What is AMT?
The Alternative Minimum Tax (AMT) is a near flat tax rate imposed on individuals, corporations, estates, and trusts. Getting taxed under AMT usually requires fairly high income levels. The end result ensures that most high income earners have to pay some income tax. Although the AMT exemption amount is not adjusted to inflation, it is usually “patched” by congress at the end of each year with legislation.
Patching
The IRS is currently tentatively waiting for congress to pass the 2013 patch. A patch before year-end could be implemented with minimal delays to most taxpayers. A patch after year-end, according to IRS Commissioner Steven Miller, could have serious repercussions for tax payers. The IRS would have to instruct over 60 million taxpayers that they can’t file or process their tax return until system changes are done.
No Patching
In a worst-case scenario and no patch is passed then taxpayers may be subject to a much larger tax liability for 2012. Without a patch, the AMT exception and rates reduce back to their 2000 levels.
Taxfoundation.org recently calculated how the lack of AMT patches, expiration of Bush-era and Obama tax cuts, and other affected tax credits would change the average family’s tax liability in each state. The average income for a four-person family in Georgia was $65,851 in 2011. This could mean a $3,047 increase in taxes when compared to 2011 tax law. This would be a 4.63% increase overall. How this could affect other states can be viewed here.
Of course, this would only happen in a scenario of no new legislation passing. New tax and spending changes may end up taking place at the end of the year.
What can I do?
The best thing you could do is contact your representatives and demand that the 2013 AMT patch is passed quickly. You can find the contact information for your state’s Senator here and a link to contact your House Representative here.
