Fixing the AMT: Politicians As Software Architects

I love politicians who think they are software architects or system engineers. I wince whenever they pass some ill-conceived legislation, the success of which critically depends on information systems & technology (IS&T) without ever bothering to consider the technological and management risks involved. Like Captain Jean-Luc Picard, they just order, "Make it so."

This time Congress has screwed around and not passed legislation that has another signficiant IS&T component, namely the promised fix to the alternative minimum tax (AMT). The AMT was passed in 1969 as a way to make 155 very wealthy families (of the time) pay some taxes (they were able to avoid doing so by claiming lots of state and federal deductions).

Over time, the AMT has grown (it isn't inflation adjusted) to hit more and more taxpayers - 4 million in 2006. If changes aren't made, it will likely hit 25 million taxpayers this year, most who aren't aware that they will owe lots more money (about $2,000 on average), and possibly penalties for underpaying their taxes.

Congress is supposed to legislate a fix, but squabbling between Congress and the White House has delayed progress. Any legislative change, of course, may require changes to millions of lines of software in IRS computer systems since the AMT affects so many different tax computations. Reprogramming the IRS computer systems to deal with new AMT legislation requires 12 weeks from the time the bill is signed into law; the IRS also needs three weeks to print new tax forms.

The IRS is warning that if Congress waits too much longer, it may have no choice but to delay not only the tax filing season start date of 14 January 2008 to mid-February, but also refund checks for another 25 million taxpayers to the tune of some $87 billion.

I also suspect that, on top of all the confusion that will ensue, those IRS computer systems won't be able to be fully system tested given the schedule pressure, so some AMT-related problems likely won't surface until well into next year. And even though the various makers of home tax preparation software claim the delay is no big deal, I bet it will be if things drag on much longer. The risk of both deliberate and unintended tax noncompliance will soar.

Congress has been warned about this problem for over a year, but I guess it had better things to do.


Risk Factor

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Robert Charette
Spotsylvania, Va.
Willie D. Jones
New York City