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1 Mark A. Robyn & Gerald Prante, Small Problems in 2007 Tax Filing Could Be Huge in 2008 1 (2007)

handle is hein.taxfoundation/ffbahxz0001 and id is 1 raw text is: FOUNDATION: Small Problems in 2007 Tax Filing Could Be Huge in 2008 Fiscal Fact No. 107 by Mark A. Robyn and Gerald Prante October 25, 2007 According to a recently released report from the Treasury Inspector General for Tax Administration (TIGTA), 2007 was a relatively low-pain year for tax compliance at the Internal Revenue Service.1 However, the report highlighted several big problems last year that were caused by Congress's delay in enacting end-of-year tax changes. In a similar way, this could be a gigantic problem this coming spring unless something is done soon about the Alternative Minimum Tax (AMT). The Lesson of Last Year's Debacle Over the Sales Tax Deduction To get an idea of how bad this problem might be, we can look back at the problems taxpayers and the IRS had in the spring of 2007 with the sales tax deduction and the tuition and fees deduction. Last year, Congress waited on renewing these two exemptions until December when it passed the Tax Relief and Health Care Act of 2006. The IRS couldn't wait that long and had already printed the forms and instructions without including the instructions and lines for these two deductions. These erroneous forms greatly complicated the task of claiming the deductions and likely accounted for the decrease in claims that was seen in 2007 for both of these deductions. Normally taxpayers get used to a new tax provision after a few years, and compliance improves. However, for the third year in a row, millions of eligible taxpayers failed to claim the deduction for sales taxes paid, which according to TIGTA can be laid at the feet of a late-acting Congress. In 2004, 1.1 million eligible taxpayers failed to claim the deduction, increasing to 1.4 million in 2005, and 2.1 million in 2006. In total, these 4.6 million taxpayers are entitled to an estimated $1.66 billion in refunds, which can still be claimed by filing amended returns for the years in question. Anyone who itemized deductions and did not claim an income tax deduction is eligible for the sales tax deduction. The seven states that do not have an income tax are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming, so it is the taxpayers in these states who are most likely to benefit from the deduction for sales taxes paid.

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