SB/SE Payroll Tax Issue Committee Meeting Minutes

January 8, 2004
3 pm Eastern

Attendees

• Jim Abraham
• Clayton Agena
• Charlotte Cassady
• Judi Nicholas, Designated Federal Official
• Theodore Perros
• Leonard Steinberg
• Steve Wood
• Frank Woods Jr.

Not in Attendance

• David Meyer
• Charles Silva

Program Owner

• Margie Kinney

Staff

• Mary Peterson O'Brien, Program Analyst

Guest Speakers

• Kathy Welsh

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
Reviewing and approving the last teleconference meeting minutes will be postponed until the next teleconference. The committee agreed to this process.

Review Agenda
Judi reviewed the agenda. The agenda would proceed as stated.

Consideration of an Annual Form 941
Margie introduced Kathy Welsh who will discuss annualizing the Form 941, payroll tax return, for small business owners.

Kathy discussed heading up the group that is looking into this issue. Representatives from many of the IRS business units are participating in this effort. The mission is to look what reduction of burden would there be for a certain segment of small business owners to file Form 941 annually. This idea has been around for over 20 years; however, the approach has been all or nothing. Because of obvious concerns of people falling off of the radar screen and monies coming in correctly and timely to the treasury, this idea has not been pursued. Most recently, the Redleaf Foundation, a nonprofit organization that helps support home day care industry has asked that the IRS look at this issue for low dollar, low income small businesses. Again, the main concern is to reduce taxpayer burden while insuring that compliance regulations are adhered to and to promote e-file and EFTPS for tax deposits. The task force hopes to have a draft recommendation by early March to potentially implement in January 2006.

The group is in the process of requesting compliance data to analyze when they meet again at the end of January. The team would also look to very small State and Government entities as well. Kathy said that she would like to get the panel's input in this effort.

Preliminary data: For the first quarter of 2002, 2.5 million 941's were filed that had less than $2500 dollars or less of tax liability. This 2.5 million are filing 4 times a year and generating 10 million returns. The time that OMB has estimated to complete Form 941 is 2 hours. With an annual Form 941, about 15 million hours of taxpayer's time could be saved. The idea is that the quarterly deposits would still be made; however, the Form 941 would be completed annually.

One of the main issues that need to be worked is with the Social Security Administration (SSA). They, by legal mandate, are required to make quarterly estimates for budgetary purposes based on Form 941 data. This is a big concern for this project. The idea is to work with a small population to see if compliance is maintained.

Leonard asked the question if the IRS has considered semi-annual Form 941's as opposed to annually. He wondered if this would make it more palatable to the SSA. Kathy said that she would bring this idea to the team to consider.

Leonard asked if changing the Form to be more Internet friendly and with the EFTPS, make it more appealing for taxpayers to use. Kathy replied that this is on the radar screen. Can we gather through the EFTPS, the tax liability information that SSA needs. Kathy gave the committee her contact information to get further feedback from the committee.

Margie asked the question “would it reduce compliance to make quarterly payments informally as opposed to a formal process of paying with the Form 941?” Responses from the panel included: Paying has a direct impact on cash flow; it could be hard to set aside this money and have a problem at the end of the year. The panel could explore if $2500 is the right tolerance level. Another response was to ensure that the taxpayer was current for the previous two years before allowing them to file annually.

Update on Face-to-Face Meeting
The Staff is still working on the place for the March meeting. Everything should be concluded this week and the staff will contact the members about how to make travel arrangements, etc.

Action Item: Leonard asked that everyone submit agenda items by February 2nd and be prepared to have draft recommendations from each subcommittee prepared before the March meeting. All panel members will get any requests for research to Mary by February 5th. Subcommittees will give how much time that they will need during the face-to-face meeting.

Updates from the Joint Committee
Leonard gave a brief synopsis of the last joint committee call. Some of the topics included issues, outreach and replacement and recruitment of TAP members.

Issue Committee Report
Steve stated that the reporting subcommittee has finalized 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 next step is to do oral interviews. The concern for this subcommittee is the resignation of one panel member and the inability to get hold of another panel member with the result of having less people to do the work.

Action Item: Mary and Steve will contact panel members about participation.

Frank discussed having a quick subcommittee meeting. Most of the subcommittee has been out of pocket during the month of December.

Action Item: Frank will talk with his subcommittee and give Mary a date to set up a conference call by January 16th.

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 February 5, 2004.