TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
Procedures Were Not Always Followed When Resolving Alternative Minimum Tax Discrepancies
July 30, 2008
Reference Number: 2008-40-146
This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.
Redaction Legend:
1 = Tax Return/Return Information
Phone Number |
202-622-6500
Email Address | inquiries@tigta.treas.gov
Web Site |
http://www.tigta.gov
July 30, 2008
MEMORANDUM FOR COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Procedures Were Not Always Followed When Resolving Alternative Minimum Tax Discrepancies (Audit # 200740037)
This report presents the results of our review of the
Alternative Minimum Tax (AMT). The
overall objective of this review was to determine
whether the Internal Revenue Service (IRS) computer systems accurately identified
and computed the AMT for taxpayers who might be liable, including both taxpayers
who claimed the AMT and those who did not claim it but should have. This review was part of the Treasury
Inspector General for Tax Administration Fiscal Year 2007 Annual Audit Plan and
related to the Fiscal Year 2007 Major Management Challenge of addressing the
complexity of the tax law.
Impact on the Taxpayer
The number of taxpayers affected by the AMT is expected to
grow significantly in the next 10 years if Congress does not continue to
increase exemption amounts. AMT revenue increased
from $16.7 billion for Tax Year 2005 to $21.4 billion for Tax Year 2006. Determining whether the AMT is owed is
complex and time consuming, and the complexity causes taxpayer errors. Computer checks calculate what the AMT should
be based on the information reported on the tax return. Tax returns with an AMT discrepancy are sent
to IRS tax examiners for review. Our
review identified that tax examiners did not always follow established
procedures when resolving these discrepancies, which in some instances caused taxpayers
to be assessed incorrect amounts.
Synopsis
The AMT has its own definition of income subject to tax and its own tax rates. Taxpayers might not know they are subject to the AMT until they compute their tax under the regular tax system. The IRS recognizes the difficulty the AMT causes taxpayers both in determining whether the AMT applies to them and, if applicable, in computing their specific AMT liabilities. The IRS provides taxpayers with tools to determine whether they will have to prepare an Alternative Minimum Tax–Individuals (Form 6251)[1] to determine their AMT liabilities. These tools include the Worksheet To See If You Should Fill In Form 6251 and the AMT Assistant on the IRS web site (IRS.gov). We reviewed a random sample of 80 tax returns filed with a Form 6251. In every case, the AMT Assistant correctly notified the taxpayer whether a Form 6251 should or should not be completed.
Computer
checks have been developed to identify discrepancies in the reporting of the
AMT. However, examiners did not always
correctly resolve AMT discrepancies.
Despite the tools provided to assist taxpayers, the complexity of the AMT causes errors in determining and computing the tax. In Calendar Year 2006, computer checks identified about 226,000 discrepancies between the AMT figures reported, or not reported, by the taxpayers and the amounts computed by the IRS. When a discrepancy exists, the tax return is sent to an IRS tax examiner, who reviews the return and looks for obvious input errors or misplaced entries. The tax examiner determines where the difference occurred. If the examiner cannot resolve the issue, a notice is sent to the taxpayer asking for additional information or informing the taxpayer that the AMT calculation was incorrect.
We reviewed a random sample of 52 tax returns filed in Calendar Year 2006 on which IRS computers identified a discrepancy. For all 52 cases, computer checks correctly identified that there was a discrepancy, and the cases were correctly sent to tax examiners for further review. However, examiners did not follow procedures when resolving 11 (21 percent) of the 52 cases. Of these 11 cases, 3 resulted in the examiners incorrectly computing the amount of tax owed. Correct identification and resolution of discrepancies is essential to avoid further increasing the burden for taxpayers subject to the AMT.
Recommendation
The Commissioner, Wage and Investment Division, should provide information to tax examiners reiterating the importance of correctly resolving AMT discrepancies and highlighting specific issues that could lead to incorrect resolution.
Response
IRS management agreed with our recommendation. In the Submission Processing Division employee annual training, the IRS Error Resolution function will emphasize the effect of the AMT on taxpayers and the correct processing of returns to which it applies. In addition, during the filing season,[2] a reminder will be issued on the Submission Processing Division “Hot Topics” web site referencing the complexity of resolving AMT discrepancies and highlighting specific issues as necessary. Management’s complete response to the draft report is included as Appendix VI.
