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A bipartisan group of lawmakers in the US Congress has secured a commitment from the Internal Revenue Service (IRS) to suspend the collection of Alternative Minimum Tax (AMT) liabilities, including interest and penalties, that arose from employees’ exercising of incentive stock options.
Sen. Chuck Grassley (R - Iowa), one of the leading exponents of the campaign, stated on Friday that the suspension gives Congress time to enact legislation that would ease these burdens on affected taxpayers.
“Taxpayers in this situation faced a lot of income tax on very little income,” Grassley said. “There’s bipartisan consensus to fix the problem. By holding off on collections, the IRS is giving Congress time to act without making things worse for the affected families.”
Grassley is ranking member and former chairman of the Committee on Finance, with exclusive Senate jurisdiction over tax policy.
On July 3, Grassley and Senate and House colleagues wrote to IRS Commissioner Doug Shulman, asking for a suspension of liability and penalty collections in incentive stock option AMT cases, and last week, IRS commissioner Doug Shulman notified Grassley and his Congressional colleagues that the agency is offering the suspension.
Under current law ISO AMT families are entitled to use refundable credits into the future to compensate for what they owe now. However, they are being pressed to pay their current liabilities immediately, without regard for the refundable credits.
"These families are facing the garnishments of wages, foreclosures of homes, seizures of retirement accounts, and all the other tools available to the IRS to settle uncollected tax debts," the lawmakers pointed out in their letter to Shulman.
"There is now a very broad bipartisan consensus to abate all interest and penalties attributable to ISO AMT liabilities and permit taxpayers to apply the full amount of their future refundable credits towards the entirety of their current ISO AMT liabilities," the letter added.
Congress is currently working to help these taxpayers through the enactment of the AMT Credit Fairness and Relief Act of 2007 (H.R. 3861), and its companion bill in the Senate (S. 2389).
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