The Chairman of the House Ways and Means Committee has proposed a stopgap measure to extend Alternative Minimum Tax Relief for 2007.  But if Congress doesn't act quickly, it may be too late to impact the 2007 tax year.  If lawmakers do nothing, an estimated 25 million taxpayers will be subject to AMT, taking an estimated average tax hit of an additional $2,000.

The IRS announced that if Congress does not act in the next two weeks or so, 25 million to 50 million taxpayers will see the processing of their returns and their refunds delayed. In a press briefing, IRS Acting Commissioner Linda Stiff said that it will take the IRS between 12 and 13 weeks to process any AMT-related tax law changes from the day the bill is signed into law.

Currently, the IRS is scheduled to send its 1040 instruction forms to press on November 7 and will mail them out the first week in January, said IRS spokesman Terry Lemons. The agency will begin processing 2007 tax returns on January 14.

If lawmakers wait until December to make changes to the AMT, the IRS would not be able to start processing the 25 million to 50 million affected returns before mid to late March.

December tax law changes are not unprecedented. That's how long Congress waited last year to extend certain tax breaks. But those tax break extensions only affected the programming and printing of a few IRS forms and resulted in a roughly two-week delay for no more than 4 million returns, Stiff said.

By contrast, she said, "AMT is at the core of our processing system. We'll have to reprogram millions of lines of code and test it."

The AMT was originally intended for the wealthy few when it was created nearly 40 years ago. But because Congress never indexed for inflation the amount of income exempt from AMT and because it disallows a lot of popular tax breaks, tens of millions of middle-class taxpayers could get hit.

Since 2001, Congress has temporarily increased income exemption levels and allowed for some personal credits to be used. The last patch - for 2006 - put the exemption levels at $62,550 for joint filers and $42,250 for single filers. Without a patch, the 2007 exemption amounts will fall to $45,000 for joint filers and $33,750 for single filers.

The Chairman of the House Ways and Means Committee has proposed a stopgap measure to extend Alternative Minimum Tax Relief for 2007. Rep. Charles Rangel has introduced a massive tax overhaul bill that includes a plan to reform the AMT and also includes a patch provision for 2007.

For details of the full proposed bill, check the link below.

http://waysandmeans.house.gov/media/pdf/110/Summary%20for%20Distribution.pdf