Stephen Ohlemacher, Associated Press
WASHINGTON (AP) — IRS Commissioner Doug Shulman warned lawmakers Wednesday that retroactively changing 2010 tax laws early next year "would be extremely detrimental to the entire tax filing season and to tens of millions of taxpayers."
Several big tax cuts have already expired for 2010, including a patch that spares more than 20 million taxpayers from being hit with the alternative minimum tax. Key lawmakers have told Shulman that they intend to pass a 2010 patch by the end of the year.
Shulman said the Internal Revenue Service has programmed its computers anticipating Congress will patch the AMT.
Other expired tax breaks include deductions for educators, property taxes and state and local sales taxes. These tax breaks would be claimed on tax returns filed in the spring. They are separate from the sweeping Bush era tax cuts that expire in January.
Lawmakers are also working to extend the Bush tax cuts, complicating negotiations over tax breaks that already expired at the beginning of 2010.
The alternative minimum tax was first enacted in 1969 to make sure higher-income taxpayers could not use deductions and credits to avoid paying any federal income tax. The income limits, however, were not indexed for inflation, so Congress routinely fixes the AMT each year to spare millions of middle income taxpayers from tax increases that would average about $3,900.
Congress hasn't made the change for 2010. In a letter to the IRS, Democratic and Republican leaders of the tax-writing congressional committees said they would address the issue before the end of the year.
Shulman urged lawmakers not to wait until next year — after taxpayers have already started filing returns — to make the changes.
"Specifically, it would be an unprecedented and daunting operational challenge to open the tax filing season under one set of tax laws with respect to AMT and extenders, begin accepting tax returns, and then have the law change," Shulman wrote in the letter to lawmakers.
"The IRS would have to delay processing refunds for some or all of the 21 million people affected by AMT legislation and/or the over 25 million people impacted by extenders legislation," Shulman said.