Copies of this report are also being sent to
the IRS managers affected by the report recommendation. Please contact me at (202) 622-6510 if
you have questions or Michael E. McKenney, Assistant Inspector General for
Audit (Wage and Investment Income Programs), at (202) 622-5916.
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix
IV – Legislative History of the Alternative Minimum Tax
Appendix
V – Alternative Minimum Tax–Individuals (Form 6251)
Appendix
VI – Management’s Response to the Draft Report
Abbreviations
|
AMT |
Alternative Minimum Tax |
|
IRS |
Internal Revenue Service |
|
TY |
Tax Year |
In 1969, the Secretary of the Treasury reported that 155 individuals, each with an Adjusted Gross Income[3] of $200,000, paid no Federal income tax in 1966. Subsequently, Congress enacted the minimum tax to ensure that taxpayers pay at least a minimum amount of tax. This minimum tax was a precursor to the current Alternative Minimum Tax (AMT)[4] that was created in 1978. The AMT is a recalculated tax to reduce the ability of high-income individuals to avoid paying any tax on their income. The AMT eliminates many deductions and credits allowed under the regular tax system. In 1969, high-income taxpayers were defined as those who had income of at least $200,000. If adjusted for inflation, this figure would be equal to more than $1.1 million dollars today.
For Tax Year (TY) 2005, the AMT generated $16.7 billion in additional revenue. That figure grew to $21.4 billion (28 percent) for TY 2006 and will continue to grow as the number of taxpayers subject to the AMT increases.
The AMT continues to affect more taxpayers
Congress
has temporarily increased AMT exemption amounts to reduce the number of
taxpayers subject to the AMT.
In 1970, only 20,000 taxpayers were subject
to the AMT. The number of taxpayers who
paid the AMT remained fairly steady from 1987 through 1992 and increased only
slightly through 1997. However, the
number began to grow considerably in 2002 and is expected to continue to grow
significantly in the next
10 years. In recent years, Congress has
temporarily increased the AMT exemption amount to help reduce the number of
taxpayers subject to the AMT. For
example, in 2006, the temporary exemption increase prevented more than 18
million taxpayers from paying the AMT.
Similar legislation was again passed in December 2007 for TY 2007. Congress estimated that the temporary
exemption increase would reduce the number of taxpayers who would pay the AMT
in TY 2007 from 23 million to 4 million.
Although the AMT was originally intended for taxpayers
with high income, a growing number of middle-income taxpayers are subject to
the AMT. As shown in Figure 1, almost 46
percent of those who paid the AMT for TY 2005 had Adjusted Gross Income of
$200,000 or less.
Figure 1: Number of Taxpayers Reporting AMT Liabilities for TY 2005
|
Adjusted Gross |
Number of |
Percentage of |
|
Less than $0 |
5,416 |
0.1% |
|
$0 to $100,000 |
352,243 |
8.9% |
|
$100,001 to $200,000 |
1,443,404 |
36.5% |
|
$200,001 to $300,000 |
1,204,896 |
30.5% |
|
$300,001 to $400,000 |
468,924 |
11.9% |
|
$400,001 to $500,000 |
214,022 |
5.4% |
|
$500,001 to $1,000,000 |
193,782 |
4.9% |
|
More than $1,000,000 |
69,809 |
1.8% |
|
Total |
3,952,496 |
100.0% |
Source: Analysis of the Internal Revenue Service (IRS) Individual Return Transaction File[5] for TY 2005.
Figure 2 shows the exemption amounts for
single taxpayers and married taxpayers filing joint returns for TYs 1993 through
2007. The exemption amounts are based on
the taxpayers’ filing status and are subtracted from the taxpayers’ Alternative
Minimum Taxable Income. They reduce the
amount of income that is used to determine the AMT.
Figure 2: Congressional Increases to the AMT Exemption Amounts
|
Tax Year |
Exemption
Amount for Single Taxpayers |
Exemption
Amount for Married Taxpayers Filing Jointly |
|
1993-2000 |
$33,750 |
$45,000 |
|
2001-2002 |
$35,750 |
$49,000 |
|
2003-2005 |
$40,250 |
$58,000 |
|
2006 |
$42,500 |
$62,550 |
|
2007 |
$44,350 |
$66,250 |
Source:
Alternative Minimum Tax–Individuals (Form 6251) for TYs 1993 through
2007.
