The real culprit in tax havoc?

WASHINGTON - End-of-year congressional votes to change the tax code have created havoc for the Internal Revenue Service and top the list of problems bedeviling taxpayers, according to an annual report released yesterday.

The national taxpayer advocate also accused the IRS of not doing enough to help the insolvent - including those losing their homes - avoid paying taxes on canceled debts and not providing fee waivers to low-income taxpayers.

Taxpayer Advocate Nina E. Olson urged Congress to enact a Taxpayer Bill of Rights and authorize symbolic apology payments to those seriously affected by IRS errors.

The National Taxpayer Advocate, who works independently within the IRS, is required by Congress to report annually on at least 20 of the most serious problems facing taxpayers.

This year, the main culprit was Congress, which for the second straight year passed legislation in December that significantly changed the tax code. But the legislation was enacted after the IRS normally goes to print with forms for the coming tax season.

In 2006, Congress waited to extend several popular tax deductions, and the advocate said taxpayers made an estimated 1.4 million fewer claims for those benefits in 2006 than the previous year, because information on the benefits was not included in the original forms.

Some low-income people who claim the earned-income tax credit, a refund averaging more than $3,000, had to wait weeks for that refund while the IRS reprogrammed its computers. For some, Olson said, that delay could mean eviction, the inability to pay winter heating bills, or defaulting on credit card bills.

Congress recently took steps to protect people losing their homes from taxes levied on canceled debts, but the report said the IRS did not adequately explain exceptions to the general rule that such canceled debts were taxable.

The IRS also collects about $180 million a year in user fees, mostly charges to people who enter into installment agreements to pay tax liabilities over time. But here, too, the agency lacks an adequate policy for waiving fees for low-income taxpayers who cannot afford the fees, the report said.