CEDAR RAPIDS, IA--(Marketwire - November 28, 2007) - Most taxpayers who file their tax return
early do so because they are eager to claim their anticipated refund.
However, this tax season, as many as 50 million taxpayers who file their
return early may be disappointed by how long it takes to get their expected
refunds.
The cause of the probable hold up? Lawmakers' failure to approve a
temporary patch to the Alternative Minimum Tax (AMT) -- a parallel income
tax system, implemented in 1969, designed to prevent 155 wealthy Americans
from aggressively using tax credits, deductions and legal tax shelters as
tools to help them avoid having to pay federal income tax.
The AMT has become a topic of heated discussion among taxpayers and
lawmakers alike because the AMT now reaches into the pockets of the
middle-class. Regular income tax brackets are indexed for inflation, but
AMT thresholds are not. Thus far, the full effects of the AMT have been
deferred by Congress enacting a series of temporary patches -- boosting the
amount of the AMT exemption. However, the last temporary fix expired at the
end of 2006.
If Congress fails to ratify another provisional one-year increase within
the next few weeks, the number of households paying the AMT will jump from
approximately 4 million in 2006 to nearly 23 million for 2007. Another 27
million filers, who claim a variety of credits connected to the AMT, are
also projected to feel the sting of increased taxes as a number of these
credits (i.e. child and dependent care, education, residential energy and
state/local taxes) have not been extended to 2007.
Although the House approved a temporary patch to the AMT in mid November
for 2007(which also extends approximately a dozen popular tax deductions
and credits), the Senate has yet to vote on the legislation; and,
Presidential veto is expected due to other legislation contained in the
bill.
When Congress reconvenes from Thanksgiving Break, lawmakers will only have
a few days to pass a bill into law before adjourning for Winter Break.
Assuming parties can come to terms and the passage of last minute
legislation is made to happen, the news is both good and bad for taxpayers.
The good news: it's expected the AMT exemption will receive a boost for
2007 as compared to the year prior. Similarly, several credits and
deductions are also expected to be extended for the coming tax season. The
bad news: there will likely be major delays in processing your refund due
to the late changes.
The IRS, which was recently up against a hard deadline to have its forms
sent to the printer by mid November, has decided that the IRS' forms shall
be in accordance with the laws as they stand today -- assuming no patch for
the AMT and that a number of deductions and credits have expired.
Late legislation means the IRS will need to roll out new forms and
instructions as well as make programming changes to its computer systems
that are used to process tax returns -- in all taking approximately 10
weeks after the bill is signed into law. That means, even if Congress
passes a change to the bill, an estimated 50 million filers, who would have
been affected by the AMT and other expiring credits and deductions
(totaling $75 billion in tax refunds), will be faced with processing set
backs. Worse yet? Millions of other filers who are not impacted by the AMT
may also face delays due to the backlog in processing returns.
The best advice a taxpayer can follow this year: find out early if the AMT
affects you and use e-file. For a number of years, the percentage of
filers submitting their tax return electronically to the IRS has shown
increases in the double digits largely because it's convenient, secure and
reduces the opportunities for common filer mistakes. But those who e-file
their tax return also receive "Proof of Filing" which is an acknowledgement
issued to the filer reflecting when the IRS received and accepted the
return. Conversely, if an error is detected, the IRS can communicate the
problem fast -- even pinpointing the location of the error in the tax
return.
"It appears early filers impacted by the AMT will likely incur some
processing delays -- whether the filer submits a paper return or e-files.
However, those who submit their IRS return electronically will still fair
better because, as the IRS works to process backlogged returns, returns
received electronically will be processed faster," says Stephanie Behrends,
spokeswoman for 2nd Story Software, Inc. -- makers of the popular tax
program TaxACT.
"While all TaxACT editions follow existing laws, it is common some federal
forms are not ready when the filing season gets underway. Our staff is
comprised of experienced CPAs, accountants and software developers who are
accustomed to making online changes under difficult circumstances such as
these."
There are 12 forms that will be affected by the AMT which will likely
trigger processing delays for filers (one for the AMT and 11 credit forms).
They include:
Form 6251 - Alternative Minimum Tax
Form 1040, Schedule R - Credit for the Elderly or Disabled
Form 1040-A, Schedule 2 - Child and Dependent Care Credit
Form 1116 - Foreign Tax Credit
Form 2441 - Child and Dependent Care Credit
Form 5695 - Residential Energy Credits
Form 8396 - Mortgage Interest Credit
Form 8839 - Qualified Adoption Expenses
Form 8859 - District of Columbia First-Time Homebuyer Credit
Form 8863 - Education Credits
Form 8880 - Credit for Qualified Retirement Savings Contributions
As for the last form, Form 8801 - Credit for Prior Year Minimum Tax,
significant changes to a section of the form is also currently under
review.
To get a clear picture of the AMT impact on your return, visit TaxACT.com
and start a new return today. TaxACT Preview has both versions of the AMT
changes programmed. Simply enter your data using the Q&A and you can
select to see your refund amount as the law stands today vs. if Congress
passes a change. If there is a difference in the two methods of
calculating AMT, chances are your refund will be delayed.
More information regarding TaxACT may be found by visiting
www.TaxACT.com.
About TaxACT
As a trusted and secure source for tax preparation and electronic filing
services for millions of taxpayers, TaxACT.com is the only Web-based tax
planning and preparation solution to offer taxpayers a year-round solution.
TaxACT is the pioneer of totally free federal tax preparation software and
online services. Dedicated to providing consumers with a complete Web-based
tax resource for a decade, TaxACTOnline.com is the 2nd most visited online
destination for tax preparation services.(1) Designed to make preparing
taxes electronically possible for everyone for little to no-cost, TaxACT
was the first to offer free federal electronic tax preparation, printing
and electronic filing services directly to all American taxpayers.
About 2nd Story Software, Inc.
2nd Story Software, a privately held company founded in 1998, is critically
acclaimed as being a leader in developing and marketing affordable tax
preparation software and Web-based services directly to consumers. The
comprehensive suite of TaxACT products continues to empower its users to
devise well-informed tax strategies with ease, while looking out for the
cost-conscious. More information regarding 2nd Story and the TaxACT product
line may be found by visiting
www.TaxACT.com.
(1) According to collective week end-reports released by Hitwise™ during
the 2004, 2005, 2006 primary tax seasons, TaxACT Online ranked second in
the percentage of traffic it received as compared to other monitored
Web-based tax preparation services. More information regarding Hitwise may
be viewed by visiting
www.hitwise.com.
2nd Story Software, Inc., company and product logos, TaxACT and TaxACT
Online, among others, are registered trademarks of 2nd Story Software.
Other party trademarks or service marks are the property of their
respective owners and should be treated as such.
As a practical note, taxpayers are encouraged to consult a legal or tax
professional if in doubt. TaxACT provides general guidance and not legal or
specific tax advice.
Contact Information: Contact Information
Stephanie Behrends
Public Relations Manager
2nd Story Software, Inc.
Phone: (319) 373-3600
Email: