December 2000

Small Businesses Overpay Taxes Fail to Take Advantage of Relief Act of ’97

Approximately 2000 small businesses overpaid an average of $11,638 in alternative minimum taxes (AMTs) for 1998, a recent U.S. Treasury study found. With average gross receipts of no more than $5 million for three consecutive taxable years, the businesses should have been exempt from the AMT but apparently were unfamiliar with the Taxpayer Relief Act of 1997.

“These overpayments are especially troubling because there is no automatic system for refunding them or even alerting taxpayers who have mistakenly overpaid,” said Senate Small Business Committee Chair Christopher Bond (R—Mo.) in published reports.

According to the study, which wa1s issued by the Treasury inspector general for tax administration, the collective overpayment for 1998 may have been more than $25 million. Estimates for 1999 have not yet been determined.

Taxpayers have until 2002 to catch their mistake and request a refund. The study can be viewed at the U.S. Treasury website, www.treasury.gov.