Area 4 Committee Meeting Minutes

Conference Call
August 18, 2004

Present:

• James Abraham
• David Cain
• Richard Greenberg
• Delford Jones
• Lawrence Lexow
• Joseph Meissner
• Dick Murphy

Absent:

• Robin Gausebeck
• Leslie Malcolmson
• Robert Meldman
• Teresa Smedley

Staff Present

• Richard Morris, DFO, Acting Chair
• Sandy McQuin, TAP Manager
• Mary Ann Delzer, Analyst
• Patti Robb, Note-taker

Welcome / Review Agenda
Seven members present; quorum met. Richard Morris acted as chair in Teresa’s absence.

Announcements / Approve Minutes
Minutes were approved without changes.

Public Input
None

Discussion of Issues
· Lien Desk Recording – Cain
Cain finalized the report and it was elevated to the Joint Committee. In it he requested that TAP be kept in the process. The Joint Committee reviewed the report and voted to send it forward.

· Married Filing Separate – Meissner
Meissner sent out his report (see attachment). We have researched this and discussed this with IRS personnel. At one point, we thought this was a minor personal problem, but then we learned that other taxpayers have encountered this same problem. Again, IRS had sent letters to the taxpayers inquiring about such income. They again were required to explain the situation and even provide proof, such as showing that the source of the income, such as a bank account, had both the husband’s and wife’s social security numbers on the account. There are two results:

1. IRS does send out letters of inquiry in these situations. This occurs when a husband and wife file separate returns. At the same time, banks and other institutions file reports with IRS about income such as interest which has been earned by a taxpayer with a given social security number that is the primary one listed on an account. IRS then sends a letter of inquiry to that taxpayer when the income, such as interest, is not listed on that taxpayer’s return. Normally, a letter and explanation from the taxpayer clears up the situation.
2. We were also told that IRS does not usually make the same request of the married, filing separate taxpayer year after year. Usually, one explanation in one year is enough to resolve the situation in future years.

This entire process does not impose significant burdens upon taxpayers. First, they can themselves control what social security number is on any of their own accounts. Second, even if IRS makes an inquiry, the taxpayer can clear this up by explaining the situation, demonstrating that their spouse has reported the income, and changing the social security number on the account for future years. While a refund check may be held up for a short time, this does not seem like a significant burden which should change the way IRS operates in these situations.

Morris suggested a few minor changes. Abraham moved to accept the report with the minor changes and forward to the Joint Committee - seconded. No objections.

· W-4 – Cain
Smedley has taken over working this issue. She did a study as to what impact an EZ form would have. Found that when filing single, one is generally over withheld. When filing joint, generally one is under withheld. Will probably recommend using two separate forms; one for filing single, one for filing joint. The Small Business Committee recommended that the W-4 needs restructuring. They are currently writing up a report and it is almost ready to be elevated to the IRS program owner.

· VITA/TCE Test / Retest – Abraham
There was another call regarding the test / retest for VITA/TCE. It will be finalized very soon. Both Abraham and Greenberg said they were very satisfied with the process. McQuin said this is a huge success. You need to look at the successes of issues like this as well as the elevated issues. This needs to be written up and included in the annual report. Abraham will write up.

Annual Assessment
The draft annual assessment was sent out. Still waiting for the committee members to send number scores. Also need the missing outreach reports.
ACTION: Committee members send numerical scores and outreach reports to Smedley.

Office Report
McQuin reported that the names of the selected new panel members have been forwarded to Nina Olson, National Taxpayer Advocate, as well as the Department of Treasury. About 190 were interviewed. There are still a few telephone interviews that need to be done in a couple states.

Leslie Malcolmson is not on the call today because she is attending a Tax Forum. There are still two forms to go; Las Vegas and San Antonio. The NTA talks about TAP in her presentation at the forums. The Oversight Board has been talking to TAP at the forums.

All offices are working on their final face-to-face meetings. Then they will pour all their efforts on finalizing your annual meeting coming up in November. Please respond to Judi Nicholas’ request for topics for the meeting.

The Joint Committee discussed Area 4’s “What’s On TAP” issue. Smedley didn’t want you to have to wait to see the articles published so they decided that you should go forward with the articles you have completed to date. They don’t want to hold up all your hard work until a final decision is made at the annual meeting. However, Berkey has submitted parts of your articles and they were printed in the internal TAS Newsletter.

