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Congress' tax bill stall threatens timely refunds
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IRS delays printing forms
Some disruption already is taking place. As Congress was leaving for its Thanksgiving break with no deal in sight, the IRS was going to press with the forms for the 2007 tax year.
Spires said the agency has postponed printing the AMT form and 11 others affecting smaller tax issues that Congress has promised to deal with but has not.
The IRS has done the design work on the new forms after receiving assurances from Democratic and Republican leaders on the taxwriting committees that Congress will enact an AMT fix this year similar to legislation passed last year.
Congress returns this week. But it will take about seven weeks after a bill is passed and signed into law to do the necessary programming and testing before those forms could be presented to the public, Spires said.
H&R Block said 60 percent of its clients who claim credits using forms affected by pending legislation normally file by the end of February. A delayed refund could cause hardship for those people in paying holiday bills or addressing other immediate financial problems, according to the company.
Aides on the taxwriting committees said they were unaware, at this point, of any suggestions to extend the April 15 filing deadline if the filing season is contracted because of the AMT dilemma.
Group: $87 billion in refunds could be delayed
The IRS oversight board, using past agency data, said that if the start of the filing season is pushed back two weeks to Jan. 28, it would delay some 5.6 million refunds totaling $17 billion. A Feb. 18 starting date would delay 32 million refunds totaling $87 billion.
The report came after weeks of warnings — from President Bush, Treasury Secretary Henry Paulson and the IRS — about the consequences of failing to enact a temporary fix. Paulson said the 25 million returns that could be affected in 2007 would pay on average an additional $2,000 in federal income tax.
“This is a huge tax increase that taxpayers do not deserve and Congress must stop,” Bush said Saturday in his radio address, his latest comments on the issue.
That will not be easy.
On Nov. 9, House Democrats pushed through a one-year “patch” to shield 21 million taxpayers from about $50 billion in higher taxes due to the AMT. The bill included an additional $30 billion in tax relief measures such as expanding the child tax credit and extending numerous about-to-expire tax breaks for education costs, small business and military personnel.
But, honoring their pledge not to pass legislation that adds to the federal deficit, Democrats voted to increase taxes by $80 billion in other areas, including for investment fund managers. Tax-adverse Republicans voted unanimously against the bill and Bush said he would veto any bill that included a tax increase.
In the Senate, Finance Committee Chairman Max Baucus, D-Mont., has floated a proposal to find ways to pay for the tax credits, but not the AMT fix. There was no deal with Senate Republicans before the Thanksgiving break, and it was unclear whether House Democrats — or the president — would accept Baucus’ approach.
Congress’ Joint Committee on Taxation estimates that, without a fix, about half of taxpayers with adjusted gross incomes in the $75,000-$100,000 range will be affected by the AMT this year.
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