Figure 3 shows the trends in the number
of taxpayers subject to the AMT as well as the number of taxpayers who could be
affected if Congress does not continue to increase exemption amounts.
Figure 3: Growth in the AMT
Figure 3 was
removed due to its size. To see Figure 3,
please go to the Adobe PDF version of the report on the TIGTA Public Web Page.[6]
If Congress does not continue to pass
legislation to increase AMT exemption amounts, the rates will revert to levels
established by the Omnibus Reconciliation Act of 1993.[7] These amounts are $33,750 for single taxpayers
and $45,000 for married taxpayers. For TY
2007, legislation was not passed until
December 2007. Because of the
late passage of this legislation, 13.5
million taxpayers who used 5 AMT-related tax forms or schedules had to wait
until February 11, 2008, to file their returns.
Delaying the processing of these returns allowed the IRS enough time to update and test its systems
to accommodate the changes to the forms without major disruptions to other return
processing operations. We are evaluating the effectiveness of the
IRS’ implementation of the AMT legislation in our review of the 2008 individual
filing season.[8]
Determining whether the AMT is owed is
complex and time consuming
The AMT has its own definition of income subject to tax and its own tax rates. Taxpayers might not know they are subject to the AMT until they compute their tax under the regular tax system. Instructions for the U.S. Individual Income Tax Return (Form 1040) direct taxpayers to fill out the Worksheet To See If You Should Fill In Form 6251[9] or to use the AMT Assistant (the Assistant) on the IRS web site (IRS.gov) to determine whether they will have to prepare Form 6251 to determine their AMT liabilities. Form 6251 is composed of three parts:
· Part I – contains 28 lines and is used to compute a taxpayer’s Alternative Minimum Taxable Income. This Part requires a taxpayer to add certain income-related items back to his or her Adjusted Gross Income to arrive at Alternative Minimum Taxable Income.
· Part II – contains seven lines and is used to compute the AMT.
· Part III – contains 20 lines and is used to compute the AMT using the maximum capital gains rates.
After completing Form 6251, the taxpayer transfers the AMT amount back to his or her Form 1040 and completes the remainder of the tax return. Approximately 8 million taxpayers filed a Form 6251 for TY 2005. Approximately 6.7 million (84 percent) of these taxpayers had their returns prepared by paid preparers.
The complexity of the AMT causes errors in determining and computing the AMT. The IRS developed computer checks to identify taxpayer discrepancies when reporting the AMT. These checks are performed during the processing of the tax return and calculate what the AMT should be based on the information reported on the tax return. The checks identify the following types of tax returns:
· A tax return for which an AMT liability appears to exist but the taxpayer has not claimed the AMT.
·
A tax return for which the amount of the AMT
claimed by the taxpayer differs from the amount computed by the IRS.
When a discrepancy exists, the tax return is identified for further review by an IRS tax examiner, who reviews the return and looks for obvious input errors or misplaced entries. If there are not obvious errors, the tax examiner determines where the difference occurred. If the examiner cannot resolve the issue, a notice is sent to the taxpayer asking for additional information or informing the taxpayer that the AMT calculation was incorrect.
This review was performed at the IRS Wage and Investment
Division Headquarters in
Computer Checks Identify Alternative Minimum Tax Discrepancies; However, Examiners Did Not Always Follow Established Procedures When Resolving the Discrepancies
The IRS
provides tools to assist taxpayers in determining if the AMT applies to them
and, if applicable, in computing their specific AMT liabilities.
The IRS recognizes the difficulty the AMT causes taxpayers both in determining whether the AMT applies to them and, if applicable, in computing their specific AMT liabilities. The IRS has taken steps to help taxpayers better understand their responsibility for paying the AMT. IRS instructions for the U.S. Individual Income Tax Return (Form 1040) direct taxpayers to fill out a Worksheet To See If You Should Fill In Form 6251 to determine if they will have to prepare a Form 6251 to calculate their AMT liabilities.
