On July 8, National Taxpayer Advocate Nina E. Olson delivered a report to Congress that identifies the priority issues the Office of the Taxpayer Advocate will address in the coming fiscal year. The key areas of focus include improving Internal Revenue Service (IRS) procedures to protect victims of tax-related identity theft, and expanding outreach and education concerning the "cancellation of debt" tax consequences for individuals who have lost their homes to foreclosure.

The Advocate’s report, which is required by law, sets out the objectives of the Office of the Taxpayer Advocate for the upcoming fiscal year and provides substantive analysis of issues as well as statistical information.

The report notes that July 22, 2008, will mark the 10th anniversary of the enactment of the IRS Restructuring and Reform Act of 1998, which created the Office of the Taxpayer Advocate and added significant taxpayer rights protections. Olson praised the legislation, saying: "From my perspective as the National Taxpayer Advocate, I see daily how much taxpayers benefit from RRA 98."

This year the report identified tax-related identity theft as one of the most serious problems facing taxpayers. In the 2007 report, recommendations were made regarding ways to curb identity theft by the creation of a centralized unit to handle identity theft cases and the development of a centralized set of procedures that cuts across IRS functions. The IRS has since taken a number of steps to improve its procedures by developing an IRS-wide identity theft indicator, and is studying the creation of a centralized unit to assist identity theft victims. During FY 2009, the Taxpayer Advocate plans to work with the IRS to further improve these procedures.

Another area the report identifies for particular emphasis in FY 2009 is the cancellation of debt income. When an individual or business borrows money and the debt is canceled, the borrower generally must include the amount of the canceled debt in gross income. Taxpayers may exclude the amount of a canceled debt from gross income under certain circumstance and in order to do must file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, with their tax returns. This year, Olson intends to work with the IRS to simplify the instructions for Form 982, develop an IRS publication that thoroughly explains the cancellation of debt issues, and work to provide specialized training for Low Income Taxpayer Clinic practitioners.

Other areas addressed in the report include monitoring the private debt collection program, working with the IRS to assist taxpayers with disproportionate tax liabilities due to the alternative minimum tax resulting from the exercise of incentive stock options, working with the IRS to address problems and inefficiencies in the correspondence examination program, and updating a 2003 report on the standards and structure of federal ombudsmen offices.