SB/SE Burden Reduction Issue Committee Meeting Minutes

June 15-16, 2006
Face-to-Face Meeting
St. Paul, MN

Program Owner and Other Program Staff

• Bayder, Helene
• Davis, Judith
• Medlock, Teresa

Designated Federal Official

• Ramirez, Sandra — Brooklyn, NY, Manager

Committee Members Present (These attendees count for quorum)

• Behnkendorf, Larry — Waterford, MI
• Bland, Sandra — Bemidji, MN
• Bly, Bill — Wayne, PA
• Cordeiro, Daryll — Mobile, AL
• Gursey, Gregory — Anchorage, AK
• Guthman, Howard — St. Paul, MN, Vice Chair
• Hafer, Donna — Burlington, KY
• Kasturi, Srinivasan — West Orange, NJ, Chair
• Reading, Sheri — Albuquerque, NM

Committee Members Absent

• Barry, Shaun — Franklin Square, NY
• Landauer, Steven — Davenport, IA
• O’Donnell, Marie — Riverwoods, IL

TAP Staff

• Coston, Bernie — Atlanta, GA, TAP Director
• Knispel, Marisa — Brooklyn, NY, Analyst
• Odom, Meredith — Brooklyn, NY, Secretary

Roll Call (quorum met)

Welcome
Kasturi welcomed the members and the IRS staff to the meeting and thanked Guthmann for allowing us to hold the meeting in his office. He asked if everyone had any revisions to the agenda.

National Office Report
Coston announced that this year’s TAP’s Annual Meeting will be held December 11 through 14th at the same Hyatt hotel as last year. Coston would welcome any suggestions from the members to make this year’s meeting more successful than last year’s and stated that some changes have already been established with this effort. Among these changes, the time allotted to the breakouts of the various Area and Issue Committee meetings has been increased and the workshops have been designed to be more productive and valuable to the members.

Coston spoke about the success of the Town Hall meetings that were held this year and said that Nina Olson was very pleased with the outcome of each. He mentioned the last Town Hall meeting, was held in Cincinnati and hosted by our member Donna Hafer. He also spoke about the recent meeting in Cranston, Rhode Island hosted by Area 1 member Hal Gadon. He said that the latter had the largest number of attendees. Coston indicated that the success of these Town Hall meetings is measured by 1) the outreach accomplished whereby community residents learn of the TAP, and 2) by the quality of the issues these residents and attendees bring to the table. Olson has expressed her desire to continue these Town Hall meetings next year due to their great success.

On recruitment, Coston announced that almost 800 applications were received for TAP membership with only twenty-eight positions open throughout the country. The recruitment process was a success and 150 of these applicants will be interviewed in the near future.

Discussion ensued on the number of hours that the TAP expects members to dedicate to the program. A participant stated that a member who has knowledge and experience of tax issues will probably spend more hours of work in the TAP than the 500-hour maximum, while one with less tax knowledge may spend less than the 300-hour minimum. Another participant commented that some members are ill-fitted to the Issue Committee assigned to them as they did not understand the issue. Coston replied that in the new TAP year the members will have the option to change Issue Committees so that they can be more productive. Guthmann is concerned about the coordination of issues whereby some seem to duplicate or overlap. For example, he said, the Area 5 Committee and the Area 3 are working on the issue of Power of Attorney (POA). Coston stated that the TAP Analysts should be researching the TAP database to avoid this overlapping/duplication but sometimes is a matter of interpreting the issue differently. What we need, Coston added, is more dialogue between analysts and management.

Recent Proposals to the IRS and Responses Received
Kasturi spoke about the most recent response from the Office of Taxpayer Burden Reduction (TBR) Acting Director Beth Tucker. In a letter to Kasturi dated June 9, 2006, Tucker thanks the TAP and the SBSE Burden Reduction Issue Committee for their recommendation on the issue of the Office in the Home (OIH) and the Form 8829, Expenses for the Business Use of Your Home. In the letter, Tucker reiterates what Welsh told the Committee in a previous meeting that the TBR will seek IRS Counsel’s guidance to legislative key issues regarding the OIH initiative. The administrative changes that our Committee suggests have already been considered by the TBR team working on the project.

Kasturi also mentioned the previous response received from Tucker regarding the Committee’s recommendation to the TBR’s S-Election project. He asked Bayder to keep the Committee informed on the progress of this project. He also asked the members to review Tucker’s response and provide comments and/or further suggestions they might wish to address to the IRS by the next day (i.e. June 16th). Bayder added that the two TBR Analysts involved in these projects (OIH and S-Election), Welsh and Knights, would be willing to converse with them by phone on any comments /suggestions they would have.

Kasturi also requested comments from the members or any further suggestions on the draft proposal for the Innocent Spouse issue. Members had no additional comments and agreed to send the proposal to Tucker as written. Knispel will send the proposal with a cover letter addressed to Tucker.

