Tax agreement could bring significant benefits to some

WASHINGTON - If you are a college student, teacher or resident of a state that has sales taxes but no income tax, the bipartisan tax agreement this month could mean significant benefits next year. And the IRS is adjusting its computers to take in your requests.

That means it will take a little longer for some taxpayers to file their 2010 returns, as the Internal Revenue Service reprograms computers for new college tuition breaks, teachers who buy classroom supplies with their own money, and Americans who live where there's no state and local income tax to deduct.

The IRS said Thursday that it will be mid- to late February before it can accept returns that apply for those tax breaks. However, delays will be minimal for taxpayers who already itemize deductions, because they normally have to wait for their financial documents.

"The majority of taxpayers will be able to fill out their tax returns and file them as they normally do," IRS Commissioner Doug Shulman said. "We will do everything we can to minimize the impact of recent tax law changes on other taxpayers. The IRS will work through the holidays and into the new year to get our systems reprogrammed and ensure taxpayers have a smooth tax season."

The IRS will announce a specific date when it can start processing tax returns affected by the changes.

Without the law, millions of Americans would have been hit with increases starting on New Year's Day.

The package retains Bush-era tax rates for all taxpayers, including the wealthiest Americans, a provision President Barack Obama and congressional liberals opposed.

It also offers 13 months of extended benefits to the unemployed and attempts to stimulate the economy with a Social Security payroll tax cut for all workers.

Meanwhile, a board that reviews IRS operations said examinations of returns increased by 8 percent this year on taxpayers with incomes above $1 million.

Examinations of individuals with incomes below $1 million, small and large corporations, and collections, remained steady from last year. The rate of returns filed electronically rose slightly to 69 percent, while revenue from enforcement action was up from $48.9 billion in 2009 to $57.6 billion this year.

The IRS Oversight Board, which consists of nine members, was created by Congress under a 1998 law to oversee the agency's operations.