IRS watchdog asks for easing of tax rules for defaults

01/8/2009 | · CNNMoney

The National Taxpayer Advocate, the Internal Revenue Service's watchdog agency, recommended relaxing some of the burdensome tax consequences that result from defaulting on mortgages, credit cards and other consumer debt. Without reform, the group said, many Americans could end up paying taxes on canceled debt because they did not know about an obscure, complex IRS form. "Simplification should be done, but it's not critical to the economy right now," said Tom Ochsenschlager, a CPA and vice president of taxation at the AICPA. He agreed the tax code should be simplified, even if it reduces revenues, but said in the face of the economic crisis, simplification "is going on the back burner."

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