IRS Chief Warns Of Massive Delay On Tax Returns

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taxesWith fiscal cliff negotiations slowing to a near-halt, the IRS is warning that absent a deal, up to two-thirds of U.S. taxpayers will have to wait next year to file their returns.

In a letter to the top House and Senate tax writers from both parties, acting IRS Commissioner Steven Miller said that between 80 million and 100 million taxpayers won’t be able to file on time. That’s up from a November estimate, in which he told lawmakers that around 60 million taxpayers might have trouble filing.

Most taxpayers wouldn’t be able to file their returns until at least the end of March, Miller said.

The warning underscores the real-world chaos that would ensue if President Barack Obama and House Speaker John Boehner don’t reach a budget deal by Dec. 31.

The trouble all stems from uncertainty over how Congress might handle the alternative minimum tax. The parallel tax system has been in place for decades to ensure that even the richest Americans pay some level of tax. But it was never indexed for inflation, so Congress has to agree to a “patch” every few years.

The last patch expired at the end of 2011. Unless Congress acts, the tax would suddenly hit 30 million additional taxpayers – many of whom aren’t aware of the potential hit – on their 2012 tax bills.

Miller said the IRS has programmed its computers to assume that Congress will agree to a last-minute patch, as it has in previous years. But if a deal doesn’t come together, Miller said that millions of Americans will have to wait for the IRS to alter its programs.

“If an AMT patch is not enacted by the end of this year, the IRS would need to make significant programming changes to conform our systems to reflect the expiration of the patch,” Miller wrote.

Many lawmakers have suggested that they could address the AMT in early January if Washington falls off the fiscal cliff. But Miller said that even that scenario creates problems.

“If Congress were to enact a new AMT patch, the time and substantial expense necessary for the IRS to reprogram its systems to reflect expiration of the patch would ultimately be wasted,” he wrote.

Low-income taxpayers and others who clearly wouldn’t be subject to the AMT won’t get a break either. Miller said that the agency would be reluctant to process some returns while waiting to fix its computers to handle other filings.

“Allowing only some taxpayers to file as we reprogram could substantially increase the risk of fraud and error in initial filings as well as create the potential for a large number of amended returns,” he wrote.

Source: POLITICO

{Matzav.com Newscenter}


2 COMMENTS

  1. How inept!

    When writing the program, the programmer should have copied the program and the relevant portiion with an alternative table of details set to be changed and inserted if needed.

    It shouldn’t need a complete re-write!

  2. I thought everyone has to wait until next year (2013) to file their 2012 tax returns – or does it meant that two thirds of people will have to wait until 2014?

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