Tax debate has IRS stymied, too
By Kay Bell • Bankrate.com

It's a good thing Congress approved the IRS' record $8.2 billion budget earlier this year, because it's going to need it. While Republicans, Democrats and the White House dicker over the tax extenders bill, the IRS has had to scramble to put together a contingency plan for the upcoming filing season. And it's going to be expensive.

IRS Commissioner Charles O. Rossotti says it will cost the agency an extra $7.6 million to $11.6 million this fiscal year to make sure tax forms and instructions reflect any last-minute Congressional changes and are delivered to taxpayers on time.

Tax collector assume breaks will pass
Under its contingency plan, the IRS will assume that the changes were approved by Congress and print forms and publications reflecting that assumption. But the IRS documents will state that legislation affecting the forms was pending at printing time. The key provision worrying not only taxpayers but the IRS is extension of alternative minimum tax (AMT) relief. Millions of middle-class taxpayers who claim personal credits such as the $500 per-child credit are counting on the extension. Otherwise, they could be required to calculate both their regular income taxes and alternative minimum taxes.

If the current AMT fix lapses, the IRS will send out a 16-page supplementary package by Jan. 15 alerting taxpayers of the added tax filing work (and possible higher taxes) they face. If the relief is extended, taxpayers will receive a confirmation postcard explaining that no further form changes are necessary. The IRS also will post updates on the status of the forms on its Internet site.

"We have to act now to assure timely delivery of tax forms and instructions to individuals," Rossotti said in a letter sent to House Ways and Means ranking members. "Unfortunately, despite our best efforts, some taxpayers still may be confused."

--Posted Nov. 1, 1999