A Lame-Duck Congress and also the AMT Patch

The year is rapidly drawing to a close, and Congress has not however addressed the Alternative Minimum Tax "patch." This so-called "patch" is the adjustment that wants to be made to the AMT exemption quantity to avoid 26 million new taxpayers from falling into the Option Minimum Trap this year, too as to avoid every single of the 4 million already stuck there from paying thousands extra in AMT dollars. With the Republican Party's success in the recent election, will the lame-duck Congress, which is still controlled by the Democrats, be able to get this carried out in time or not?

As of January 1 of this year the AMT exemption reverted back to what it was nearly 20 years ago - an amount substantially lower than what it was for 2009. Through a series of successive and annual temporary "patches" over this 20-year period, the exemption has been indexed for inflation so as to maintain the number of Alternative Minimum Tax payers somewhat constant - at present approximately four million taxpayers. These patches typically have been for just one year at a time due to the fact the cost of doing them is so massive. Some day there might be a permanent fix, however it is unlikely that this can happen anytime soon.

The 2009 AMT exemption amount, itself the product of last year's patch, was $46,700 for single taxpayers and $70,950 for married couples filing jointly. What this exemption amount commonly means is that a taxpayer's Alternative Minimum Taxable Income (AMTI) for 2009 had to be far more than $46,700 higher ($70,950 for couples) than the taxpayer's Standard Tax taxable income prior to the AMT even would start to apply.

For 2010, these exemption amounts revert back to $33,750 for single taxpayers and $45,000 for married couples filing jointly, and will stay there unless Congress acts once more to update them for inflation. The substantial difference in these exemption amounts equates to 26 million possible AMT payers.

The draft Form 6251 for 2010, which might be discovered on the IRS' web internet site, reflects these lower exemption amounts, mainly because the IRS does not have the authority to use a different number until Congress acts.

Caution: if this draft form is being employed by a taxpayer as a 2010 AMT calculator, it'll produce an Option Minimum Tax liability substantially higher than what it most likely will wind up becoming immediately after Congress acts.

Congress returns for its post-election session on November 15th, takes the following week off (Thanksgiving), and then returns for just three additional weeks before the final adjournment of the 111th Congress. The Congressional agenda is over-full, with lots of, a lot of issues to do in addition to taxes. Just inside the tax location, nonetheless, it has to deal with the expiration of the "Bush tax cuts," the expired estate tax, and dozens of "extenders" - those miscellaneous provisions within the tax law that expired on December 31 of last year.

Stay tuned for developments on the patch - "conventional wisdom" is that Congress will get this accomplished, but it's likely to be a bit of a mad scramble as this and all the other legislative requirements are addressed throughout this short period of time.