IRS Acting Commissioner Linda Stiff

Thank you for joining me today. There has been a lot of discussion in the press and on the Hill lately regarding the Alternative Minimum Tax. I'm going to refer to it as AMT from here on. And I'd like to take just a few minutes and discuss the tax-administration implications facing the taxpayers of this country and the IRS as a result of the AMT issues.

As tax administrators at the IRS, our goal is to deliver a successful filing season to the nation's taxpayers. That means two things to us that work at the IRS

• first, that we process tax returns in a timely manner;
• secondly, that we issue tax refunds to the millions of taxpayers who expect and deserve them.

Legislation enacted late in the year makes it increasingly difficult for us at the IRS to deliver a successful filing season, meaning that we're able to process tax returns timely and put the refunds in the hands of the taxpayers timely. The current situation involving the alternative minimum tax is adding increased risk to our ability to deliver a successful filing season this coming January.

Let me describe that situation for just a moment. The AMT was originally designed to ensure that higher-income taxpayers could not use popular deductions and credits to completely eliminate their tax liability. While the AMT was not indexed for inflation, the Congress has stepped in and enacted a series of temperary patches through the years to prevent middle and low-income taxpayers from being affected by the AMT. At the end of 2006, the latest AMT patch that Congress enacted expired.

As we stand here before you today, we don't have a patch for tax-year-2007 returns that are about to be filed in January. We are at a crucial point in the IRS for the upcoming filing season on this issue. Any changes made in November or December will lead to later processing of tax returns and major delays in our ability to issue tax refunds. Enactment of a patch, like we've experienced in prior years, in mid November, or even later in December, would delay processing and refunds for as many as 50 million taxpayers. That means that we wouldn't be able to process the tax returns of the 50 million in a timely manner.

This delay will affect lower-income, middle-income, and upper-income taxpayers.  It will delay processing of tax  returns.  I want to slice the 50 million  for you into two buckets, okay?  It will delay processing of tax  returns and payments of refunds  for the 25 million taxpayers who  would have been subject to the  AMT without a patch.  Last year there was four million  taxpayers subject to AMT.  If we don't have a patch, 25  million will be subject.  If we get a patch in late  November or December, we'll have  to delay the refunds of that  potential 25 million while we  catch up. 

Additionally, over and above  that 25 million, there is  potentially another 25 million  taxpayers who could see delays  in our processing of their  returns and the receipt of their  refunds.  This is because a wide group of  taxpayers, including taxpayers  who claim the Child Tax Credit,  the Child and Dependent Care Credit, and Education Credits  are impacted by the AMT law.  The AMT law affects not only  taxpayers who are subject to  AMT, but it affects taxpayers  who claim those credits, the order in which they claim them,  and the amounts which they'll be  entitled to.  All of these folks could be  caught in the delay if we don't  have a patch enacted before  November and December. 

Did we provide scenarios to  everyone?  It actually gives you an  indication of what the  taxpayers' individual  experiences could be, both with  patch and without the patch.  Now, having said that that's the  taxpayer impact, as tax  administrators, we need to be in  a position to administer the  filing season and administer the  laws as they exist on the books  at the point in time of January  14, which is when we will  initiate the filing season for  next year.  A major challenge for us will  involve the reprogramming of  IRS return processing system.  If a patch is enacted, the IRS  must reprogram, test, and  integrate the changes into our  complex computer programs and  systeMs.  We estimate that will take us 12  to 13 weeks from the time a bill  is signed into the law.  You can do the math.  If the law or the patch is not  enacted until mid-to-late  December, the IRS systems will  not be ready to process tax  returns that have AMT or any of  the 11 credit forms that I  described earlier, affecting  these 50 million taxpayers until  mid-to-late March.  The IRS would have to delay  receipt of the electronically  filed returns.  Taxpayers filing paper -- We  would have to shelve those  returns and hold them until our  systems were able to do the  processing.  One other important point -- If,  for some reason, the Congress  doesn't enact a patch, it will  mean that 21 million more people  than last year are going to be  hit by the AMT. 

That will have a dramatic effect  on a variety of individuals,  turning expected tax refunds  into tax bills.  You've got the four examples in  front of you that give you a  sense of the impact from a  taxpayer perspective. 

Now, before I close and open up  for question, I want to assure  everyone that the IRS stands  ready to work quickly and  swiftly to administer the law  and implement any legislation  enacted by the Congress.  We will work hard.  We will do everything we can to  get it right and minimize burden  on taxpayers.  We will do everything within our  power to ensure that the filing  season is delivered, returns are  processed, and refunds are in  the hands of taxpayers promptly.

Thank you, and if you have  any other follow-up questions,  feel free to call our press  office at (202) 622-4000. 

Audio File: Alternative Minimum Tax - IRS Acting Commissioner Linda Stiff - 02/22/08, 7 minutes long.  The audio file will open in Windows Player, and you will be able to pause, fast forward, rewind, mute, and control the volume from the interactive player. 

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