SBSE Issue Committee Meeting Minutes

February 3, 2005

Opening of the Meeting
Nagel opened the meeting and welcomed all the members. He announced that Sandi McQuin will be acting DFO for this meeting. McQuin briefly explained the current stage in the process of selecting members for the newly formed TAP Communications Issue Committee. Nagel stated that this Committee will be beneficial to the organization by considering the issue of advertising the TAP.

Roll Call

Panel Members Attending

• Clayton Agena, Honolulu, HI
• Nancy Allen, Roswell, GA, Vice Chair
• Margaret Balcom, Concord, CA
• Aaron Bell, Kenmore, NY
• Bill Bly, Wayne, PA
• Paul Duquette, Amherst, WI
• Robert Forst, Encino, CA
• Donna Hafer, Burlington, KY
• Edward Hanna, Tampa, FL
• Steven Hoffman, Columbus, OH
• Bradley Moore, Decatur, GA
• Paul Nagel, Glen Cove, NY, Chair
• Owen Oatley, Holly Hill, FL
• Charles Silva, Provincetown, MA
• Lynwood Sinnamon, Arlington, VA
• Mary Suther, Dallas, TX
• William White, St. Joseph, MO

Absent

• Paul Brubaker, York, PA
• Charlotte Cassady, Talbotton, GA
• Stanley Miller, St. Louis, MO
• Howard Perkins, Suisun City, CA
• Sallie Richardson, Taylorsville, UT
• Steve Rue, Mechanicsville, VA

Quorum was met.

TAP and IRS Attendees

• Helene Bayder, SB/SE Program Owner
• Michael Chessman, TAP SBSE Liaison
• Meglan Knights, Analyst, Office of Taxpayer Burden Reduction
• Audrey Jenkins, TAP Analyst
• Marisa Knispel, TAP Analyst
• Sandra L. McQuin, Acting Designated Federal Official (DFO)
• Kathy J. Welsh, SBSE Program Analyst

Program Owner Presentation
Bayder asked the members for any feedback on the Filing Extension Project. Silva indicated that the TAP’s Area 1 had written a recommendation to make the automatic extension to file the individual tax return a six-month extension. Bayder was aware of this recommendation since receiving a copy of the proposal Knispel shared with her. Nagel suggested that the title of the Form 4868 needs to be changed to indicate that the extension is now an automatic six-month extension; the current form does not indicate the time given to the applicant. Bayder promised to share the first draft of the new Form 4868 with the Committee.

Hanna spoke about establishing an extension period to file Form 1065 for partnerships. Knights replied that the main factor in considering extensions for Form 1065 is the fact that the individual partners are required to file their Form K-1s with the Form 1040 by April 15th. Some discussion ensued on this issue.

White added that the problem with the existing extensions is the lack of consistency in their filing deadlines, therefore defeating the purpose of simplification.

Chessman said that compliance is a concern for the IRS when related to the issue of extensions. The SBSE has also studied the automatic six-month extension that states like California and Kansas provide to file the state tax returns and found that these states have no compliance problems. Compliance in filing or paying state tax was not affected by giving a six-month vs. a four-month extension in these states.

Hanna continued his discussion on the variety of filing deadlines that currently exists. Chessman would like to survey this Committee to get their opinion on the partnership’s due date. Should the due date be September 15th or should it be October 15th?

SBSE Program Analyst Kathy Welsh briefed the Committee on the Employers Annual Federal Tax Program aimed to reduce the small business taxpayer’s burden by establishing a new rule and process to file and pay employment tax annually instead of quarterly. She explained that the annualization of Form 941 stemmed as an initiative from the work done with the Redleaf National Institute. This Institute is a non-profit organization that supports the in-home day care provider industry. The idea of annualizing Form 941 has been considered in the past by the IRS but it never came to fruition. However, the same idea has been already implemented with agricultural employers, Form 940 filers and also with individual taxpayers who are not required to pay estimated taxes when they owe less than $1,000 annually. The Program began in 2003 and it is projected for completion in December, 2005 with a target date of January, 2006 for implementation. The Program involves the creation of a new form, Form 944, to annualize the Form 941 so that the taxpayer will only have to file one instead of four tax returns and also make only one payment with the return instead of four. This will significantly reduce the taxpayer’s burden by reducing the number of hours to complete, file and pay these employment taxes. However, we must keep in mind that the taxpayers who are eligible to file Form 944 are only those who owe less than $1,000 per year as their total employer tax liability. The IRS has identified that there are over a million taxpayers who fall under this category.

Chessman indicated that until now, the only methodology the IRS had in measuring taxpayer burden was by the line by line study and analysis of each IRS form along with the number of hours involved in the completion and filing of each of these forms. The IRS has now come up with different approaches to measure burden reduction. Other projects that the IRS’s SBSE organization is currently working on, for example, are: 1) Form 940 series, 2) activities that relate to a tax return, such as the study on the number of notices that must be sent to the self-employed taxpayer before he or she complies in filing or paying the tax.

Welsh indicated that annualizing the Form 941 may actually avoid late filing penalties and deter non-filing. Welsh will share the draft of the new Form 944 with all the members. Nagel suggested, and everyone agreed, that the Subcommittee #3 which is currently considering the issues of streamlining business tax returns also consider the new Form 944 issue since it falls within the same category of business tax returns.

Other Issues
Nagel asked each member (through roll call) whether they wanted to hold a full Committee meeting each month or alternate between subcommittee and full Committee meetings. Consensus was reached to have a full Committee meeting per month. Knispel explained how the subcommittee meetings will be scheduled and how the subcommittees must report out to the full Committee at their monthly meeting. She also indicated that during their first subcommittee meeting, the members should choose a subcommittee chair and a date and time to hold their meeting each month.

The members briefly discussed selecting a face-to-face date and location. Knispel will coordinate with the Program Owners and then email the members to select date and location. May and June are months to consider according to all participants.

Nagel asked McQuin when will the members know who was selected to be part of the new TAP Communications Issue Committee. McQuin replied that a response will be given early the following week.

Closing/ Assessment
Nagel thanked the members and the IRS staff for participating on the call.

Public Input
None.

Action Items
Knispel will email all the members prospective dates and location for the FTF meeting.

Welsh will share the new Form 944 with the Committee.

NEXT MEETING:
Teleconference on Thursday, March 3rd at 3:00 PM ET.