Area 1 Committee Meeting Minutes

April 22, 2003
Teleconference

Opening of the Meeting
Chairperson Fish opened the meeting at 11:09 AM Eastern Time by welcoming all attendants. He announced that he had received Member Kelly's proposal on the advertised local IRS phone number that was written by Member Brace. He will ask that this proposal be shared with all members prior to forwarding it to the Joint Committee.

Roll Call

Panel Members Attending

• Elizabeth Brodbine-Ghoniem, MA
• Walter Fish, NY, Chair
• Lorraine Fletcher, NY, Acting DFO
• William Gedge, CT
• James Grimaldi, NY, Vice Chair
• Diane Mignano, RI
• Paul Nagel, NY

Panel Members Absent

• Abigail Alicea, NH
• Aimee Brace, NY
• Peter Gorga, Jr., NY, DFO
• Catherine Kelly, ME
• Shamsey Oloko, NY
• Eileen Shuman, VT
• Charles Silva, MA

TAP Staff Attending

• Nancy Ferree, TAP Program Manager
• Marisa Knispel, TAP Program Analyst

Meeting Minutes
Chair Fish led discussion on prior meeting minutes and members agreed to approve them.

Subcommittee Reports
Member Gedge led discussion by explaining that the Penalty Abatement subcommittee will hold a teleconference later this week. There is nothing new to be reported at this time.

On the issue of grants given to businesses, victims of September 11, 2001, Member Grimaldi informed the committee that Congresswoman Maloney's office invited him to participate in a press conference on April 7th. Member Grimaldi spoke at the conference not as a TAP member, but as a concerned citizen and tax practitioner. He sees by this recent conference and other media, that the issue is receiving a lot of coverage.

Member Grimaldi continued by speaking on the issue of IRS extensions. He does not understand why the second extension (which allows filing to be extended to October 15th) must be filed. According to the Internal Revenue Code, it is mandatory to file the Form 2688 by August 15th to receive the extension of time to file. However, other taxing authorities grant an automatic six-month extension. The committee would like to know why the forms are necessary. Are requests denied? Also, if tax is due but not paid with the form, is the filing extension granted? Will filing a petition for an installment agreement along with the extension ensure that the taxpayer is not penalized for late filing? Analyst Knispel will do research on the subject.

New Issues
Member Gedge spoke about two new issues received from local taxpayers. The first has to do with phase-outs, which is an active issue for the committee. In doing his 2002 taxes, a taxpayer was $21 over the income limit to claim the $1,000 education deduction. The taxpayer asked if there was any way that one could anticipate going over the limit amount in order to make adjustments before filing. Instead of missing out on this deduction, why can't the taxpayer be subject to a phase-out? Member Nagel explained that this taxpayer might have misunderstood his situation. First of all, it is not clear if the taxpayer is referring to the education credits (HOPE or Lifetime) or the student loan interest deduction. Nagel explained that the education credits phase out up to the AGI of $102,000 while the student loan interest phases out up to $130,000.

The second issue is on reporting requirements for stock divestitures. In divesting, some companies declare dividends that are “tax-free disbursements”. These disbursements are reported in paper form that the taxpayer must attach to his tax return. Hence, taxpayer may not file electronically. If these disbursements are non-taxable, why is it necessary to send the reporting forms to the IRS? Isn't the IRS aware of the disbursement? Why then impede the taxpayer from filing electronically because of having to send in the paper documents? Member Grimaldi explained that these tax-free exchanges or any tax irregularities on the return are explained to the IRS via paper forms. The issue, he feels, is that attachments like these are an obstacle for electronic filing.

Chair Fish commented on the fraudulent returns prepared and fraudulent statements made by paid tax preparers. As a practitioner, he is very concerned about this issue. He was reminded that other committees are working on the issue of licensing tax preparers and that it is also an issue for the National Taxpayer Advocate as mentioned in her 2002 Report to Congress. Acting DFO Fletcher commented that the NTA proposes that tax preparers have basic knowledge of tax law, however she cannot ensure that these practitioners will eventually “do the right thing”. Analyst Knispel suggested that any proposal or recommendation on the issue be written and forwarded to the Ad Hoc Committee.

Member Ghoniem suggested that we include the Alternative Minimum Tax as one of our issues. She asked if any other committee is currently working on it. Program Manager Ferree explained that this issue is popular among various committees and that the upcoming Issue Matrix will allow us to cross-reference issues so as to avoid duplication. Analyst Knispel reminded Ghoniem that the Inflation/Phase-Out subcommittee agreed at the last meeting to make the AMT part of their study.

Future Meeting Planning
June meeting in Andover was discussed.

Public Input
None.

Closing Assessment
Chair Fish stated that this committee is developing various interesting issues that eventually may be forwarded to the Ad Hoc and Joint Committee. In closing, he also reminded member to make hotel reservations for the upcoming Andover trip.