The IRS also provides the Assistant, which is an electronic version of the AMT worksheet. Taxpayers enter information from their returns, and the Assistant will inform them as to whether they need to complete Form 6251 to determine their tax liabilities. We reviewed a random sample of 80 tax returns filed with a Form 6251. In every case, the Assistant correctly notified the taxpayer whether a Form 6251 should or should not be completed.
Computer checks identify AMT discrepancies
The complexity of the AMT causes taxpayer errors in determining and computing tax liabilities. IRS computer programs calculate what the AMT should be based on the information reported on the tax return. The calculated amount is then compared to the AMT reported by the taxpayer. During Calendar Year 2006, the IRS identified 1) approximately 61,000 tax returns on which taxpayers appeared to owe the AMT but did not claim it on their tax returns and 2) approximately 165,000 tax returns that had discrepancies between the amount of AMT shown by the taxpayer and what was computed by the IRS.
We reviewed a random sample of 52 tax returns filed in Calendar Year 2006 with a difference between the AMT figure provided by the taxpayer and that computed by the IRS. Computer checks correctly identified that there was a discrepancy for all 52 cases, and the cases were sent to IRS tax examiners for further review.
Examiners did not always follow procedures when resolving AMT discrepancies
In resolving the identified discrepancies, examiners did not follow procedures for 11 (21 percent) of the 52 cases sampled. For 8 of those 11 cases, the discrepancy resulted from IRS employees incorrectly transcribing information from paper tax returns to IRS computers when the tax returns were processed. The transcription errors resulted in the taxpayers’ AMT figures being incorrectly computed when the IRS performed its verification. Examiners working these cases identified that the discrepancies were the result of transcription errors but did not correct the transcription errors in IRS computers as required. There was no effect on the amount of tax that the taxpayer owed, and contact with the taxpayer was not necessary because the IRS resolved the errors internally.
For the remaining three cases, the incorrect resolution resulted in an incorrect amount of tax being assessed:
· ****1****
· ****1****
Computer checks accurately identified AMT discrepancies for further review. However, incorrect tax examiner resolution of AMT discrepancies can result in the incorrect calculation of the tax owed. Resolving these discrepancies correctly will help to ensure that taxpayers are correctly paying their tax liabilities. In addition, correct identification and resolution of discrepancies is essential to avoid further increasing the burden for taxpayers subject to the AMT.
Recommendation
Recommendation 1: The Commissioner, Wage and Investment Division, should provide information to tax examiners reiterating the importance of correctly resolving AMT discrepancies and highlighting specific issues that could lead to incorrect resolution.
Management’s Response: IRS management agreed with this recommendation. In the Submission Processing Division employee annual training, the IRS Error Resolution function will emphasize the effect of the AMT on taxpayers and the correct processing of returns to which it applies. In addition, during the filing season, a reminder will be issued on the Submission Processing Division “Hot Topics” web site referencing the complexity of resolving AMT discrepancies and highlighting specific issues as necessary.
Appendix I
Detailed
Objective, Scope, and Methodology
Our overall
objective was to determine whether the IRS computer systems accurately
identified and computed the AMT for taxpayers who might be liable, including both
taxpayers who claimed the AMT and those who did not claim it but should have. Our review included an analysis of the demographics
of those taxpayers affected by the AMT.
To accomplish this objective, we:
I.
Evaluated
the information that taxpayers can use to determine their need to consider
whether they might owe the AMT.
A.
Reviewed
the U.S. Individual Income Tax Return (Form 1040) and related instructions and Your Federal Income Tax For Individuals (Publication
17) for references to AMT issues. We
also reviewed the Alternative Minimum Tax–Individuals (Form 6251) and related
instructions for clarity and reviewed draft publications covering the AMT. In addition, we reviewed the AMT Assistant on
IRS.gov for clarity and ease of use.
II.
Identified
the IRS processing controls in place to identify and correct returns that are
claiming the AMT or should be claiming the AMT.
A.
Reviewed
the Internal Revenue Manual to determine the information from the Form 6251
that was transcribed for paper returns and was available in the computer system
for both paper and electronic returns. We
reviewed the Internal Revenue Manual processing procedures related to the AMT for
the IRS Code and Edit and Error Resolution functions.
