National Taxpayer Advocate Nina E. Olson has sent Congress her annual report in which she notes the most serious problems faced by taxpayers.
Topping this year’s list is the havoc that late changes to the tax code bring to the filing process. For the last two years, lawmakers have waited until December to enact tax laws that affect millions of filers. In 2006 it was extenders, which included popular tax deductions for state sales taxes, educator expenses and tuition and fees. This last December, it was the one-year "patch" to the alternative minimum tax (AMT).
Such late-session actions cause problems for the IRS, which must then work in a crunch situation to get forms and systems ready for the filing season that begins just a few weeks later, as well as for taxpayers, who must not only play catch-up with the laws, but who also are limited in their tax planning efforts because of the uncertainty of the tax laws.
Last year, Olson noted, more than a million taxpayers may not have claimed tax deductions to which they were entitled simply because they did not know about them because of the late law changes.
"When taxpayers do not claim tax benefits because they do not know about them," Olson said, "Congress’s intent in providing the tax benefits is undermined and taxpayers understandably question the fairness of the tax system."
Low-income taxpayers also may experience financial hardship because their refunds are delayed.
And the IRS itself "must divert its thinly stretched resources to implement the changes."
Suggested changes to the system: So that members of Congress better understand the filing-season impact of last-minute tax legislation, Olson recommends that the Treasury Department and the House Ways and Means and Senate Finance committees "create a formal process by which IRS estimates of the filing-season impact of significant tax legislation are transmitted to the tax-writing committees at several points during the year." She suggests June 30, Sept. 30 and monthly thereafter.
I suggest that all taxpayers jam our Representatives’ and Senators’ phone lines demanding that they do their job in a timely manner. If we are expected to meet tax filing deadlines or face penalties, then they should complete their legislative duties in a timely manner or face penalties, too.
Two words: Nov. 4.
Let your lawmakers know you’ll remember how poorly they did their jobs when it comes time to decide whether they should keep those offices on Capitol Hill.
Click here for the highlights of Olson’s 2007 annual report. I’ll look at her findings more closely in the next few days (you can too; links to the full report can be found here) and blog about some of her other recommendations.
