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Products Affected:

AMT Law Enacted
On December 19th, 2007 Congress passed the Tax Increase Prevention Act of 2007. The President has since signed the bill into law. This legislation increases the exemption amounts for alternative minimum tax and allows certain credits to offset AMT.

Impact of AMT on Current Release (January 16, 2008 Update)
The Lacerte program includes calculations using the increased exemption amounts and the allowance of credits against AMT. The ordering of personal credits has changed in accordance with the legislation, as well. This release also includes updates to the Foreign Earned Income Tax Worksheets to reflect changes made in the Tax Technical Corrections Act of 2007.

Final AMT Forms Included in Release (January 16, 2008 Update)
The following forms are included as final in this release: 1116 (foreign tax credit); 2441 (child and dependent care expenses), 5695 (residential energy credits), 6251 (alternative minimum tax), 8396 (mortgage interest credit), 8839 (adoption credit), 8859 (DC first-time homebuyer credit), 8863 (education credits), 8880 (saver's credit), Schedule 2 (child and dependent care expenses for Form 1040A filers), Schedule R (credit for the elderly or the disabled). Subsequent releases will be updated, with detailed explanations of the changes so you are able to continue your filing season.

2006 Tax Planner Program
To enable you to analyze the impact of this new tax law on your clients, the 2006 Tax Planner has already been updated to allow you to override the 2007 AMT exemption. To use this override, on the "Alternative Minimum Tax" worksheet, toggle "Exemption amount option" to "Amount below - with phase-out" and in the "exemption amount" field enter one of the following amounts: $66,250 for married couples filing jointly or qualifying widowers, $44,350 for single or head of household, or $33,125 for married couples filing separately.

When the Internal Revenue Service Will Process Returns
The Internal Revenue Service announced that, on January 11, 2008, it expects to be able to begin accepting taxpayers' returns (both e-file and paper) that do not involve the five AMT-related forms listed below.

The IRS has targeted February 11, 2008, as the potential starting date for taxpayers to begin submitting the five AMT-related forms affected by the legislation. The February date allows the IRS enough time to update and test its systems to accommodate the AMT changes without major disruptions to other operations related to the tax season.

The February start date is applicable for taxpayers using any of these five forms:

* Form 8863, Education Credits.
* Form 5695, Residential Energy Credits.
* Form 1040A's Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers.
* Form 8396, Mortgage Interest Credit.
* Form 8859, District of Columbia First-Time Homebuyer Credit.

While these five forms require significant additional reprogramming due to the AMT patch, the IRS has been able to reprogram its systems to begin processing seven other AMT-related forms, including Form 6251, Alternative Minimum Tax - Individuals.  Taxpayers filing these seven forms should not experience delays in filing, and the IRS expects to begin accepting those returns starting on Jan. 11, 2008.

Electronic returns involving the five AMT-affected forms will not be accepted until systems are updated on February 11, 2008. Similarly, paper filers with those affected forms should wait to file their returns until February 11, 2008, as well. 

The IRS urges affected taxpayers to file electronically in order to reduce wait times for their refunds. E-file with direct deposit gets refunds in as little as 10 days, while paper returns take four to six weeks.

"E-file is a great option for everyone, especially if they are affected by the AMT," said Richard Spires, IRS Deputy Commissioner for Operations Support.  "Filing electronically will get people their refunds faster, and e-file greatly reduces the chances for making an error on the AMT or other tax issues."

What You Should Do
You may file your clients' tax returns that do not have any of the five AMT-affected forms, beginning on January 11, 2008, the date that the IRS has targeted to accept most returns. If any of your clients have credits listed in the five AMT-affected forms above, you may file those returns on February 11, 2008, the date that the IRS has targeted to begin accepting the five AMT-related forms affected by the legislation.

Newly added software features:
* A diagnostic is generated on returns with Form 1040A (short form) and Schedule 2 (dependent care credit) indicating that you can force Form 1040 (long form) and Form 2441 (dependent care credit) to avoid the processing delay.
* A diagnostic is generated on returns with one of the five AMT-affected forms informing you to not send the return to the IRS until February 11.
* For returns with one of the five AMT-affected forms, the client letter indicates that the return should not be sent until February 11.
* A diagnostic informs the user how to remove the February 11 date from the client letter. It also says that taxpayers filing after January 31, who would owe a penalty due to the delay, can file Form 2210 to request a waiver of any estimated tax penalty that resulted from the delay.
* A client display field has been added for Delayed Returns. To use the new display field, select the "Settings" pull down menu, choose "Options", and click on the "Display" tab. In the "Available" window,  click on "Miscellaneous" to expand, and then select "TIPA Delayed Forms". Click the right arrow to move it to the "Display" window. The program will display the number of forms in the return that are impacted by delayed processing. This display field is updated by pressing F3 and selecting all clients. Then, access the Clients tab at the top and select Update Client Database. This action could take up to an hour, depending upon the size of your database.

IRS Press Release
IR-2007-209, Dec. 27, 2007: http://www.irs.gov/newsroom/article/0,,id=176948,00.html

Legislation Details
http://www.taxalmanac.org/index.php/December_2007_Legislation