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Senate Passes AMT "Relief" Bill and is Pondering Other Minor Changes
By Russell O. Coon, CPA
Unfortunately, the "relief" was merely restoring the 2007 Alternative Minimum Tax exclusions to the same level as last year. In the world of Washington Legislative spin, that's considered a tax cut. The delay, however, in getting even this, and other expected 2007 tax legislation done may result in late tax refunds and an inability for people to plan their affairs.
Of late, Congress has had the propensity to delay decisions, even apparently simple ones, to the last minute. While on December 6th, the Senate has passed the AMT tax measure that will impact 2007 tax returns (which could be filed in as little as three weeks from now), it will take more time to get that signed bill into law. Although this AMT legislation would result in $51 billion in less taxes being paid, its primary focus is on middle income taxpayers who were not subject to the AMT last year. Without this legislation, reportedly 23 million more taxpayers (read voters) would have been subject to this tax. Nothing substantive was done to reduce or eliminate this tax from last year's levels for people who were subject to this tax last year.
In addition, Congress is considering a host of tax deductions and tax credits which are now set to expire as of December 31, 2007. These deductions and credits historically have had a limited sunset period (i.e., scheduled expiration dates). These items include limited deductions for college tuition, deductible state and local sales taxes, deductions for teacher's out of pocket costs for classroom supplies, and research and experimentation tax credits.
Once legislation winds its way through Congress, and is signed by the President, it still has to find its way into the myriad of changes required in the IRS and commercial preparer computer software, forms and instructions. The IRS has indicated that this late legislation is likely to result in delays in refunds. Even the AMT legislation that passed in the recent Senate session is only a one year "patch" (i.e., if nothing done to extend it next year, it will expire and older provisions less favorable to taxpayers will take its place). The same problem will exist for 2008 until it is addressed on a more permanent basis.
Taxpayers have enough problems determining the likely facts and circumstances of their own future financial affairs. The people and organizations affected by this late legislation do not have the ability to plan the tax results of their affairs. As one commentator indicated, "It's like playing 9 holes of golf before finding out what the rules are." In this case, it's closer to 17 holes.
If you would like to discuss this subject further, please contact Russ Coon (rcoon@pmn.com) or any member of our tax service team at (617) 426-9440.
Note: This article represents a general overview of or opinion on certain tax issues or developments and should not be relied upon without an independent, professional analysis of how any of these provisions may apply to a specific situation. We recommend you consult your professional tax advisor before taking any action based on anything in this article.
IRS CIRCULAR 230 NOTICE: In compliance with U.S. Treasury Circular 230 Regulations and any applicable state laws, we hereby notify you that any tax advice contained in the body of this document, or attachments thereto, was not intended or written to be used, and cannot be used, by the recipient or any other party for the purpose of (1) avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein.
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