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Congress prodded to act on tax cuts; IRS chief warns of filing disaster

IRS Commissioner Douglas Shulman warned Thursday of a disastrous tax filing season next year if Congress puts off dealing with tax cuts that are set to expire at the end of the year or have already expired.

If Congress waits until the end of the year or acts retroactively on expired tax laws, "you could have a real disaster in the filing season where there is total confusion" about existing tax law, Shulman said at the National Press Club. He said one result could be that the tax agency, as it did last year, would have to delay the opening of filing for some taxpayers.

Shulman noted that the 2001 and 2003 George W. Bush tax cuts are set to expire at the end of this year, as is the payroll tax cut that was enacted last year and extended by President Obama in February. The future of all those tax breaks is certain to be contentious as the fall elections near and as Congress approaches year-end votes on spending legislation.

Shulman said lawmakers also must decide on changes to the alternative minimum tax and determine what to do about several dozen already expired tax breaks in such areas as research and development, ethanol and teachers who buy supplies for their classrooms.

"It is an issue we are tracking closely and we are quite concerned about, and we are hopeful that these pieces of legislation will pass sooner rather than later," Shulman said.

Last year, some taxpayers had to wait until mid to late February to file their returns because Congress made changes to the 2010 tax law in December, and the IRS needed more time to reprogram its processing system.

Shulman also told reporters he planned to step down as commissioner when his term ends this autumn. He was nominated by Bush in late 2007.