SB/SE E-Filing Issue Committee Meeting Minutes

March 11, 2004

Attendance

• Dick Bobb
• Darlene Bramon
• Mario Burgos, Chair
• David Cain
• Helen Curol
• Patrick McCombie
• Howard Perkins

Program Owners

• Karen Taylor
• Terri Wedepohl

Staff

• Sandy McQuin, Designated Federal Official
• Mary Ann Delzer, TAP Analyst

Guests

• Bob Taylor, Chairman, Council for Electronic Revenue Communication Advancement (CERCA); CFO, Universal Tax Systems (UTS)
• Mike Cavanagh, Executive Director, CERCA
• Pete Isberg, National Payroll Reporting Consortium; Director for Government Affairs, Automatic Data Processing, Inc.
• Rick Oelerich, Electronic Tax Administration Advisory Committee; President, Oelerich and Associates 

Welcome/Announcements/Review Agenda/Roll Call
Burgos welcomed members of the TAP. Burgos also welcomed the invited guests. Burgos thanked the guests for taking the time to share their concerns about the IRS E-File program.

Guest Input

Bob Taylor: In regard to marketing to tax professionals, am interested in commenting e-file season as issues this season occur over getting the basics done. If IRS doesn't address, will impede acceptance of e-file by practitioner. Need basic system to function. If are inherent problems, then it is difficult. Practitioners are not going to embrace e-file, even if you do all the marketing. The perception in the practitioner community will impede the marketing and you won't get results to get practitioners on board.

From the UTS perspective, was a tough year as PATS was delayed, as well as the answer files were late. ERO database was nightmarish. A month behind and so not good for new e-filers. Their first experience is the EFIN application and that was delayed a month. Bad first impression.

Inconsistent communication in regard to the 515 reject issues. IRS did not give good advice to the transmitters. Actually told to hold them even though false rejects on 515. Austin has poor system implementation issues. Fairly smooth after a rough start. Practitioners feel taking on more problems and so just file on paper.

As far as marketing presence, was forward steps made before Free File Alliance. IRS marketed to transmitters. Were interesting marketing ideas. Each company does merit of proposal, but some concern about endorsement of the IRS. CERCA membership said how can IRS promote one service over the other. With Free File, CERCA was able to bring the industry together to come up and with encourage consumers. In the non: professional market, able to gain coverage. Was able to lay ground work for cooperation between industry and government. Would be smart to look forward at other opportunities for a spirit of cooperation with e-filing services. What important features that could be used as a carrot to get practitioners to embrace e-file. It is a shame there is not more interaction. There would have been good input. IRS putting emphasis on other services. Industry to come to the Service and agree on services for incentives for paper filers. Have existing customer base industry would encourage e-filing. Transmitters send out 1000s of pieces of mail each season to encourage the purchasing e-file. Need more coordinated, concise marketing. To this point, IRS is not able to look at the potential opportunity there.

Mike Cavanagh: Have worked with IRS leadership for several years. Materials prior were out of the box ideas. Have had a difficult preseason, early season. Has been an emphasis of thinking inside the box. Things need to work smoothly to move segments over to e-file. Are in contact with Terry Lutes. To have new ETA Director reporting in 3-4 weeks. Had issues/problems early this season. More this year than there should have been. Need to be working these issues very hard for the benefit of everyone.

Free File Alliance is an example of an outside box idea. Answered public policy questions. Marketing was done. Less formal and not as much money was spent. Were more opportunities to kick things around. Would urge getting back to using these companies as resources.

Rick Oelerich: ETAC is in interested in what incentive package makes sense. “E-services” piece needs to be a complete range of services, rather than the piecemeal approach that has happened. Have had intense discussions on hat e-services are about. What value do they bring to the market place? Business forms not available. Practitioners can't embrace because doesn't work in their business model. Really not want to be bothered.

Really is an incomplete approach. Current 1040 system dates from 1985. This is a problem as 1040 is the biggest market. Message with e-services is how do we develop a complete package. Adding electronic 1120, 990, next 1065. But at what point does the new 1040 come in the new platform. Practitioner wants to hit the send key to deal with all the forms. Otherwise have to force them to the table. Practitioners need to be able to do all returns one way.

