patch to the alternative minimum tax later than usual.
On Dec. 19, Congress voted to put a one-year freeze on growth of the AMT, shielding nearly 20 million middle- and upper-middle income taxpayers from first exposure to the tax. In 2006, the tax affected 4 million.
However, officials with the Internal Revenue Service said the agency will need at least 10 weeks to update its form and its computer system. By mid February, the government estimates that nearly 38 million returns – worth $87 billion – will be delayed.
Susanne Tote said she is among shoppers who stretch their credit limit in December while awaiting their refund.
"I file early so I can, obviously, get my return early, because I'd like to have my money as soon as possible," Tote said. "And it makes me angry that they do it this late in the season. They had all year. Why didn't they change it earlier so things could be on time?"
One-year fixes have become standard since the AMT was enacted in 1969 to catch a small number of very rich tax dodgers by imposing more stringent rules for deductions. However, the AMT was never adjusted for inflation, threatening to entrap many more people. Many beneficiaries of the AMT fix are people with incomes in the $75,000 to $200,000 range.
Certified public account Ben Micham could find a silver lining in the delay to passing an AMT patch in 2007: Complications in the tax code like those around the AMT drive more people to use tax preparers, he said.
"People are using tax preparers more and more because of the complexities," Micham said. "So that's gone up. Good for my job. Good for job security."
Even taxpayers with relatively simple returns might also be affected the delays, Micham warned. Accountants and technicians will have to adjust their software after the IRS finishes updating its system.
The length of the delays to refunds will depend on how quickly all those players in the tax system can adapt, Micham said.