B.
Reviewed
any Examination function referral procedures to determine how a return gets to the
Examination function.
C.
Reviewed
the computer programming to determine how the IRS calculated potential AMT.
III.
Evaluated
the processing controls by reviewing a sample of tax returns that had the AMT
assessed.
A. Extracted all TY 2005 Forms 6251 filed in Calendar Year 2006 from the IRS
Return Transaction File[10] in the Treasury Inspector General for Tax Administration
Data Center Warehouse[11] and separated the records into 2 files: cases for which the AMT was more than $0 and
cases for which the AMT equaled $0. Data were validated to the Integrated Data
Retrieval System.
B.
Randomly sampled 52 of the 7,583 tax returns
processed at all Submission Processing sites for which the AMT was more than $0
and there was a significant[12] difference between the AMT calculated by the
IRS and the AMT calculated by the taxpayer.
A random number generator was used to ensure that tax returns had an
equal chance of being selected. We reviewed
the sample cases to determine whether IRS processing procedures were correctly
followed. We determined that a
statistically valid sample was not needed based on our review of these 52
returns.
IV.
Determined
the number of taxpayers who filed Form 6251 but were not required to pay the AMT
(AMT = $0).
A.
Randomly
sampled 28 of the 4,016,823
returns that had AMT = $0 from the data extract in Step III.A. A random number generator was used to
ensure that tax returns had an equal chance of being selected. We reviewed
the sampled cases to determine whether the AMT Assistant on IRS.gov would
mislead the taxpayer into thinking the AMT could be owed. We determined a statistically valid sample
was not needed based on the results of our review of these 28 returns.
Appendix II
Major Contributors to This Report
Michael
E. McKenney, Assistant Inspector General for Audit (Wage and Investment Income
Programs)
Scott
A. Macfarlane, Director
Russell
P. Martin, Director
Deann
L. Baiza, Audit Manager
Sharla
J. Robinson, Lead Auditor
Kathleen
A. Hughes, Senior Auditor
Glory
Jampetero, Senior Auditor
Ryan
C. Powderly, Intern
Appendix III
Commissioner C
Office of the Commissioner – Attn: Chief of Staff C
Deputy Commissioner for Services and Enforcement SE
Commissioner, Small Business/Self-Employed Division SE:S
Deputy Commissioner, Small Business/Self-Employed Division SE:S
Deputy Commissioner, Wage and Investment Division SE:W
Director, Compliance, Wage and Investment Division SE:W:CP
Director, Customer Account Services, Wage and Investment Division SE:W:CAS
Director, Examination, Small Business/Self-Employed Division SE:S:E
Chief, Performance Improvement, Wage and Investment Division SE:W:S:PI
Senior Operations Advisor, Wage and Investment Division SE:W:S:PA
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk Analysis RAS:O
Office of Internal Control OS:CFO:CPIC:IC
Audit Liaison:
Senior Operations Advisor, Wage
and Investment Division SE:W:S
Appendix IV
Legislative History of the Alternative Minimum Tax
Congress enacted the minimum tax in 1969 after the Secretary of the Treasury reported that 155 individuals, each with an Adjusted Gross Income[13] of $200,000, paid no Federal income tax in 1966. In 1978, Congress enacted a minimum tax that resembles the current AMT. The 1978 tax was payable in addition to all other tax liabilities to the extent that it exceeded the individual’s regular tax liability. It was imposed at a flat rate of 20 percent on Alternative Minimum Taxable Income in excess of an exemption amount.[14]
Congress repealed the minimum tax in 1982 and expanded the AMT to include the tax preferences from the minimum tax. The provisions enacted in 1982 are the foundation for today’s AMT. The AMT has been amended a number of times. The following table describes the legislative action for the original minimum tax and the current AMT.
