IRS Advocate Points Out Multiple Problems with IRS Implementation of Cancellation of Debt Provisions.

In their just released 2007 report to Congress the IRS Taxpayer Advocate points out a number of problems with IRS implementation of Cancellation of Debt Provisions and makes several recommendations for correction. Problems go beyond new mortgage debt relief provisions and include cancellation of debt on automobiles and credit cards.

I have extracted the Cancellation of Debt Section of the much longer 2007 IRS Taxpayer Advocate report and added several bookmarks. A listing of the recommendations is on the last two pages, with details found for each recommendation earlier in the report. You will find this extract HERE.

One problem identified for is that local VITA tax providers AND IRS Taxpayer Assistance sites have been instructed to NOT provide guidance in this area. The Advocate also points out that another problem is that in the absence of a consolidated single publication, filers may need to read through up to six sets of forms and instruction and three publications in order to properly file a tax return with cancellation of debt. This absence of assistance and the scattered complexity of guidance clearly will force many taxpayers with cancellation of debt to pay for the services of a tax professional.