SB/SE Burden Reduction Issue Committee Meeting Minutes

April 4, 2006
3:30 PM ET
Teleconference

Program Owner

• Bayder, Helene
• Tucker, Beth

Designated Federal Official

• Ramirez, Sandra — Brooklyn, NY, Manager

Committee Members Present (These attendees count for quorum)

• Barry, Shaun — Franklin Square, NY
• Behnkendorf, Larry — Waterford, MI
• Bly, Bill — Wayne, PA
• Gursey, Gregory — Anchorage, AK
• Guthman, Howard — St. Paul, MN
• Hafer, Donna — Burlington, KY
• Kasturi, Srinivasan — West Orange, NJ, Chair
• Landauer, Steven — Davenport, IA
• O’Donnell, Marie — Riverwoods, IL
• Reading, Sheri — Albuquerque, NM
• Rue, Thomas — Mechanicsville, VA, Vice Chair

Committee Members Absent

• Bland, Sandra — Washington, DC
• Cordeiro, Daryll — Mobile, AL

TAP Staff

• Jenkins, Audrey — Brooklyn, NY
• Odom, Meredith — Brooklyn, NY, Secretary

Roll Call (quorum not met)

Welcome
Kasturi congratulated all members for all of the hard work they put in to get the recommendation out on Form 2553.

Introduction of Beth Tucker
Kasturi welcomed Beth Tucker.

Tucker addressed the committee. She will be working in the afternoon with the Commissioner, Mark Everson and also with SBSE’s Kevin Brown. Brown will discuss how important it is for SBSE to continue to look at ways to reduce the burden on small business self-employed taxpayers. The Office of Taxpayer Burden Reduction staff is impressed by the work the TAP is doing. The goal is to make sure the the committee’s work be as data driven as practical. The initiatives considered are areas that will have the greatest potential to alleviate taxpayer burden, and make it much easier for small businesses to comply and flourish. The Office in the Home is a very important issue and OTBR welcomes all suggestions from the committee.

Subcommittees Report-Out

• Subcommittee on Office-in-Home
  Bly stated the committee had a meeting on March 29th.The committee decided the use of a square footage calculation for the home office deduction. This method would be an option available to the taxpayers, but they may choose to use the traditional method. The committee is considering flat square footage rate that would eliminate the need for depreciation and other expenses for home office allowed now. The committee would like for Kathy Welsh to sit in on the next meeting so the committee can present her with their new ideas. Kasturi suggested quantifying the benefits of the committee’s recommendation based on data from the IRS such as the number of returns affected, and estimated hours saved. The committee is still looking for ideas on other ways.

New Issues

• Innocent spouse
  Lisa McLane presented the committee with some highlights on the new Form 8857. In June of 2005, a cross functional team was developed to take a look at the innocent spouse program, with the objective of simplifying the process and reducing taxpayer burden. The customer base is about 25,000 taxpayers who file these claims annually. Though small in number, it is a high profile program. Presently 43% of the Form 8857 received are rejected in the first- read operation. If the claim makes it through the first-read, 63% more of these claims are rejected and disallowed once they are processed. This is a huge concern. There have been reports of problems with the form from the functional area which is located out in the Cincinnati area. They reported taxpayers experience difficulty understanding the Form and thus make mistakes completing it. They are often confused with its purpose and that of Form 8379 (Injured Spouse). Some other steps the team took were collecting data from the Form and observing the process of the claims to pinpoint the cause of the high reject rate. The SBSE team conducted a focus group with the appeals function. TAP Analyst Mary Ann Delzer helped Lisa McLane get feedback from one of the TAP committees at a meeting on August 26, 2005. Feedback was requested from the TAP members to hash out ideas on improving the form and the program. The team used a research report to understand the demographics of the filers and to study the characteristics of claim filings. The team decided to redesign the Form 8857, made an assessment of each line of the Form and reevaluated Form 12510 questionnaire, which must be completed if the taxpayer is to be considered for relief. The draft of the new Form 8857 was presented to the committee during this conference call. This should contribute to faster claim processing and it will eliminate the suspense period on waiting on questionnaires coming back to the IRS. Hopefully it will also eliminate 30,000 letters a year that are sent to taxpayers. The form was converted to a plain language format to be understood at the level of a seventh-grader. Most of the instructions are on the form and the form has a new section called “Figure Out If You Should File This Form”. The new form will limit claims up to 3 yrs. This 3-year logic will accommodate over 90% of the filers and it should help with the accuracy and relevance of the information from the taxpayers. The box labeled “Important Things You Should Know Before You File This Form” should give taxpayers some direction of how to complete it and emphasize the importance of answering all of the questions on it. The current check box for spousal abuse was replaced by a line stating, “We Must Contact The Person Who Was Your Spouse For The Years You Want Relief”- this must be done by law. This upfront reference should eliminate 2,500 to 3,000 letters a year and expedite claim processing. This was a suggestion put forward by the TAP panel. Part 2 of the form is the section which the team worked on to educate the taxpayer on the type of relief using plain language. Question 5 asks the taxpayer is he/she is interested in getting the refunds and to educate the taxpayer on when he/she needs to send proof of payment. Parts 3, 4 & 5 have been redesigned to focus on key questions that the IRS needs answered to make a proper determination. The check boxes throughout these three parts should enable determination about what the taxpayer knew and did not know about their return filings and about their financial situation for the years they are seeking relief. The table in part 5 was redesigned for determining if economic hardship exists. Hopefully this will allow the IRS consider any relief the taxpayer is entitled to. Parts 6 & 7 have been mirrored from the form 940. Publication 971 will also need to be changed as a result of the new form 8857. There will be some focus-testing done with taxpayers on this project that will start in mid-May and run through June. The new form should be released by August or September. The team will appreciate any input from the TAP.

Formation of Subcommittee for Innocent Spouse
Kasturi requested Behnkendorf take the lead on this subcommittee. Hafer, Reading and O’Donnell will also be part of this subcommittee. Any other members interested in participating on it should contact Behnkendorf. He will be soliciting members by email and a date and time to meet. McLane stated that it would not be a problem for the subcommittee to contact her directly.

Closing
Ramirez will follow up via email in reference to the Minutes Approval Process.

Bayder will have McLane and Welsh participate at the next teleconference with more information. Judi Davis will present the members with a new issue.

McLane thanked the committee for their time and interest in the Innocent Spouse form.

Bayer thanked the committee as well.

Public Input
No public participation

• Meeting adjourned 4:30 P.M. EST
• Next meeting, May 2, 2006 @ 3:30 P. M. EST