|
Legislation |
Married Filing Jointly Exemption |
Single Exemption |
Tax Rates |
Comments |
|
Tax Reform Act of 1969 (P.L. 91-172) |
$30,000 plus regular tax |
$30,000 plus regular tax |
10% |
Introduced the “add-on” minimum income tax of 10 percent of the amount of preferences[15] in excess of an exemption of $30,000 for both joint and single filers. The main preference item was capital gains, but preferences also included stock options, depreciation, and depletion allowances. |
|
Excise, Estate, and Gift Tax Adjustment Act of 1970 (P.L. 91-614) |
No change |
No change |
No change |
Allowed deduction of the “unused regular tax carryover” from the base for the minimum tax. |
|
Tax Reform Act of 1976 (P.L. 94-455) |
Greater of $10,000 or ½ of regular tax |
Greater of $10,000 or ½ of regular tax |
15% |
Raised the rate of minimum income tax to 15 percent and lowered the exemption to the greater of $10,000 or one-half of regular taxes. This Act also added certain itemized deductions as preferences. |
|
Tax Reduction and Simplification Act of 1977 (P.L. 95-30) |
No change |
No change |
No change |
Reduced the minimum tax preference for intangible costs of drilling oil and gas wells. |
|
Revenue Act of 1978 (P.L. 95-600) |
$20,000 |
$20,000 |
10% on 20% on $40,001 -$80,000 25% on more than $80,000 |
Introduced the AMT alongside the minimum income tax and moved certain itemized deductions and capital gains to the AMT. The AMT had graduated rates of 10 percent, 20 percent, and 25 percent and an exemption of $20,000. |
|
Economic Recovery Tax Act of 1981 (P.L. 97-34) |
No change |
No change |
10% on 20% on more than $40,000 |
Eliminated the 25 percent AMT rate to correspond with reductions in rates of regular income tax. |
|
Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248) |
$40,000 |
$30,000 |
20% |
Repealed the “add-on” minimum tax and made the AMT rate a flat 20 percent of AMT income after exemptions of $30,000 for single filers and $40,000 for jointly filed returns. The preferences from the add-on tax were moved to the AMT. |
|
Deficit Reduction Act of 1984 (P.L. 98-369) |
No change |
No change |
No change |
Made minor changes concerning the Investment Tax Credit, intangible drilling costs, and other items. |
|
Tax Reform Act of 1986 (P.L. 99-514) |
No change |
No change |
21% |
Raised the AMT rate to 21 percent, made high-income taxpayers subject to phaseout of exemptions, increased the number of tax preferences by adding preferences for interest on private activity bonds and for appreciation on charitable contributions. The AMT base was expanded to include deferral items,[16] and an AMT credit for a prior year AMT liability due to deferral items was introduced. Net operating losses were allowed to offset only 90 percent of Alternative Minimum Taxable Income, and the Foreign Tax Credit was not allowed to be used to reduce the tentative minimum tax by more than 90 percent. |
|
Revenue Act of 1986 (P.L. 100-203) |
No change |
No change |
No change |
Made technical corrections related to the Tax Reform Act of 1986. |
|
Technical and Miscellaneous Revenue Act of 1988 (P.L. 100-647) |
No change |
No change |
No change |
Made technical corrections related to the Tax Reform Act of 1986. |
|
Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239) |
No change |
No change |
No change |
Made further technical amendments. |
|
Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) |
No change |
No change |
24% |
Raised the AMT rate to 24 percent. |
|
Energy Policy Act of 1992 (P.L. 102-486) |
No change |
No change |
No change |
Made changes regarding intangible costs of drilling oil and gas wells. |
|
Omnibus Reconciliation Act of 1993 (P.L. 103-66) |
$45,000 |
$33,750 |
26% on 28% on more than $175,000 |
Introduced graduated AMT rates of |
|
Taxpayer Relief Act of 1997 (P.L. 105-34) |
No change |
No change |
No change |
Made changes regarding depreciation and farmers’ installment sales, and repealed the requirement that alternative depreciation periods be used in computing the deduction for Accelerated Cost Recovery System depreciation. |
|
Tax Technical Corrections Act of 1998 (P.L. 105-206) |
No change |
No change |
No change |
Adjusted the AMT for new capital gains rates. |
|
Tax Relief Extension Act of 1999 (P.L. 106-170) |
No change |
No change |
No change |
Allowed use of all personal nonrefundable credits against the AMT through 2001. |
|
Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) |
$49,000 for years 2001-2004 $45,000 for 2005 and beyond |