McQuin reminded members that we are trying to wrap up current issues as new members will be coming on board soon. New issues can be addressed after the annual meeting. Keep sending your issues – they will be entered into the database for future consideration. We don’t want to lose them.

A conference call is being set up with Denise Fayne, Director, Tax Forms and Publications, to respond to the Just In Time issue. She wants to address several other issues on this call too.

Outreach Reports
Abraham did an interview on EITC and Tax Burden with a reporter from the local Dispatch newspaper.

Miscellaneous
Meissner asked about the confidentiality issue. McQuin told him this was brought up during the Joint Committee meeting. Director Coston will talk with the NTA as to whether this is a TAP issue. There is some confusion regarding this issue. The IRS is not outsourcing work. Some practitioners are doing this. However, since it has come up in a couple different committees, Coston will address.

Closing
Morris thanked everyone for their time. Meeting adjourned.

Action Assignments

1. Committee members send numerical scores and outreach reports to Smedley.

Action items still open from previous meetings:

1. Malcolmson will complete FICA/Medicare report for September meeting.
2. Gausebeck will contact Meissner about her suggestion to put the EIN on tax form with the name.

Attachment

TO: Area 4 Tap Committee

FROM: Joseph Meissner, Subcommittee Chair for Married, Filing Separately Return problem

DATE: August 17, 2004

SUBJECT: Draft of Final Report on Problem of Married, Filing Separately Returns

I. BACKGROUND:
A married taxpayer reported that he had been having a problem with his return. He files separately. His wife and he have income which is in his Social Security Number. He reports the income on her return. Both are legally entitled to this income. For several years he has received each year an inquiry from IRS about this. Of course, this holds up his refund. He explains each time the situation to IRS which has accepted that the income is properly reported. Then he receives his refund. He is concerned why this continues to happen and asked TAP to research this.

II. PROCEDURE:
We have researched this and discussed this with IRS personnel. At one point, we thought this was a minor personal problem, but then we learned that other taxpayers have encountered this same problem. Again, IRS had sent letters to the taxpayers inquiring about such income. They again were required to explain the situation and even provide proof, such as showing that the source of the income, such as a bank account, had both the husband’s and wife’s social security numbers on the account.

III. RESULTS:

1. IRS does send out letters of inquiry in these situations. This occurs when a husband and wife file separate returns. At the same time, banks and other institutions file reports with IRS about income such as interest which has been earned by a taxpayer with a given social security number that is the primary one listed on an account. IRS then sends a letter of inquiry to that taxpayer when the income, such as interest, is not listed on that taxpayer’s return. Normally, a letter and explanation from the taxpayer clears up the situation.
2. We were also told that IRS does not usually make the same request of the married, filing separate taxpayer year after year. Usually, one explanation in one year is enough to resolve the situation in future years.

IV. RECOMMENDATIONS:

1. This is a problem that begins with the two taxpayers. If they filed jointly, there never would be a need for IRS to inquire. Furthermore, the problem only happens when one taxpayer reports the income, but the account is primarily under the other taxpayer’s Social Security Number. In other words, the taxpayers themselves could avoid the problem by putting the social security number on the account which is the same social security number used for reporting this income to IRS.
2. With the greater use of computers and the reporting by all banks and institutions of income to IRS, taxpayers should be on notice that IRS must insure all income and income taxes are properly accounted for. One way of helping the taxpayers would be to provide a warning in the IRS tax publications that IRS will initially look to the social security number of any account for who should be reporting that income. The listing of income under a different social security number may trigger an inquiry from IRS.
3. There are a number of non-governmental publications which are used by many taxpayers. TAP informally could contact these publications and respectfully recommend that they contain warnings to taxpayers about this.
4. From all of our research, it is apparent that IRS personnel are simply fulfilling their duties in making inquiries about such income. In fact, both as TAP members and as citizens, we want IRS personnel to do this.
5. Finally, this entire process does not impose significant burdens upon taxpayers. First, they can themselves control what social security number is on any of their own accounts. Second, even if IRS makes an inquiry, the taxpayer can clear this up by explaining the situation, demonstrating that their spouse has reported the income, and changing the social security number on the account for future years. While a refund check may be held up for a short time, this does not seem like a significant burden which should change the way IRS operates in these situations.