Currently rejects remove a return from the e-filing environment, this places an additional responsibility on the practitioner as well as the taxpayer. The modernized platform that the 1120 and 990 is built on holds promise of a solution to this issue. ETAAC continues to discuss whether conditional acceptance or some other solution for IRS to accept e-filed returns that are less than perfect.

IRS seems to see e-filing as a privilege, to move to the next level e-filing needs to be looked at as a choice with a limited number of barriers. Example IRS has screening process to prevent unwanted mail into service centers but no one has to be approved before sending mail. Need to change that thought process; how we look at ERO's.

Delays by IRS a huge barrier with 2-3 years late delivery date for many system improvements. For practitioners to embrace e-filing, need full service solution from start to finish.

Pete Isberg – Represents reporting agents or payroll companies. A handful of companies file one third of the employment taxes. All do 100% e-filing, electronic pre-filing verification of client entity information and electronic deposits. All Form 941, 940, W2/W3 and 1099 filings are electronic. And all are waiting for the next generation of service. IRS post: filing activities should be electronic. Now 100s of notices and 100s of envelopes (probably 400,000 notices mailed in standard paper format for the industry). Need to change the notices to electronic. Need automatic link to the reporting agent who filed. Reporting agents know their client accounts and can resolve the error that occurred. Need account resolution through email.

“E-services” is in good shape for the 1040 filers, who at least have access to the system. Large business e-filers, who file 100% e-file, need e-services. These services not scheduled for years to come, e.g., 2008.

Many practitioners can't e-file because of W2s that do not match IRS' database. Spend time inputting and then need to file on paper. Need to move to getting info electronically. Payroll preparers could print employee: copy W2s with 2-D barcodes to enable tax preparers to scan them return electronically. Barcodes ensure accuracy. Doesn't effect the practitioner and the barcode could be supported if that was a requirement. Industry finds that if we the IRS “suggests” any optional element for W2s, clients ask why it is there, and often demand that any non: mandatory element be removed from their company's W2s, which requires additional programming, training of client relations staff etc.. If the IRS wants 2-D Bar codes on paper W2s, it needs to be made a requirement.

Large payroll processors do already make W2s available for electronic import over secure internet connection (e.g., into tax prep software such as TurboTax), which has the same benefits (faster return preparation, eliminates data entry errors.

Another issue is that name and Social Security Number don't match. About 10% of the W2s received by the Social Security Administration do not match. The IRS should consider eliminating this as a reason to not accept an electronically filed return. Most are valid; i.e., Employees forget to notify the employer or SSA of name changes (marriage/divorce). That is a significant number of returns that are not able to be electronically filed. IRS does not provide feedback to employers that the TIN is not correct. (This obviously needs to happen before the quality will improve.) Concerns with undocumented workers who once here, if their employers get information about a name/TIN mismatch back, the workers will leave and/or go underground. At least now we have the tax revenue. If not looking to clean up the data, then accept e-filed returns with name/TIN mismatches.

Burgos: To summarize what has been said, really three themes. IRS needs the system to work, communication the practitioners around incentives (IRS needs to ask if providing valuable incentives), the current piecemeal approach won't work.

Bobb: Glitches in the start: up of the season. How are they doing now? Any Idea of how many transmitters were turned off?

Bob Taylor: Don't have statistics. Just what I hear from our customer service. Yes, running smoothly now. Every year it is something. PATS testing is done to approve an ERO if you file direct. If practitioner uses a transmitter, so no extra step. Cost is about $1.00 per return for that service. We don't hear that cost is really not an impediment.

ERO application database has to be right upfront. Need accounts set up properly. Did catch up in November, but is a short season and so need to get it right. Rejects a constant source. Always SSA mismatch frustration. IRS induced 515 false reject error. IRS needs to focus on the basics.

In regard to new things, e-services doesn't scratch the surface as to what practitioners want. But need the basics to work. Identified what practitioners want and we wait with no forward progress.

Filing centers consolidation a problem. Austin filing center should mirror Memphis. Need to get those working through the year.

Cain: Smaller tax practitioners thinking that Free File Alliance is actually competition.

Cavanagh : Not the intent for Free File. Not want to compete meant to be for those taxpayers doing own returns. Really a public policy option that the industry filled.

Curol: Concerns about small businesses, especially women doing projects out of their homes. Are marketing to these practitioners. Seems a very small perspective.

