'Fiscal cliff' could increase middle-class taxes
Updated On: Dec 27 2012 08:08:34 AM CST
Millions of middle-class Americans would face higher taxes right away if Congress fails to reach an agreement to avoid the so-called "fiscal cliff."
A little-talked about change to the alternative minimum tax, enacted decades ago to hit the wealthiest Americans, would instead hit joint filers making as little as $45,000 if lawmakers fail to avoid the cliff.
"It'll come as a surprise for many people," said Marshall Mennenga, an enrolled agent with Mennenga Tax and Financial Service. "There's going to be a lot of people very upset if they don't pass the 'patch' and get this thing corrected."
The alternative minimum tax, or AMT, went into effect in 1968 to tax 155 wealthy Americans who were deducting so much that they weren't paying any income tax.
But it was never indexed to inflation, meaning it's catching more and more people each year.
With the so-called "patch," or Congress' short-term solution, individuals making as little as $48,450 or joint-filers making $74,450 might have to pay the AMT.
Without a deal, the net expands to $33,750 for individuals and $45,000 for joint filers.
Millions of people in between would have to pay if they have deductions, such as on medical or some mortgage interest, Mennenga said.
One couple making less than $100,000 came through the office this week and found out they'd face nearly $5,000 in additional taxes under the AMT, he said.
Congress remained out of session on Wednesday on Christmas break, although the U.S. Senate planned to reconvene on Thursday. It remains unclear when the House will come back.
"I cannot imagine our Congress not passing the patch," Mennenga said. "If they don't pass it, they will never be reelected again."
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