Guthmann is concerned about the time it takes the IRS to implement the recommendations that have been accepted. Kasturi recognized the improvement in communication between the TAP and the IRS as it is reflected on Tucker’s responses to our Committee as she addresses our recommendations item by item.

Update on Last Year’s Proposals
Bayder provided the Committee with an update of last year’s recommendations on several issues:

Filing Extension Project
Last year’s Burden Reduction Issue Committee provided input on the issue of making Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, an automatic six-month extension. The Form was changed and the extension period increased from four to six months this past filing season.

Annualization of Form 941 and Creation of Form 944
To simplify the process and reduce taxpayer burden, the employment tax return, Form 941, was simplified for those employers who have up to $1,000 in annual employment tax withholding liability. A new Form 944, Employers Annual Tax Return, was created for those who qualify to file annually instead of quarterly. However, Bayder said, the IRS has been experiencing some problems with the processing of this new Form that have resulted in mailing erroneous notices to taxpayers. Bayder added that action is still pending on another related TAP recommendation to increase the threshold for the filing of the Form 944 to $2,500. Davis stated that the Social Security Administration and the IRS do not agree with this proposal of raising the threshold in order to increase compliance.

Davis also said that 20,000 employers who qualify to file Form 944 filed Form 941 instead causing the IRS to address notices to them in order to rectify the situation. She added that research shows that about one million taxpayers are affected by the current $1,000 limit and increasing the threshold to $2,500 will increase the number of affected taxpayers substantially.

Rounding Off
The Office of Taxpayer Burden Reduction (TBR) is reconsidering this issue for various reasons. A couple of reasons are that while reducing the burden for some taxpayers, it would increase it for others and it would also increase the IRS’ burden in programming. The latter will result in the unnecessary mailing of notices to taxpayers.

Collection Information Statements
All stakeholders’ suggestions received were considered by the project team. Currently, the IRS is refining its software to allow taxpayers to pre-calculate interest and penalty to complete these statements.

Prioritization of SBSE Notices
Bayder indicated that the TAP’s W&I Notices Issue Committee worked on this topic while the SBSE Burden Reduction Issue Committee concentrated on the mail-out strategy.

Examination Appointment Letter
Last year’s Committee provided input on the notice the taxpayer receives when called for an audit to make it clear and concise. The IRS team working on this issue intended to educate the taxpayer as to how the examination process works and how to prepare for an examination. TAP made great recommendations not only on this notice but on other literature sent to taxpayers such as Publication 1, Your Rights as a Taxpayer. The changes to Publication 3498, The Examination Process, have already been made.

Issues for Future Meetings
Bayder briefed the members on some of the issues that will be assigned to them in the future:

1. Specialty Tax- employment tax and excise tax concerns such as non-compliance and communication with those citizens living abroad. The IRS unit working on international issues will work with us.
   
2. Changes to the Form W-4 (Withholding Program) and the problems encountered in completing this Form.

Participation in Meetings
Ramirez facilitated a group discussion on enhancing member participation in the Committee’s work. The discussion covered topics such as difficulty of issues, knowledge and expertise of the subcommittee members on the issue worked, attendance, role of the subcommittee chair, times and length of subcommittee meetings, standing subcommittees vs. rotating subcommittees, etc. The members voted (5-3) to retain the current process of creating subcommittees as new issues come up and to allow members to participate in subcommittee activities based on their interest/knowledge in the issue.

Participation and Outreach in the TAP’s Issue Committee
Kasturi encouraged members to make a special effort to outreach in their communities to capture broad public perspectives on issues we are working. For example, Program Analyst Kathy Welsh invited the Committee to solicit input on the Office in the Home from the practitioners and the self-employed residents of the members’ areas. Bland shared her experience on polling TAP membership on free e-file to gain insight into their concerns. Kasturi shared his experience on getting small business input on Sub-S election process through a presentation to SCORE, a volunteer advisory organization sponsored by the Small Business Administration (SBA).

Electronic Installment Agreement (e-IA)
Teresa Medlock, a Collections Program Manager, is working in conjunction with the Office of Taxpayer Burden Reduction (TBR) on the Electronic Installment Agreement (EIA) that will allow taxpayers to establish a payment agreement with the IRS on the Internet. The EIA will reduce taxpayer burden by reducing the use of paper agreements and make the process easier and more convenient. At the same time it will also be more efficient for tax practitioners and reduce the IRS resources needed to monitor the program. The idea for the EIA came about from the fact that in Fiscal Year 2005 alone, the IRS processed 2.6 million installment agreements. The program will be completed in 3 phases and is being tested at a small-scale since May 1, 2006. Some modifications must be made before its full release to the public.

