The IRS may need to delay the start of the 2013 filing season, and taxpayers may experience delays in being able to file or delays in having their tax returns processed, because of any tax legislation that is passed in the final two months of 2012. However, if no new tax legislation is passed, the IRS may need to significantly delay the start of the filing season so that IRS can re-program their computers. This information was gleaned from a letter from Acting Commissioner Steven Miller, who wrote to Representative Sander Levin, who sits on the House Ways and Means Committee.
In his letter, Acting Commissioner Miller responded to requests from Congressional representatives on how the Internal Revenue Service is preparing for the upcoming filing season in 2013. He focused his attention on two separate issues that could cause delays in the processing of tax returns: (1) whether the parameters of the alternative minimum tax are revised (referred to as "the AMT patch"), and (2) whether any already expired tax deductions are revived and made effective for 2012 (the "tax extenders").
The AMT patch poses a significant challenge to the IRS and to taxpayers. The Acting Commissioner revealed that:
- 28 million more taxpayers could be subject to AMT in 2012 than in 2011
"Under current law, however, the thresholds revert to much lower levels for 2012 -- $33,750 for individuals and $45,000 for married taxpayers filing jointly. At these levels, approximately 33 million taxpayers would pay AMT for tax year 2012 (with returns filed in the spring of 2013). This is about 28 million more taxpayers who would pay the AMT than if the exemption amounts were increased as in the past."
- Processing delays will be "minimal" if Congress passes an AMT patch
"...if Congress enacts an AMT patch, including both increased exemption amounts and the special tax credit ordering rules, before the end of the 2012 calendar year, the IRS would likely be able to open the 2013 tax filing season with minimal delays for most taxpayers."
The Acting Commissioner also noted that the IRS is already prepared to go ahead with an AMT patch, and that not much re-programming would be needed if the AMT patch is legislated.
- Processing could be delayed until "late March" if Congress decides not to pass an AMT patch
"... in order to allow time for the IRS to make the programming changes necessary to conform our processing systems to reflect expiration of the AMT patch and the credit ordering rules, the IRS would, at minimum, need to instruct more than 60 million taxpayers that they may not file their tax returns or receive a refund until the IRS completes the necessary systems changes. Because of the magnitude and complexity of the changes, it is entirely possible that these taxpayers would not be able to file until late March 2013, if not even later."
The Acting Commissioner also addressed the possibility that "tax extenders" are included in any new legislation:
- Processing could be delayed by about four weeks if Congress decides to revive and extend already expired tax provisions
"Two years ago, Congress enacted legislation extending these provisions retroactively in mid-December 2010. As a result, the IRS made the necessary changes to its forms and systems, and delayed the opening of the 2011 filing season by four weeks for approximately 9 million affected taxpayers.
"If the IRS were presented with a similar scenario of late enactment of tax extenders legislation this year, I would anticipate a similar outcome. There would be some inconvenience and delayed refunds for a substantial number of taxpayers, but the overall risk to the tax filing season would be manageable."
Taxpayers have experienced processing delays before.
In 2007, the IRS scrambled to address the Tax Relief and Health Care Act of 2006, which extended several lapsed tax deductions. That legislation was passed both chambers of Congress by December 9, 2006, and was signed by the President on December 20, 2006. For the tax returns that year (2006), we had to manually "write in" special codes on Form 1040 and Schedule A to indicate tax breaks that were extended but weren't printed on the forms.
In 2011, the IRS delayed accepting certain tax returns until February 14, 2011. The delay was caused by the Tax Relief Act, which had passed both chambers of Congress by December 16, 2010, and was signed by the President on December 17, 2010. That legislation extended some already lapsed tax deductions, notably for the sales tax deduction, classroom expenses, and the tuition deduction.
The full letter is available at:
Steven Miller, Letter to Sander Levin, November 13, 2012, made available by the Committee on Ways and Means, http://democrats.waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/Final_Response_Levin_37392.pdf.