Congress inaction risks 2013 tax delay: IRS watchdog

WASHINGTON Wed Jun 27, 2012 11:25am EDT

WASHINGTON (Reuters) - Tax refunds in 2013 could be delayed if the U.S. Congress fails to address major fiscal policy questions soon, said the IRS' in-house champion for taxpayers' rights on Wednesday.

National Taxpayer Advocate Nina Olson said in a report that "the 2013 filing season is already at risk" due to inaction by Congress on tax laws that have expired or will soon expire.

"An aura of uncertainty prevails as the IRS and taxpayers wait for word about what will be the law," she said in the mid-year report by the Taxpayer Advocate Service that she heads.

Ahead of the November 6 elections, Congress has been unable to agree on what to do about the December 31 expiration of the tax cuts enacted in 2001 and 2003 under President George W. Bush.

Other open questions include dealing with 60 tax breaks that expired at the end of 2011 and 41 more expiring at end-2012, such as deductions for mortgage insurance premiums and state and local taxes, as well as approving another "patch" to prevent the alternative minimum tax from hitting millions more taxpayers.

The Taxpayer Advocate Service takes up tax cases for people who face challenges in dealing with the IRS.

Last-minute congressional action on tax laws in 2010 forced the IRS to push back to February 2011 the start date for filing tax returns. Normally, taxpayers can begin filing in January.

Olson is expected to testify before a congressional panel on Thursday at a hearing about taxpayer identity theft.

Her report said identity theft and tax fraud were top issues for taxpayers in fiscal 2011, which ended September 30, 2011.

The Taxpayer Advocate Service handled 21,743 identity theft cases through April 2012, a 62 percent increase over the same period in fiscal 2011, the report said.

(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Tim Dobbyn)

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