IRS delays for AMT patch may not be as bad as first feared!

Author: Michael Kitces

Team Kitces

Michael Kitces is Head of Planning Strategy at Buckingham Strategic Wealth, which provides an evidence-based approach to private wealth management for near- and current retirees, and Buckingham Strategic Partners, a turnkey wealth management services provider supporting thousands of independent financial advisors through the scaling phase of growth.

In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

Read all of Michael’s articles here.

While Congress was debating the so-called "AMT patch" that
ultimately became the Tax Increase Prevention Act of 2007 (H.R. 3996),
much news was made about the fact that the legislation was passed so
late in the year that the IRS would need time to reprogram their
systems and thus wouldn't be able to process some tax returns in a
timely manner.

The IRS has now announced that they expect their
systems to be fully functional with all of the necessary updates by
February 11th. However, they have also announced that in fact the
systems are already updated to properly process Form 6251, the
Alternative Minimum Tax form for individuals.

Instead, the IRS
has indicated that the primary forms that cannot be processed until the
February 11th target date are the following:

• Form 8863, Education Credits
• Form 5695, Residential Energy Credits
• Schedule 2 (Form 1040A), Child and Dependent Care Expenses for Form 1040A Filers
• Form 8396, Mortgage Interest Credit
• Form 8859, District of Columbia First-Time Homebuyer Credit

Notably, most of the above were not actually a function of Congress'
legislation increasing of the AMT exemption (the primary purpose of the
so-called "AMT patch"). Instead, the above actually suggest that the
IRS' primary problem was the fact that the Tax Increase Prevention Act
of 2007 also extended taxpayers' ability to use most nonrefundable
personal tax credits to offset AMT liability (e.g., the dependent care
credit, the HOPE and Lifetime Learning education credits, etc.).

If
you aren't one of the approximately 11 million taxpayers claiming one
of the aforementioned credits, then you shouldn't have any issue filing
before the February 11th deadline, even if you are subject to the AMT -
a nice benefit for those anticipating a tax refund, who would like to
receive it as soon as possible!

You can see more information from the IRS about how the AMT is affected the 2008 tax filing season by clicking here.