ENROLLED AGENTS - AMERICA'S TAX EXPERTS

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NAEA Letter Regarding the Absence of Congressional Action on the AMT

November 27, 2007

The Honorable Max Baucus

Chairman, Senate Finance Committee
219 Dirksen Senate Office Building
Washington, DC 20510

The Honorable Charles Grassley
Ranking Member, Senate Finance Committee
219 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Baucus and Ranking Member Grassley,

As president of the National Association of Enrolled Agents (NAEA), I write on behalf of approximately 40,000 enrolled agents (EAs) nationwide. The purpose of this letter is to share with you our concern about the absence of congressional action on the alternative minimum tax (AMT).

The tax law as it is currently written will hit millions of taxpayers with an unexpected tax increase this year, in the form of the AMT. You have repeatedly stated that Congress will act, as it has done in the past, to hold harmless most taxpayers from the AMT. Yet, Thanksgiving is just behind us and no such legislation has been enacted. I regret to say that through its inaction, all Congress served up was an extra helping of uncertainty.

While we remain optimistic that Congress will increase the AMT exemptions before the end of the year, we are troubled by the potential havoc such late action will wreak on the filing season, and we find ourselves increasingly concerned that Congress will recess for the year without instituting an AMT “patch.” Since it may take up to ten weeks for IRS to update its computer systems, taxpayers will experience delays in the processing of both paper and electronically filed returns and refunds. At the moment, it appears that the filing season may well start in mid-February for the 23 million taxpayers on the AMT bubble PLUS millions more taxpayers whose credits will be treated differently after the AMT patch is passed. Effectively, this shortens the filing season, delays anticipated income tax refunds, and puts great strain on the tax administration system.

This is a glaring example of the difficulty of the temporary approach to dealing with tax code provisions. In a June Finance Committee hearing, NAEA Government Relations Chair Frank Degen, EA, testified that the current approach of patching the AMT “makes meaningful, long-term tax planning impossible for millions of taxpayers” and urged Congress to enact a “lasting solution to the AMT problem.” We hope that if any good comes out of the impending challenges of the upcoming filing season, it is that Congress will fix the AMT once and for all.

NAEA stands ready to assist the committee in its continuing effort to improve the tax administration system.

Sincerely,

Diana Thompson, EA
President

CC: IRS Acting Commissioner—Linda Stiff
Assistant Secretary for Tax Policy—Eric Solomon