SB/SE Fair Compliance (Schedule C Non-filers) Committee Meeting Minutes

May 3, 2003

Members in Attendance:

• Patrick Castleberry, Edmond OK
• Walter Fish, Bellmore, NY
• Chris Forzano, Vancouver, WA
• Richard Greenberg, Hinsdale, IL
• Edward Hanna, Tampa, FL
• Karen Kerrigan, Vienna VA
• Judi Nicholas, Designated Federal Official
• Paul Nagel, Chair, Glen Cove, NY
• Owen Oatley, Holly Hill, FL
• Teresa Smedley, Salem, IN
• Bob Taylor, Pittsburgh, PA
• Charles Taylor, Lancaster, CA

Members Absent:

• Richard Cormier, Manassa, CO
• Manning Mosley, Wayne, PA

Other Attendees:

• Michael Sollitto, Program Owner
• Margie Kinney, Chief of Special Projects
• Angela Kraus, Chief, Partnership Relations for Trade and Service Organizations
• Tony Chavez, SB/SE Senior Program Analyst
• Mary O'Brien, TAP Analyst

Attachments
Agenda

Welcome/Announcements/Review Agenda
Paul Nagel opened the business meeting. Paul welcomed everyone and thanked all for taking the time out of busy schedules to meet face-to-face. Paul introduced Tom Senjuens, TAP chair and Deryle Temple, TAP Director and asked each to spend a few minutes to talk with the issue committee members.

Comments from Ton Senjuens, TAP Chair
Tom Senjuens gave a brief overview of the TAP Joint Committee meeting held May 2nd and 3rd at the same location.

Comments from Deryle Temple, TAP Director
Deryle welcomed everyone and stated that her purpose for speaking was to say hello and introduce herself as the TAP Director. The Issue committee members gave a self-introduction.

Presentation from Taxpayer Education and Communication for SB/SE
Tony Chavez gave a presentation on the mission of The Taxpayer Education and Communication (TEC) organization in SB/SE. The SB/SE TEC mission is to educate and inform SB/SE taxpayers and representatives about their tax obligations by developing educational products and services focused on customer needs and by providing top quality pre-filing services to help taxpayers understand and comply with the tax laws. One of the ways that the TEC organization accomplishes its mission is to look for errors and omissions on tax returns to see where there is an educational need.

There are three major functions in the TEC organization:

• Field Operations: Tax specialists (prior revenue agents who understand and are able to communicate tax law) educate specific targeted market segments about IRS rules and regulations pertaining to that market segment.
• Financial Transactions: The mission is to educate taxpayers on tas schemes. Examples. 1. Abusive home business tax schemes. A promoter tries to sell a package to a taxpayer saying that 90% of the expenses can be written off. 2. Off shore tax schemes. Credit cards from offshore accounts. Taxpayers conceal transfers of money or other property to a foreign entity, where the income it generates may be hidden. The funds can then be repatriated with offshore credit cards.
• Prefiling agreements: The IRS strives to find agreements with taxpayers before they file returns. If the taxpayer agrees to file a return (filing is a requirement), then the IRS agrees not to assess a penalty. Another example of is the Tip Reporting Program.

Angela Kraus discussed TEC partnership outreach. The mission is to proactively establish partnerships with trade associations, small business associations, and government entities. Partnership Outreach describes its two primary functions: establishing partnerships and conducting outreach efforts to stakeholders with the objective of helping small business taxpayers. These activities support TEC's mission to develop and deliver top quality educational and informational programs, products and services aimed at increasing voluntary compliance and reducing taxpayer burden. This pre-filing focus results from the recognition that increasing voluntary compliance decreases the need for more costly enforcement procedures.

TEC Partnership Outreach, with the field organization, engages partners who can expand TEC's outreach to small businesses. By leveraging relationships with partners such as professional and trade associations, practitioners, small business organizations, and other government agencies, TEC expands its ability to target and reach small business taxpayers. Using existing distribution channels of these partners allows TEC to reach significantly more taxpayers than it could through traditional face-to-face outreach activities.

Another function of TEC is to produce a variety of products to educate the small business market segments. The goal of Product Development is to ensure the delivery of products and services while meeting the needs of customers and anticipating newly emerging issues.  Product Development is primarily responsible for designing, developing, and manufacturing educational programs, products and services for Partnership Outreach programs, Small Business/Self-Employed customers and other stakeholders. Some of the methods of distribution are drop-in articles, email distributions, IRS field offices (86 nationwide) and the website www.irs.gov.

Margie Kinney discussed the Office of Burden Reduction. This office was set up approximately a year and a half ago to achieve significant burden reduction for all taxpayers but, especially for SB/SE taxpayers: by developing proposals that foster burden reduction; by coordinating and championing burden reduction efforts throughout the IRS; and by working with others in IRS, Congress, state and other federal agencies, and the small business community to develop, coordinate and implement meaningful burden reduction efforts that are consistent with IRS's customer service and compliance goals.

Burden is defined as necessary versus unnecessary. Necessary i.e. filing out a form. The IRS needs to monitor tax revenue thus forms are necessary. Unnecessary i.e. Form simplification. This office looks for ways to simplify. An example is with Schedule B. This form did require that a taxpayer list all interest income if interest income was over $400. The threshold has been increased to $1500. Another example is who is required to file Schedules L, M1 or M2. Smaller businesses are no longer required to file.

Projects under way to streamline policies and procedures include:

• Efiling, the need to transcribe Form W2 and Form 1099.
• Signature alternatives for large corporations.

Projects under way to lessen burdensome rules, regulations, and laws include:

• Development of an Industry Resolution Program. The idea is to work with industry to develop a standard deduction for childcare meal expenses. Previously, each daycare provider was required to maintain receipts and account for each meal served a child.
• Extending the standard mileage rate for more than one business vehicle.

Margie stated that she would like to invite someone from the Business Marketing Services Program to speak with the issue committee. The Business Marketing Services Program focuses on advertising such as the efile program.

Questions:

• Does the Informational packages include Publications 334?
• What is included in High School Education COE?
• How effective have some of the outreach efforts been?
• Have there been many discussions to tell the differences between the Form 1099 and the W2?

Margie discussed a few of the old IRS strategies to educate small business taxpayers. The first time that someone got a penalty for a business, the resources for information were:

• The taxpayer would give a list of SBA workshops.
• Newsletter gave list of publication number and title so a taxpayer could fill in the request to send to a distribution center to acquire the publication.
• A letter was sent from the district director that made them aware they missed a payment. Included in the letter was a brochure on how and when to make a payment. This strategy got good results.

Margie discussed that it would be effective to develop products for a targeted Schedule C nonfiler group that could be tested. The question would be to see if the IRS could do this.

The idea of trade shows was brought up. The question from the issue committee is how to find out if there are any trade shows and the times, dates and places of the event. Margie responded that the TEC territory managers have been informed about the mission of the TAP and will keep the TAP managers informed of upcoming events. Judi reminded the members that travel is limited and that all travel will need to be approved through the TAP office.

New Business
Paul discussed the possibility of what happens when a subcommittee is finished with recommendations to the IRS. He asked the members to brainstorm other issues concerning Schedule C Nonfilers. Some thoughts were generated around the following:

• Standard deduction for Schedule C.
• Offset of FICA for five years
• Instructions for Form 1099 to include that EITC could be missed if income is reported in the wrong box
• Small Business Scams
• Reporting programs for when a taxpayer stops filing Schedule C but continues to file.

It was discussed that the IRS program owner will need to ensure that the issues worked meet their business need.

Meeting Adjourned
Paul closed the meeting for the day. It was agreed to start at 8am on May 4th.