A few weeks ago I was completing my estimated federal tax payment for the quarter. To do this, I estimated our 2010 taxable income, and determine the amount that will be due to Uncle Sam. Each quarter I have to pay a portion of this to the US Treasury. Estimating our 2010 tax is done relatively easy with a software program. I noticed that our 2010 estimated federal income tax included over $2,000 relating to the Alternative Minimum Tax (AMT). My wife and I had never been hit with the AMT in the past. Surely there was some mistake. I looked to the IRS website and noticed that the AMT “patch”, that is usually passed annually, has not yet been extended to 2010.
Last week, Congress adjourned and will not be returning to Washington until mid to late November for a brief session. With so much talk from all the Washington legislators about not raising taxes on the middle class, where is the discussion about passing an AMT “patch” for 2010? The Congressional Budget Office estimates that some 27 million additional people will fall subject to the AMT in 2010 as compared to 4.5 million subject to its reach in 2009. These 22.5 million households will pay an average $3,900 for the AMT. According to the CBO, virtually all married couples making over $100,000 will be subject to the AMT in 2010.
A large plurality in Congress agrees that the patch should be passed for 2010. However, that does not mean anything will get done. Inaction and finger pointing rules the day and who would have thought that the repeal of the estate tax would still not be legislated upon? In my situation, I am unsure of whether to pay an additional $500 in taxes this quarter. Do I pay now and get a refund from Uncle Sam on April 15, 2011 (if the AMT patch is passed)? Or do I assume the patch will be passed, not pay the $500, and expose myself to interest and penalties if my assumption is wrong. This is the problem with temporary fixes. They leave taxpayers with uncertainty, which have real dollar impacts on household budgets.
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