Cavanagh: We are speaking from the industry perspective. Marketing to small business owners need to done as well.

Bob Taylor: Need two prong approaches. Direct to the consumer and then to the professionals and the transmitters. Need both to have to happen.

Oelerich: Need a more complete process. All processes as all forms.

Karen Taylor: As Chief for marketing for SBSE, work with ETA as directly relates to SBSE. Involved with national campaign for TV, radio and print. Want to work with small businesses. Have a TEC field sales force that does visit large practitioners, especially those not filing electronically. Large business will be able to do returns with new modern e-file program for Forms 1102, 5500 and so far.

E-services: Industry solicited and what was requested if file electronically what information they want electronically. Is limited to EROS who file 100 returns or more. It is true payroll providers not getting the first roll out. In the plan for the next generation. Budget is a consideration, do want payroll providers to get the same access.

As far as filing season problems, processing problems early on. Were glitches.

With the application process, Form 8633, changed to completely electronic process. Moving to new database and were problems. Was a big backlog when went from paper to electronic.

Burgos: Interested in marketing collaboration. Free file a great example. Public private sector driving awareness. Idea that private industry sending out marketing pieces. More than IRS and still IRS doing separate marketing.

Bob Taylor: With e-services there was that potential collaboration. Unfortunately unveiled the campaign after the fact.

Burgos: Why do it after the fact. Coordinating the efforts, or at least compliment the efforts of the industry.

Karen Taylor: Terry Lutes heads council for the marketing program. Not sure the same goal, as all are pushing their own business case. Especially with V-coded returns, not sure consolidated effort is possible.

Bob Taylor: The promise of delivery of eservices and effective carrot. Will get them to file business and individual returns. Can do the job easier and facilitate communication. Should be coordinating the message to give them access to improve electronic services. Perspective the same to move across the board to get to 80% e-filing. Need more coordination. Get it if the message is out at the same time.

Oelerich: ETAC looked at e-services in depth. Have process concerns that this is more complicated than the hot line. Wait time not there, but too many times still have to fax disclosure authorization.

Single call can fix it. Why build a process that is not faster in resolution. Need one stop contact, otherwise no incentive. Is a confidence problem with IRS.

Burgos: ETAC members appointed?

Oelerich: Yes.

Wedepohl: If have interest in looking at how e-services will work, was just featured on Tax Talk Today. Program is available through irs.gov. Program is a streaming video and old programs are still accessible.

ACTION: Delzer to send out website link for Tax Talk Today.

Burgos: TAP committee working on an “E-file made EZ” website. Would practitioner find that helpful?

Oelerich: Great idea. One time thought about a mentoring program pairing early adaptors that will embrace the e: fie ideas. Any resource we can give them. Practitioners often see reject notice as they prepared a bad return. Perception is a problem. Any info for the practitioner will help the process.

ACTION: Next ETAC public meeting May 11, 2004 . Delzer to contact Nancy French, ETAC Chair, about agenda and TAP participation.

Office Report

Face-to-face Meeting
McQuin asked if anyone had questions about the meeting in Dallas, March 28, 2004. Members to see Delzer for tax exempt certificates for Texas sales tax. Robb to send out options for transportation. Hotel approximately one-half hour ride from airport.

Burgos: At meeting looking to review the website. Since not part of the practitioner group, feel personally challenged. Won't be sure if it is what people need.

Karen Taylor: IRS will focus test with the practitioner community like folks on the call. Have partnerships with practitioner associations. Dallas meeting will be a step-by-step/ walk through. Look at how it flows.

Wedepohl: Still working on it and so there is a new version everyday. It is aimed at the professional community. But need help with the general flow. Whether it makes sense. Then make sense.

Burgos: Questioned the ability to have contact with Terry Lutes.

Karen Taylor: New director of ETA is reporting soon. ETAC are external experts that report to the ETA director.

Burgos: Would like to explore the marketing between industry and IRS. Move beyond what we can commit to. Would like to pursue to get him on the calendar and on a call.

Closing/Assessment
Bramon stated this was a great meeting and hoping for a great face to face meeting in Dallas.

Burgos requested time on the agenda to use and discuss this information.

Next meeting March 28, 2004, Dallas Texas.