Congress passes HR 4351, the AMT Relief Act of 2007

On Wednesday, Congress passed HR 4351, the AMT Relief Act of 2007. This bill is meant to patch the AMT law for the 2007 tax year. Text of the new act can be found here.

Highlights of the bill:

1. Extention of AMT relief through 2007.
2. New AMT exemption amounts: $66,250 for joint filers, $44,350 for individual filers.
3. Decrease in earned income floor for child tax credit to $8500.

The bill’s passage came at the last day of the session, and is expected to delay the tax season. The IRS estimated that it could take seven weeks to update their central computers with the law changes.

The late season start will affect millions of taxpayers looking for early tax refunds. The IRS estimates that seven weeks will be required to make changes to their computer systems. This could delay the start of tax season by a month, according to estimates. The filing deadline has not been changed from April 15th, but the IRS has left that as an open possibility.

Tax professionals who cater to this group should be prepared for the confusion, as refunds will ultimately be delayed.

From the SF Chonicle:

The IRS has said it needs seven weeks from the patch’s enactment to adjust its computers to the change. Given the lag time, as many as 15.5 million tax refunds totaling $39 billion will be delayed next year, the IRS oversight board has estimated. In other words, 11 percent of 140 million filers will probably have to wait a little longer to get their money back from the IRS.

“The filing season usually starts the second week in January,” said William Fleming of PricewaterhouseCoopers, an accounting firm. But the delay in passing the patch, he said, “could cause a delay in early filing by as long as a month and a delay in getting refunds by the same period of time.”

“The IRS is doing all it can to have a fully successful filing season,” Treasury Secretary Henry Paulson said. “However, it is likely that there will be some delays, including delays of some refunds.”

Mddle and upper-middle income taxpayers will also be affected. AMT income exclusion limits are raised to $44,350 for individuals and to $66,250 for married couples.

The IRS has released the following revised federal tax forms affected by the law (and more will likely come):

1040 Schedule R, 1040A Schedule 2, 8396, 5695, 8839, 8859, 8880, and 2441

Orange Door, Inc. is conducting a detailed analysis of the effect of the new law, and will be providing support for these new forms with Orange Tax Suite Pro 2007.

If you have any questions regarding the new law, please feel free to contact us.