"Compared with the regular tax system, the AMT is a parallel 'secret' tax system that most taxpayers have not yet experienced personally In short, it is a time bomb on a short fuse," said Nina Olson, the National Taxpayer Advocate, in her annual report to Congress.
Olson's office is an independent one within the IRS created to help taxpayers resolve problems with the agency.
In her annual report, Olson identified the 20 most serious problems facing US taxpayers. However, she focused on the creeping eligibility of more taxpayers for the alternative minimum tax, which forces taxpayers to calculate their taxes in two ways to determine their liability.
The AMT was created in 1969 to ensure the wealthy paid at least some taxes after a congressional hearing found 155 taxpayers with adjusted incomes of more than $200,000 had paid no federal income taxes for 1966.
But for several reasons, including exemptions that are not indexed for inflation, the AMT is expected to capture more and more taxpayers in coming years.
About 12.7 million taxpayers are expected to be affected by it in 2005, up from about 2.4 million currently. Figuring the AMT liability, if any, can also be a cumbersome affair.