SB/SE Payroll Tax Issue Committee Meeting Minutes

SB/SE Reducing Taxpayer Burden – Payroll Taxes
Las Vegas, NV Face-to-Face Meeting
March 19, 2004

Attendance

• Jim Abraham
• Clayton Agena
• Charlotte Cassady
• Maria Hermann
• Theodore Peros
• Charles Silva
• Leonard Steinberg
• Frank Woods
• Steven Wood

Staff

• Margie Kinney, Program Owner
• Judi Nicholas, Designated Federal Official
• Mary Peterson O’Brien, Program Analyst

Roll Call
Everyone introduced himself or herself stating the area that they were from. The quorum requirements were met.

Welcome
Leonard discussed the current vacancies in the TAP and the recruitment. He stated that the success of TAP is important. Leonard would like each member to relate what they think would be important to maintain and improve the TAP. It was discussed that some of the reasons that people have dropped out of TAP is the time commitment, not feeling prepared to work the issues, and frustration over legislative issues. Judi discussed the recruitment process. Judi said that what she hears is that what would have helped is to have addressed the expectations during the recruitment process. She asked. “to address the issues of failed expectations, what information would be helpful to new panel members. Leonard would like everyone to get together and think of how to maintain the work, how to bring people up to speed. Margie asked if they analyzed what caused the attrition rate? Was the attrition rate broken down by issue and area committee? Leonard stated that they didn’t break it down; however, he would bring it up to the Joint Committee. Jim said that they should look at the selection process. Explain the process and see if those that are selected are still interested in volunteering. Theodore thinks that the term for some people should be more than the 2 to 3 year terms. Theodore stated that he is frustrated that he can’t advocate legislative issues for taxpayers. Jim stated that sometimes he feels that he is an advocate for the tax preparer. Most people are interested in those issues that are legislative like Earned Income Tax Credit or Alternative Minimum Tax. It is frustrating not to work these issues. Judi clarified that the TAP cannot make recommendation about specific legislation. It does not mean that the panel cannot discuss legislative issues. The TAP position on legislative issues can be forwarded to Nina as it relates to taxpayers. The TAP cannot draft legislation. Jim would like to see a better channel for legislative issues to be elevated to Nina. Theodore would like a separate document that outlines legislative issues.

Margie stated that she as a program owner can propose legislative issues. What this means for this subcommittee is that if legislation is a burden to taxpayers, the issue can state what legislation and why it is burdensome as part of their recommendation.

Review/Approve Minutes
The minutes for February were approved.

Agenda
Leonard reviewed the agenda and stated the changes for agenda items timeframes. By consensus, everyone agreed to the changes.

Updates from Program Owner
Margie gave an update on the various IRS programs this issue committee has been involved with.
941 redesign: The redesign of Form 941 is moving forward. Bar coding was discussed. If the IRS could implement bar coding, the savings for one year could pay for the cost. This would reduce the amount of data input. At this time, it is projected that programming for bar coding will be completed in the year 2007 or 2008. The Bar Code will include the name, address, and quarter of the return. Leonard asked if the IRS would loose money because of lost revenue from penalties. Margie stated that money that is brought in due to penalties is not counted. IRS does not get to use funds from penalties, the funds collected goes to the Treasury Fund. The only fees that the IRS is allowed to charge and keep are small fees such as for copying a return. Such fees are the cost of doing business.

Payroll Tax Workshop: Margie stated that due to shifting priorities and resources, the payroll workshop has been put on hold. The workshop will be completed. At this time, it is 90% completed. The projected date for completion will be early summer. Margie would like the committee to look at the script and make recommendations.

The committee discussed informing and educating small business owners about the workshop when it was completed. The IRS cannot spend money on advertising except for what congress allow. Other options were discussed which included PSA’s and other outreach efforts.

Standardized Employee Identification Number (EIN): What if businesses would have an EIN that works with all agencies? Every state has its own number system for businesses. The number that the state gives for a particular business has a meaning behind the number. The EIN that IRS issues is a dumb number that means, no meaning. Legislation would be necessary to cross reference IRS EIN numbers with that which the state assigns. Senate Bill 882 addresses this issue.

