Area 1 Committee Meeting Minutes

March 21, 2006

Designated Federal Official

• Gorga, Peter New York, NY LTA

Committee Members Present (These attendees count for quorum)

• Barry, Shaun — Franklin Square, NY
• Epstein, Harvey — Lee, NH Vice Chair
• Gadon, Harold — Cranston, RI
• Guthman, Michael — Westport, CT
• Hom, Gim — Acton, MA
• Margulies, Howard — North Easton, MA
• Parra, Luis — Bronx, NY
• Searleman, Sanford — Glens Falls, NY
• Zgoda, Bruce — Clarence, NY

Committee Members Absent

• Havey, Dorothy — Lincolnville, ME Chair

TAP Staff

• Jenkins, Audrey — Brooklyn, NY Analyst
• Odom, Meredith — Brooklyn, NY Secretary
• Ramirez, Sandra — Brooklyn, NY Manager

Welcome

Roll Call (quorum has been met)

JC Report Out
Ramirez provided members with an update on the Joint Committee (JC) meeting. The committee’s concern about whether the new Quality Assurance subcommittee process would cause delays in review of submitted recommendations to the JC was raised by Chair Havey. The JC will try this new process and if it does not work well, they will review it and make changes as necessary. Epstein noted that Havey sketched out a sample timeline showing the timeframes from the time a recommendation goes to the full committee until it gets to the Joint Committee which was shared with the (Area1) committee.

Subcommittee Report Outs:
Subcommittee 1
The subcommittee had a meeting on March 10th. In an attempt to align their meeting date with the full committee/joint committee meeting date the subcommittee has changed its meeting time to the first Friday of the month rather than the second Friday of the month. Thus, the next subcommittee meeting will be on April 7th instead of the 14th. The Forms W4 and W4P issue which was a two part issue had the VITA aspect referred to that issue committee which accepted it. The remaining aspect was referred to the Ad Hoc issue committee which did consider it. The outcome was that the IRS agreed to add a statement to the W4 referring filers to the Form W4P in the event they may need to file that.

Epstein feels the Form W4 has to be modified to include retirement income. Ramirez spoke with the manager of the Ad Hoc, who spoke with the Ad Hoc program owners and they are open to reconsidering the issue. Hom, who is a member of the Ad hoc committee, noted that the program owners explained that because the Form W4P impacts only a small number of individuals, that the benefit of changing the W4 was outweighed by the probability that the change would burden and confuse the vast majority of W4 filers. The program owner also noted that when a person retires and receives pension income, by law, they will have the income taxes withheld unless they request not to have income tax withheld.

Epstein stated the Form W4 does not include retirement income when determining the correct or best withholding for a retired person with a job. If you get a pension, the pension income is not counted and you are withheld at a much lower rate. A lot of retired people take jobs because they find their retirement income is inadequate. When they do so, the withholding is inadequate for them and they have to pay a large amount of tax at the end of the year. Epstein recommends a change to the W4 form so that wherever reference is made to the two earner or two jobs it also includes consideration of retirement taxable retirement income as a second income source.

Other issues: Forms 1098 and 1096 issues are in progress; the subcommittee is waiting for some data and will be continuing working these at the next subcommittee meeting.

Subcommittee 2
Hom stated the subcommittee met and discussed the draft of the Schedule D recommendation. Suggestions were made to strengthen the proposal before summiting to the full Area 1 committee. The capital loss carryover will help in the calculation in the following year’s tax return. If you look at Form 8606 regarding deductible vs. non deductible IRAs they actually do use the carryover line concept. 433D issue: Installment agreements do not show enough information for the taxpayer to know how much is really owed to the IRS (specifically how much interest is being charged). Stall letter issue: didn’t get sense of support for the issue but committee will look at issue at subsequent meetings.

New Issues & subcommittee assignments
Ramirez explained the purpose of sharing the issues with the committee; which is so that the committee can discuss and decide whether they should accept each or not (drop it) and then, if accepted, whether it will be actively worked or placed in the parking lot for future further consideration, combined with another issue, etc... Gadon requested that the date of the contact be noted in the future. Jenkins then read each of the seven issues received as a result of taxpayers contacting TAP via our toll free and web site. The committee discussed each one as a group and arrived at the following decisions on each:

• Issue #3690 – IRS should stop attacking Churches – Searleman noted IR bulletin 2006-036 which recently discussed 501(h) organizations (churches). This revenue ruling is about allowing churches to do some political activity (which is normally forbidden in order to maintain exempt status). After discussion, Epstein noted that it should be placed in the Parking Lot for tracking to see if other similar complaints come in. No one disagreed.

• Issue #3758 – Form 1099 fileability – This issue is the same one being worked by subcommittee 1 with respect to Forms 1099 and 1096 so it will be made Active and assigned to Subcommittee 1.

• Issue #3486 – Caller suggested a change to the Earned Income Tax Credit Worksheet B for 2003 to prevent unemployment compensation from being entered into the calculation for earned income. Caller was not accurate in her statements as unemployment income is taxable income so the committee decided to Drop.

• Issue #3607 – IRS sends envelopes to make estimated payments. It should not say on the envelope to remember to include your SSN. Members noted that the envelope is addressed to the IRS so it’s obvious that the SSN and other personal information are contained within so committee decided to Drop.

• Issue #3678 – Levy release requests taking too long. The caller made some complaints about working with IRS but was not clear as to what the actual problem(s) were and with whom. For example, was payment made and a levy still took place? Gorga noted that by law the IRS cannot levy before the 30th day and procedurally the IRS waits another 15 days before taking action. Jenkins is to call the taxpayer for clarification and the issue will be reconsidered next month.

• Issue #3707 – Caller suggests IRS better train representatives answering the tax exempt/nonprofit toll free phone line. Epstein asked whether there was a way to register such complaints. Gorga said each operating division keeps customer satisfaction survey results and statistics. Gorga suggested it could also be referred to Nina to include in her report since it’s a hard issue to quantify. Members had mixed feelings about the issue so acting chair Epstein agreed it should be dropped.

• Issue #3701 – Tax Fax Service was terminated which is inconvenient for those without internet service. Jenkins read a brief IRS report on the dropping of this service by IRS in October 2005 due to reduced use and its cost with e-services filling the gap. The committee decided to drop.

Member Outreach Activity/Town Hall Meeting
Gadon did outreach to AARP and SPEC. He is also working on the May Town Hall Meeting in Cranston, Rhode Island.

New Action Items

• Subcommittee 2 will meet April 11, 2006
• Subcommittee 1 will take Issue #3758- Form 1099’s
• Jenkins will contact taxpayer for Issue #3678 to clarify issue
• Jenkins to update the status and history of each issue reviewed today on the TAP database.

Public Participation
No public participation

Meeting adjourned 10:00AM

Next Meeting
4/18/06 @ 9:00AM