$35,750 for years 2001-2004 $33,750 for 2005 and beyond |
No change |
Temporarily increased the exemption amount to $35,750 for single filers and $49,000 for jointly filed returns. This Act allowed use of the child, adoption, and Individual Retirement Account credits against the AMT liability through 2010. |
|
Job Creation and Worker Assistance Act of 2002 (P.L.107-147) |
No change |
No change |
No change |
Allowed all personal nonrefundable credits to be used against the AMT liability through 2003. |
|
Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L. 108-27) |
$58,000 for years 2003-2004 $45,000 for 2005 and beyond |
$40,250 for years 2003-2004 $33,750 for 2005 and beyond |
No change |
Temporarily increased the exemption amount to $40,250 for single filers and $58,000 for jointly filed returns. This Act conformed the AMT rates for dividends to the lower rates adopted for the regular tax. |
|
Working Families Tax Relief Act of 2004 (P.L. 108-311) |
No change |
No change |
No change |
Extended the temporary increase in the exemption amounts made by the Jobs and Growth Tax Relief Reconciliation Act of 2003. |
|
American Jobs Creation Act of 2004 (P.L. 108-357) |
No change |
No change |
No change |
Allowed the Foreign Tax Credit to offset the entire tentative minimum tax (repealed the 90 percent limitation on use of Foreign Tax Credits). |
|
Tax Relief Extension Reconciliation Act of 2005 (P.L. 109-222) |
$62,550 for 2006 $45,000 for 2007 and beyond |
$42,500 for 2006 $33,750 for 2007 and beyond |
No change |
Increased the exemption amount to $42,500 for single filers and $62,550 for jointly filed returns. |
|
Tax Increase Prevention Act of 2007 (P.L. 110-166) |
$66,250 for 2007 $45,000 for 2007 and beyond |
$44,350 for 2007 $33,750 for 2007 and beyond |
No change |
Increased the exemption amount to $44,350 for single filers and $66,250 for jointly filed returns. |
Appendix
V
Alternative Minimum Tax–Individuals (Form 6251)
The Form was removed due to its
size. To see the Form, please go to the
Adobe PDF version of the report on the TIGTA Public Web Page.
Appendix
VI
Management’s Response to the Draft Report
The response was removed due to its
size. To see the response, please go to
the Adobe PDF version of the report on the TIGTA Public Web Page.
[1] Appendix V provides an example of Form 6251.
[2] The period from January through mid-April when most individual income tax returns are filed.
[3] Adjusted Gross Income is income less certain deductions, such as the Health Savings Account, Individual Retirement Account, and Education deductions, and/or expenses, such as Educator Expenses and Moving Expenses.
[4] Appendix IV provides the legislative history of the Alternative Minimum Tax.
[5] The Individual Return Transaction File contains data from the Individual Master File. The Individual Master File is the IRS database that maintains transactions or records of individual tax accounts.
[6] Economic Growth and Tax Relief Reconciliation Act of
2001, Pub. L. 107-16, 115 Stat. 38.
[7] Pub. L. No. 103-66, Title XII, Sec. 12001, 107 Stat. 413.
[8] The period from January through mid-April when most individual income tax returns are filed.
[9] Appendix V provides an example of Form 6251.
[10] The Individual Return Transaction File contains data from the Individual Master File. The Individual Master File is the IRS database that maintains transactions or records of individual tax accounts.
[11] A Treasury Inspector General for Tax Administration repository of IRS critical historical data. The mission of the Warehouse is to provide data and data access services; centralize storage, security, and administration of files; and develop uniform and user-friendly interfaces for users to access data.
[12] For the purpose of our review, we considered a difference of $100 between the AMT calculated by the IRS and the AMT calculated by the taxpayer to be significant.
[13] Adjusted Gross Income is income less certain deductions, such as Health Savings Account, Individual Retirement Account, and Education deductions, and/or expenses, such as Educator Expenses and Moving Expenses.
[14] Present Law and Issues Relating to the Individual AMT, Joint Committee on Taxation (JCX-3-98, dated February 2, 2008).
[15] Certain income-related items that must be added back to Adjusted Gross Income to arrive at an Alternative Minimum Taxable Income.
[16] A deferral item is an amount for which the asset or liability is not realized until a future date.