The ability to file federal and state W2’s to the SSA: There must be a business case built. The problem is funding. The Social Security Administration is prohibited to spend anything on this project. The IRS would have to build a business case for funding the project when the IRS is not benefited. What if electronic filing was mandated for Form W-2? The processing savings would be substantial.
The committee discussed the possibility of mandating some of the Payroll and Business Forms.

Action Item: The committee will continue discussing mandates for electronic filing and electronic deposits as well as how mandates should be implemented.

Update From Kathy Welsh on Annualized Form 941
Kathy gave a brief history of the Annualized From 941 project. In the past, IRS has looked at an annualized Form 941 as an all or nothing approach. A barrier is that the Social Security Administration needs accurate data. The current project is looking at a smaller portion of Form 941 filers to see if the burden to small businesses could be reduced. Demographics, taxes owed and the number of employees were a consideration. Those who owe less than $2500 per quarter, this is about 40% of business owners, and have between 1.5 and 2 employees are the target group. The recommendation is to offer annual filing to this level of taxpayers. They are currently recommending a good compliance record and that the taxpayers use the EFTPS system to make deposits. The next step is determining what computer support and resources are needed to launch the pilot in 2006.

Comments from the committee included the idea of a semiannual filing requirement for Form 941, the idea of indexing the limit of $2500 for inflation and marketing/education for the public advertising the pilot. Kathy gave an overview of what is currently planned for marketing.

Kathy stated that the project has not been officially accepted. There is still issues to work on. She will keep the committee informed of the progress.

Focus Group
Margie gave a background of the issue of Form W4’s and withholding. She would like the committee to concentrate on this issue.

ACTION ITEM: Mary will ensure that the entire TAP sends Form W-4 issues to this committee to work on. Mary will also find out what committees are currently working on Form W4 issues.

Margie gave the timeline for the IRS task force.

Initial report to the IRS Commissioner by the end of April
Recommendations to the IRS Commissioner by October
Respond to congress by 2005

The committee discussed the many problems associated with Form W-4’s form the employer and the employee perspective as well as the other agencies affected. The other agencies include Social Security Administration, Health and Human Services. Revamping the system and reducing the number of balance due returns could result in cost savings in collection activities such as notices and resources spent on revenue officers. These resources could be shifted to improved customer service.

Issue Committee Breakout Sessions

The committee adjourned to work in subcommittees.

Subcommittee Report Out

Reporting Subcommittee – Steve reported for the subcommittee. The results from our oral survey shoes that there is not an overwhelming interest in electronic filing. Many taxpayers don’t see any value or the need to e-file. Some taxpayers indicated a mistrust of the IRS if electronic methods would be used. Out of those surveyed, 95% do not e-file and about 50% knew the e-file was an option.

The committee will recommend education to employers as an answer to increase the number of E-filing. Low cost communication items could be used such as posters in IRS offices, libraries and post offices. The IRS forms should be changed to highlight E-Filing. Mail marketing material to those filers who currently do not e-file.

The committee is also considering Incentives to those who e-file. Some ideas include:

• Tax credits to buy equipment and/or for education costs to increase computer literacy
• Free filing
• E-file training at Small Business Workshops.

The committee sees that the main barrier would be the amount of IRS resources.

Deposit Subcommittee: Frank reported for the deposit subcommittee.

Recommendations for Electronic deposits - Same as Electronic Reporting.

Barriers:

• Security
• Don’t have a computer
• Don’t have a reason to change

Methods to remove barriers:

• Pre-enroll businesses into the EFTPS – IRS is currently doing this
• Education to dispel the fears.
• Lobby software companies to produce payroll software that will calculate, tax, allow electronic fling and electronic deposit at the same time.
• EFTPS penalty refund deposits program. – Recommend that the IRS fully implement it

Leonard discussed recommendation on penalties.

Conclusion

Leonard adjourned the meeting. The committee will meet March 20th at 8am.