AMT Fix Could Delay Your Refund
I’ve read two articles in as many days about the Alternative Minimum Tax (AMT) and how it’s fix might delay refunds for everyone due one. Whether you are affected by the AMT or not, if a fix doesn’t pass soon, you’ll likely have to wait months for your refund.
The AMT ‘fix’
The back story is that the AMT, originally designed to make sure the very wealthy pay at least some tax is, in a word, broken. As the law was written, it wasn’t indexed for inflation. As a result, more and more people are falling into the AMT’s clutches every year.
Our far-sighted federal government annually does what it is best at and dodges the issue temporarily. That is, they pass a one-year fix, each year. This year’s no exception.
The problem is they’ve taken the issue up so late in the year. The IRS has to program computers and print forms based on the current tax code. If that code isn’t set, they either have to delay that work or redo it when changes are made.
The upshot of all this is that if a compromise on the AMT is not reached very soon (like, mid-December soon), it’s likely every U.S. household due a refund will have to wait months to get it.
Don’t rush to file
So you probably shouldn’t be in a hurry to file your 2007 tax return, even if you’re owed money. If you do file early (like most due a refund do), it’s entirely possible you’ll have to file again - this time filing an amended tax return, a 1040X.
I’ve had to file a 1040X before and it’s a pain. The form is short enough and it’s not especially difficult to understand. It’s just that I absolutely hate having to do something twice. I’m not sure if this is still the case, but the year I had to file a 1040X, I had to do so on a paper form, even though I’d filed electronically.
For me, I think I’ll just keep an eye on the situation and, if necessary, file later than usual once the dust settles. Grrr.
November 16th, 2007 at 10:24 am
[…] It seems the Blues’s victims aren’t limited to personal finance writers, as Advanced Personal Finance shows us—a lazy U.S. government could delay your tax refund next year. […]
November 21st, 2007 at 3:55 pm
hahahahaha…. Refund???? good one!
On the more serious side… it is certainly financially better to wind up owing as much as you can without incurring penalties than getting a refund anyway… let the money work for you until april 15 rather than letting it be a no interest loan to the govt.
December 7th, 2007 at 5:05 pm
[…] of the AMT, KMC has an article about why your tax refund might be delayed if Congress doesn’t pass a fix for the AMT formula soon. Let’s all hope our legislators […]