Taxpayer Advocate Service: Your Voice at the IRS

National Taxpayer Advocate Annual Report to Congress

Repeal the AMT

AMT Graphic: Graphic shows the AMT is complicated, burdensome, and doesn’t achieve its original goal of preventing wealthy taxpayers from escaping tax altogether. About 7,000 millionaires didn’t pay tax in 2011.

 

ALTERNATIVE MINIMUM TAX CONTINUES TO BURDEN TAXPAYERS

As our Annual Report went to press on December 31, it appeared an agreement has been reached to patch the Alternative Minimum Tax (AMT). For taxpayers and the IRS, that is good news.

However, even if a permanent patch is enacted, the AMT is still extremely burdensome for taxpayers, and will continue to affect many middle and upper-middle income taxpayers, who presumably were not its intended target. At the same time, the AMT does not affect many wealthy taxpayers, who still manage to pay no income tax. One projection estimated that about 7,000 millionaires reportedly paid no income tax in 2011.

Taxpayers spent about 18 million hours for the 2000 tax year (the most recent year for which we found data) completing and filling out AMT tax forms and determining whether they owed the tax. The AMT requires millions of taxpayers to essentially compute their tax liabilities twice – once under the regular tax rules and once again under the AMT rules – and then pay the higher of the two tax amounts.

The National Taxpayer Advocate reiterates her longstanding recommendation that the individual AMT be repealed.

Read the Full Discussion

The AMT does not achieve its original purpose. Many middle and upper-middle class taxpayers pay the AMT, while most wealthy taxpayers do not, and thousands of millionaires pay no income tax at all. At the same time, the AMT adds significant complexity to tax computations, requiring millions of taxpayers essentially to compute their tax liabilities twice – once under the regular tax rules and again under the AMT rules – and then to pay the higher of the two tax amounts.

- Nina Olson, National Taxpayer Advocate

Other Most Serious Problems