Medlock explained the three phases the EIA must undergo and provided a printed Power Point presentation to the attendees to help visualize the different computer screens seen when accessing the EIA (Attachment #1). She also explained that the EIA team considered and incorporated some of the many suggestions by external stakeholders such as the National Association of Tax Professionals (NATP), National Association of Enrolled Agents (NAEA) and the TAP among others.

Vice Chair Election
Howard Guthmann was nominated and elected by consensus.

Amended Tax Return Project 94X
Judy Davis reviewed the information she had given the members in their May meeting on the background and the aim of this Project (Attachment #2). She discussed the two options being considered by the IRS project team to reduce taxpayer (both employer and payer) burden in correcting previously filed employment tax returns. Davis asked the Committee to review these options and make suggestions.

On June 16th, the second day of the meeting, the members worked with Davis and discussed the pros and cons of both options. They suggested combining parts of the current two options to create a simpler, easier way to amend an employment tax return. The combination would then be tailored to each applicable tax return (Form 941 , 943, 944 and 945) and allow for a stand alone form that can be processed in a consistent manner, reduce IRS notices to the taxpayer and allow the assessment of interest and penalties to be consistent and efficient.

June 16, 2006

All members and IRS staff were present with the exception of:

Program Staff

Medlock, Teresa

Committee Members Absent

• Barry, Shaun — Franklin Square, NY
• Bland, Sandra — Bemidji, MN
• Landauer, Steven — Davenport, IA
• O’Donnell, Marie — Riverwoods, IL

Taxpayer Burden Reduction (TBR) Referral Process
Analysts Tammy Cleveland and Kathy Welsh joined the meeting via phone to make a presentation on the Referral Process available to the public to submit burden reduction ideas to the Office of Taxpayer Burden Reduction (OTBR). The Form 13285A, Reducing Tax Burden on America’s Taxpayers, available on line for submitting ideas may be mailed or emailed to this Office. The purpose of this Process is to achieve: 1) simplification of IRS forms and publications; 2) streamlining internal policies and procedures; 3) promoting less burdensome ruling and laws; and, 4) assisting in the development of a new, more accurate burden measurement methodology. All this will reduce the burden to taxpayers which is measured in time and money they spend in complying with tax filing obligations. Some of the suggestions referred in this Process come from IRS employees. All suggestions are analyzed and discussed with the affected IRS organization before initiating steps to implement. Staffing and cost of implementation must also be analyzed. If suggestion requires a legislative change, OTBR will write to the taxpayer suggesting that they address their proposal to their congressman. However, if there is potential for burden reduction in the suggestion, there is a four-step process to follow. Cleveland supplied the members with Talking Points (Attachment #3) that indicate what these steps are and gives examples of TBR projects that are underway. Cleveland also stated that the person who submits the suggestion will receive confirmation of receipt and information on the IRS’s decision as and when it is made.

The presentation created great interest and discussion from all the members and many questions were asked. Coston, for instance, indicated that the IRS has several suggestion programs that are available to employees as well as the public. He asked: Does the process cross-reference those other suggestion programs to avoid redundancy? Cleveland replied that the Process filters all suggestions before addressing them to the proper IRS organization.

Taking the opportunity of Welsh’s presence on the phone, the Committee asked for an update on their recommendation on the issue of Office in the Home. She indicated that at the moment, the IRS Counsel was considering the legislative aspects of their proposal and will provide their response to the Program in July.

TAP/SBSE Coalition
Beth Tucker, Office of Taxpayer Burden Reduction (TBR) Acting Director, also joined the meeting via phone. She personally thanked the Committee for their work on the proposals they have already addressed to her office. She added that the TBR is a valuable tool for the IRS Commissioner, and thus she appreciates TAP’s and other stakeholders’ input on their work. Tucker also promised to keep the Committee members informed of progress on the recommendations the IRS decides to accept for implementation.

Kasturi asked Tucker if the Program Owners could provide the Committee with their internal data and research so that the members better understand the basis of the issues and consequently respond with a more analytical approach in developing their suggestions.

Committee Report-Out on the 94X Project
Members discussed the amended tax return project and made their suggestions to consolidate parts of the two options being considered into one form that would be tailored to each of the employment tax forms. Davis expressed her appreciation for their valuable feedback. She agreed to work with the project team to create a sample of the recommended form(s) to be used for making adjustments to the employment forms and share it with the Committee at the next month’s meeting. At that time, any further suggestions will be considered before the final product is presented to the Program.

Closing
Again, Kasturi and all the members thanked Guthmann for his hosting this meeting. The members decided to cancel the originally scheduled July 11th meeting and wait until our August 1st meeting to discuss progress on the 94X Project that will be presented again by Davis.

Action Items
Knispel: Send the Innocent Spouse proposal to Tucker.
Davis: Work with the Committee’s recommendation on 94X Project and create a sample to present at the next month’s meeting.

Next meeting: Tuesday, August 1st , 3:30 P.M. ET.