April 2, 2003

Present:

• James Abraham
• Bob Burke
• Frank Claudman
• Dan Drumel
• Robin Gausebeck
• Dick Greenberg
• Glenn Hall
• Larry Lexow
• Leslie Malcolmson
• Joe Meissner
• Bob Meldman, Chair
• Dick Murphy
• Richard Morris, DFO
• Teresa Smedley

Absent:

• David Cain
• Ivan Cotman
• Thad Davis
• Delford Jones
• Nancy Quarles

Staff Present

• Mary Ann Delzer, Analyst
• Patti Robb, Notetaker

Welcome/Announcements/Review Agenda
Meldman said the Joint Committee spoke with Deryle Temple about what to do about legislative issues. Nina Olson is working on guidelines. They should be out within a couple weeks. In the meantime, all legislative issues will be put on the back burner.

Roll Call

Review/Approve Minutes
Minutes were approved by consensus.

Public Input
None.

Agenda Items

• Form 990 - Meissner - Subcommittee has had a couple of meetings to date. They are continuing their work.. Malcolmson contacted various groups to research this issue. Also working with representatives form the New York Attorney General's Office. Will probably have a recommendation ready in three months.
• Refund Anticipation Loans (RAL) - Letter is being rewritten. Meldman - there was an article in yesterday's USA Today (4/1/03) with comments from Nina Olson. She is very interested the RAL. Drumel questioned this should be coordinated with the EITC group? Meldman stated all input should go up to the Joint Committee for recommendation.
• "Just in Time" Notification

ACTION: Smedley will prepare a final report for the Cincinnati meeting. If you have any information regarding this topic, please forward to Smedley.

• Excise Tax Paid by Private Foundations - Report is on hold awaiting guidelines from Nina Olson.
• Taxpayer Correspondence - Delzer will forward the feedback given to the staff.
• Increase Capital Loss - This issue is legislative and will also await the guideline from Nina Olson.
• Elimination of Supporting Forms 1040A - Gausebeck reported subcommittee met with Nancy Harwell from Forms and Publications. While this issue was brought up as an area concern, how widespread is it? Will be doing more research. Meldman suggested committee members poll people at outreaches to see if they have complaints.

ACTION: Delzer sent an email to all panel members for their input. She will compile the responses and forward to the subcommittee.

New Issues

• Accuracy of Withholding Table (#382) - Smedley explained that the tables work if you are single, but when two people work, they are not accurate. The issue here is really improving the W-4 Form.

  ASSIGNMENT: Smedley will work after the filing season is over.

• AMT - On hold.
• Tele-file/over 65 (#340) - Telefile does not allow for the larger standard deduction so you cannot file on the telephone if you are over 65 years of age.

  ASSIGNMENT: Hall is assigned to work on this issue.

• Refund Check Envelope (#339) - The window on the refund envelope is slotted so anyone could lift a corner and view the SSN. There needs to be cellophane in this window or the window needs to be eliminated.

  ASSIGNMENT: Quarles is assigned to work on this issue.

• Franking privilege (#441) - Drop
• Qualified 5-year Cap Gain (see Issue 6 below)- Abraham would like to send this issue forward to the Joint Committee.

  ACTION: Abraham will amplify the recommendation for the Covington meeting.

• OID -

  ACTION: Abraham will write this up for the Covington meeting.

• Use of mediation in the Appeals process - When someone appeals a decision, the mediator assigned is an IRS employee. Will discuss in Covington.
• Schedule D Tax - Greenberg's issues to also be added to Covington agenda.

Action Items
Delzer reviewed the action items and all were completed.

April 28-29, 2003, Covington, KY Meeting
After reviewing the draft agenda, Malcolmson asked that the subcommittees get more time to meet as some people are on several committees.

Delzer prepared a press release which the media specialist will disseminate. Also the Government Liaisons in Ohio and Kentucky will also share with their congressional office. Delzer will send to committees members for their use.

There will be an optional dinner on Monday evening for committee members and guests. Delzer will send out the menu for your selection. The cost will be approximately $25 per person. Nothing has been organized for lunches or dinner on Tuesday.

