SB/SE Payroll Tax Issue Committee Meeting Minutes

December 4, 2003
3 pm Eastern

Attendees

• Jim Abraham
• Clayton Agena
• Charlotte Cassady
• Yvonne Gallegos Bodle
• Keith Johnson
• David Meyer
• Judi Nicholas, Designated Federal Official
• Theodore Perros
• Charles Silva
• Leonard Steinberg
• Steve Wood
• Frank Woods Jr.

Program Owner

• Margie Kinney

Staff

• Mary Peterson O'Brien, Program Analyst
• Marla Ofilas, Note taker

Guest Speakers

• Kathy Rusiecki - Office of Taxpayer Burden Reduction(OTBR), team leader for the redesign effort
• Lynda Mulvaney – Representing IRS Forms and Publications (the IRS division responsible for all updates and changes)
• Kerry Levin, Cindy Helba, - Westat Consultants.
• Carolyn Boccella Bagin – Center for Clear Communication

Guests

• Scott Mezistrano, APA

Roll Call
Mary O'Brien took roll call and a quorum was met. Judi asked if each of the guest speakers could introduce themselves.

Review/Approve Minutes
Leonard asked the committee if they had any changes to the draft minutes from the November 6th teleconference. There were no additions or changes to the minutes and the minutes were approved.

Review Agenda
Leonard reviewed the agenda and announced minor changes.

Face-to-Face Meeting
Leonard discussed the Las Vegas location for the face-to-face meeting. The committee will meet March 19th and part of the day on the 20th. Travel dates have been set for the 18th and the 20th. Mary acknowledged that the staff is in the process of making the arrangements for the meeting.

Leonard stated that he saw the committee working to consolidate the research that has been done and start to formulate recommendations at the face-to-face meeting. Leonard felt that the time spent during the face-to-face would be intensive but that he feels that with preparation before the meeting, the goals could be achieved. Leonard asked if there were any questions or suggestions to the agenda for Las Vegas. The committee had no further questions and Leonard asked Margie to introduce the guest speakers.

Discussion of Revised Form 941
Margie introduced Kathy Rusiecki, the team leader for the redesign effort of the Form 941. This is a project that she has been working on with many people across impacted IRS organizations.

Kathy thanked Margie and the committee for the opportunity to discuss the project. Kathy stated that the meeting objective was to obtain input concerning improvements and discuss what was confusing about the revised Form 941 draft. Kathy explained that the project objective would simplify the Form 941. The committee's comments at this stage in the redesign effort is crucial in knowing if the team is on target with its mission to simplify the Form 941. At this point, the redesigned Form is just a concept and is not a completed draft. It is most likely that after all of the feedback, the draft Form would be changed. Kathy explained a little about the process it takes for the IRS to change a Form.

Facts to consider:

• There are about 23 million Form 941's filed every year by about 6 million employers.
• Deposits are extremely important to the Department of Treasury in terms of bringing in revenue; therefore, this is a very sensitive Form.
• There is pre-filing and filing sections, which go on while you gather your materials to actually prepare your return. And there are also post filing, when notices are issued. For example, math error notices or balance due notices.

The task force wanted to reduce taxpayer burden in these three areas of pre-filing, filing and post filing. They also need to consider the compliance aspects. Would changing Form 941 adversely affect compliance? Finally they wanted to improve processing of the form. Currently, all lines on the form are transcribed into the computer system. This costs a great deal of money. It also cost money to process math errors. Simplifying the Form would reduce the processing costs to the Internal Revenue Service.

Kathy discussed the fact that the Form was important to many offices in the Internal Revenue Service; therefore, it was important to include all the interested parties in the task force. The task force has representatives from the Office of Taxpayer Burden Reduction, Small Business and Self Employed Compliance, Large and Mid-Size businesses, Tax Form and Publications, Taxpayer Advocate Service, Tax Exempted and Government Entities, Electronic Tax Administration and Council. Kathy included, Forms and Publications helped out by involving Westat consultants to help in recommendations for plain language.

The team reviewed a lot of information when they were preparing to revise the form. The task force spent time looking at each line on the form and decided if it was needed, whether it was used, and who used it. The task form did remove some lines as a result of the analysis. There were also challenges along the way. One challenge is that multiple objectives can be conflicting. For example, reducing burden for the taxpayer may result in less efficient compliance for the IRS. There are also conflicts in objectives for other interested stakeholders such as taxpayers, practitioners, Treasury and Social Security Administration.

Kathy pointed out the general changes to the form. The first general change is what the team calls the “Wow Factor”. It is called this because a reverse background that has been used in the main part of the form. This is based on a form that is used in Australia and because of the successful feature they have. She explained that they are working on the scanning capability of the form. This will save the IRS significant resources. It will also have a bar code on the form. When IRS prints and mails the form out to each employer, they will put a bar code, which encapsulates the name, address and employer identification number of each taxpayer. This way if the taxpayer makes a mistake, IRS will be able to scan the bar code and won't have to rely on the scanned identification. The bar code was developed to help with increasing accuracy. Taxpayers often times input wrong information in the entity section.

