Patching AMT will delay tax refunds

WASHINGTON - More than three million people will have to wait until February to get their tax refunds because of Congress' late fix to the alternative minimum tax, the IRS said yesterday.

Congress put a one-year freeze on growth of the alternative minimum tax last week, shielding many middle- and upper-middle-income taxpayers from exposure to the tax.

But the late action means the Internal Revenue Service will not be able to start processing five AMT-related forms until February, delaying potential refunds for those people until that month.

Between three million and four million people filed in January this year using those forms, with many of those people expecting a refund, the IRS said. The average refund in 2007 was $2,324, the agency said.

The IRS was able to reprogram its computers to begin accepting seven other AMT-related forms when the tax season opens in early January.

But the tax packages that will start arriving in the mail after New Year's Day were printed in November, before the AMT fixes were approved by Congress. The IRS has created a special section on its Web site,

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, with updated copies of AMT forms.

The alternative minimum tax was passed in 1969 and was aimed at that time at about 155 wealthy families that used deductions to avoid paying any federal income tax. The AMT disallows certain deductions and credits. It was not adjusted for inflation; as a result, over the years, it has hit a growing number of middle-income taxpayers.

The five forms affected by the delay are:

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.

Any taxpayer using those forms will have to wait until February to file their taxes, the agency said.