Meeting Adjourned.

ISSUE #6: SOME OF THE NEW REQUIREMENTS FOR ENTERING DATE ON THE 1040 SCHEDULE D

SOURCE: PERSONAL KNOWLEDGE FROM PREPARING SCHEDULE D'S FOR TAXPAYERS

REASON: INSTRUCTIONS ARE NOT ONLY CONFUSING AND IN SOME RESPECTS CONTRADICTORY BUT REQUIRE AN INORDINATE AMOUNT OF TIME TO REPORT TRIVIAL AMOUNTS OF INCOME.

DATE: 15 MARCH 2003

THE PROBLEM:
The new requirements for determining whether or not "Qualified 5-Year Gains" were actually qualified along with the "Unrecaptured Section 1250 Gain" worksheets adds a great deal of time in the reparation which in many cases, is reporting only small amounts of income.

DISCUSSION:
On the first return of this type that I prepared, it took me over an hour to figure out the proper sequence as well as how to actually prepare the form for an amounts which totaled less than $30.

One of the problems is that Schedule D lends to the confusion because there are conflicting instructions as to whether or not the worksheet needs to be filled out in the first place.

RECOMMENDATIONS:

1. That the instructions outlining the proper procedure be rewritten to eliminate or at least, reduce the confusion.
2. That a floor be placed on the reportable amounts such as less than $100 or whatever is appropriate which might just eliminate the need for the worksheet. A simple entry on Schedule should be sufficient.

ISSUE #7: SOME TAXPREPARERS TAKING ADVANTAGE OF TAXPAYERS WHO HAVE QUALIFY FOR REFUNDS AND WHO CHARGE A HUGE PERCENTAGE OF THE POTENTIAL REFUND IN ORDER THAT THE TAXPAYER RECEIVE AN IMMEDIATE REFUND

SOURCE: CHATTING WITH TAXPAYERS WHO HAVE IN THE PAST, USED THE IRS VITA SITES TO HAVE THEIR RETURNS PREPARED, EITHER FOR E-FILING OR PAPER

REASON: SOME TAXPAYERS ARE NOT USING THE FREE VITA AND TCE SITES THIS YEAR AND PAYING HUGE AMOUNTS IN ORDER TO RECEIVE EARLY REFUNDS FROM THE PREPARER.

DATE: 15 MARCH 2003

THE PROBLEM:
The various tax credits such as Child Tax Credit, Earned Income Tax Credit, Additional Child Tax Credit, etc., were designed to provide lower income taxpayers with financial relief.

Each year, these benefits have been increased until the amount of refund in many cases reaches the $4 to $5,000 level.

The temptation to get this money as quickly as possible has caused a number of taxpayers to use private ERO's who then provide them with a quick refund but charge huge amounts to do so.

DISCUSSION:
One lady with whom I spoke would not tell me what she paid for this service for a refund of about $4,700. When I asked her if it was $500, she said, "Oh yes, more than that."

A program with good intentions to benefit lower income families is now costing taxpayers huge amount because of those who are using the immediate refund service. The benefit to those who provide these so-called immediate payments is mind boggling.

Thus, a program which was designed to help lower income families has become a major benefits to those who have found a bonanza with little or no risk.

RECOMMENDATION/S:
This is a matter which perhaps could be addressed administratively by changing the procedure so that only the taxpayer can receive the refund. Perhaps those who provide immediate refunds might think twice before investing in a program where the taxpayer has to return the check.

However, there is also the probability that legislative action is also needed.

Just how much latitude the IRS would have administratively in this matter would require an inquiry to the IRS.

In any event, the huge charges taxpayers are willing to accept and some tax preparers charge stretches the moral and ethical considerations of a program which was designed to help low income families.

TAP should investigate this matter in conjunction with the IRS in order to find a method which reduces or eliminates the ability of some preparers who take advantage of those who seek their services.

     Respectfully submitted,
     James M. Abraham, P.E.
     Brigadier General, USA, Ret
     Member, Tax Advocacy Panel