Kathy outlined the work that needs to be completed for a final draft of Form 941. First, the task force needs to finalize the format. This is a concept document that is shared to get feedback and make changes if needed. Also, consistency changes that affect other forms need to be considered.

Kathy concluded her presentation and opened the meeting to comments and questions. Kathy also stated that all ideas and suggestions would be recorded.

Leonard stated that the committee would need to discuss how to include the work on Form 941 in the TAP annual report.

Action Item: Mary will add this topic to the agenda for the face-to-face meeting in March.

Leonard asked Kathy if additional work by her task forces are being done, if they could provide it to Marge prior to the face-to-face meeting in March so the panel could address the items in full and have the ability to make additional comments.

Action Item: Mary will obtain a task force progress report to bring to the March face-to-face meeting.

Questions from the Panel and Guests:

• Q: Is the quarter designation supposed to be based on the calendar year or the fiscal year? A: The 941 is required to be filed as shown.
• Q: Line 1: Is it necessary to distinguish between full-time and part-time employees?
• Q: Line 1: The definition of “other compensation” could be confusing. Are the instructions going to specifically address this confusion?
• C: Line 4: Insert “other” before compensation to make it consistent with line 2.
• Q: Line 7d: Insert “corrected” or “amended” 941c? A: no
• Q & C: Part 2: Don't like “ Are you unsure about whether you are a monthly or a semiweekly schedule depositor?” Change phrasing to “If you are unsure…”
• Q: Line 14b: You are not requiring to know which states the deposit was made in if made in more than state. Won't that be confusing?
• Q & C: Line 4: Which wages are not subject to Social Security and Medicare taxes? Suggest that this question be divided into two parts: Wages not subject to Social Security and Medicare taxes; Wages not subject to income taxes … because of a great number of aliens who are not taxed for SS or Medicare, but do have income taxes
• C: Line 7: It's longer than it needs to be.
• C: Line 17: Glad to see it. An attempt to make the seasonal employer issue more apparent. Good.
• Q: When you begin to publicize the new form, that would be a good time to push for electronic deposits?
• C: Cut down on instructions
• C: I have never filled out a 941 before, but tried this one and the old one. This one is easier.
• Q: Line 15: Need connector words? “You were a monthly schedule depositor AND if line 10 …” “ You were a semiweekly depositor …”
• Q: Part 4: What's a personal ID?
• C: Really good looking. Easier on the eyes. Easier to fill out. Very positive changes in style and look.
• Q: Line 1: Total number of employees paid? As of a certain date?
• C: Line 2: Add “Do not include third party sick pay” or “sick pay made by a third party.”
• C: Line 7: Separate current sick pay and fractions of cents since they are calculated at different times.
• Q: Line 7e: What would be included?
• Q: Line 7d: Plural or singular? Prior quarter's or prior quarters'?
• C: Part 2: change “Are you unsure” to “To determine whether you are…”
• C: Line 14b: Add “or if you use EFTPS and the funds were drawn in a state that is different from the one on the front…”
• Q: Part 3, line 16: Need a date?
• Q: Part 5: Need email address?

Updates from the Program Owner
Margie stated that there are two new opportunities for the committee to provide their input. The first is a proposal to potentially make the form 941 an annual form for a small select group of taxpayers. The person on the task force would like to talk to the panel in January during the panel meeting and get the panel feelings on having an annualized 941 instead of quarterly and who should be included in that group. Everyone felt it was a great idea and Margie expressed that it would be a go for the next call.

The second opportunity is for Tuesday Dec 16 at 3pm. Margie asked for volunteers who have business experiences on record keeping or advise businesses on keeping records. Margie would like to know how the records are kept and then how they are transferred to the practitioners. Margie asked the committee members to check their calendars and let her know if they will be able to attend the call.

Updates from the Joint Committee
Leonard skipped the updates from the Joint Committee due to time and asked Steve Woods to give his subcommittee update report.

Issue Committee Report
Steve stated that the reporting subcommittee prepared a survey for small business owners and practitioners regarding their payroll taxes and how the taxes were processed, how they might change, what would improve the process as far as both of the groups and they focused on very small business, 20 or less. The Subcommittee had one quick teleconference and will meet again and get their questions in order within the next two weeks.

Leonard invited Frank Woods to discuss the Deposit Subcommittee. Frank discussed the five issues the subcommittee is working on.

• How to increase electronic deposits
• Education
• Penalties
• Deposit schedules
• Reviewing of the deregulations for the federal unemployment tax.

Frank continued to explain that they are still in their fact-finding phase except of FUTA. A preliminary report has been completed and will be discussed at the next subcommittee conference.

Issue Committee Business (Old and New)
Leonard asked the committee if there were any old or new business that needs to be discussed. No issues were presented. Leonard asked if he had a motion to adjourn. All agreed and Leonard ended the call by reminding the committee of the next call on January 8, 2004.