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

February 10, 2004

Opening of the Meeting
Nagel opened the meeting at 11:02 A.M. ET by welcoming members and introducing the new Committee's Program Manager, Rebecca Mack Johnson. He also introduced and welcome guest Joan Pryde of Kiplinger Magazine.

Nagel asked members if they had seen the meeting's agenda and requested any change be made before opening. No changes were made.

Roll Call

Panel Members Attending

• Walter Fish, Bellmore, NY
• Chris Forzano, La Center, WA
• Richard Greenberg, Hinsdale, IL
• Edward Hanna, Tampa, FL
• Karen Kerrigan, Oakton, VA, Vice Chair
• Paul Nagel, Glen Cove, NY, Chair
• Owen Oatley, Holly Hill, FL
• Sandra Ramirez, Brooklyn, NY, DFO
• Robert Taylor, Pittsburgh, PA

Absent

• Patrick Castleberry, Edmond, OK
• Manning H. Mosley III, Wayne, PA
• Teresa Smedley, Salem, IN
• Charles Taylor, Los Angeles, CA

TAP Staff and IRS Staff Attending

• Rebecca Johnson, SBSE Program Manager
• Marisa Knispel, TAP Program Analyst

Quorum was met.

Review and Approval of Minutes
Greenberg requested that page 3 of the minutes from the December 9, 2003 meeting read that SPEC Territory Manager Pat Kirk is responsible for introducing the IRS tax curriculum into the high school business programs. Greenberg's efforts are to extend the curriculum beyond the business programs to people who are employed. He is currently working with Kirk to get the tax curriculum into non-business programs.

Correction is needed on page 4, where Ed Hanna's name was misspelled as Hannah.

Consensus was reached in accepting the minutes pending these corrections.

New Program Owner
Johnson briefed the members on her IRS background and explained that she was chosen to work with this Committee due to her involvement in the EFTPS/FTD Penalty Refund Project during her position as Supervisory Tax Specialist in the IRS's TEC organization. She added that she appreciates the opportunity to work with this group.

Johnson stated that in today's meeting, she would like to speak to the members about this Project, the notices and letters that deal with the non-filer issue and the status of the Committee's EZ Pay Proposal.

The EFTPS/FTD Project's aim is to entice small business owners to use EFTPS instead of paper. EFTPS, she said, is more accurate eliminating 98% of errors that occur with the use of paper coupons. Also EFTPS is a convenient system that may be used 24 hrs. per day, seven days a week and allows for cancellation of payments. She talked about the IRS's current efforts in enticing small business owners to use EFTPS by giving the analogy of Delta Airlines' tactics for their customers to use electronic ticketing. When a small business owner who never used EFTPS signs up to make all his deposits with this system, she said, and he proves to be consistent in using it, the IRS will abate a penalty from the past year.

The incentive was tested on a control group and the IRS found that there was an increase in enrollment and compliance. Based on this data, the IRS decided to roll out the program nationwide. The IRS did not want to use the media to promote the program; instead, they wanted to promote it through the practitioner community. However, media advertising of the program will now begin on April 19th.

Johnson said that Kiplinger expressed interest in advertising this program in their newsletter. Pryde agreed and said that a subscriber was interested and asked how to enroll. Johnson offered phone numbers of the services to contact to enroll in EFTPS: the Business and Specialty Hotline at 1-800-829-4933 and the EFTPS Customer Service at 1-800-555-4477. Fish suggested promoting the program via the penalty notices sent to taxpayers. Johnson said it was a good idea.

Hanna asked if any other forms besides the Form 941 may be filed using EFTPS; Johnson replied not yet. Greenberg asked what is the amount of deposits that the taxpayer must make in order to be granted penalty abatement. Johnson could not recall the amount of the deposits for mandatory use. Note: Later today, the staff researched the information and found that for 2004, mandatory use of EFTPS is required when: 1) the total deposits in 2002 were more than $200,000 or 2) when the taxpayer was required to use EFTPS in 2003.

Johnson indicated that the Program Owners were considering the Committee's EZ Pay Proposal and that this proposal could work in conjunction with the EFTPS Project. She said that Gramalia sent a letter to the Committee members thanking them for their recommendations. Nagel read the letter aloud.

Johnson has discussed the Proposal with TEC and IRS Counsel and will be meeting again this Friday with the former to further discuss and develop something similar to the EFTPS concept. She will report their efforts back to this committee because she feels that stakeholder input, mainly that of practitioners, is crucial for the project's success. Ramirez reminded Johnson that the Committee is not solely composed of tax practitioners.

Fish concurred that the EFTPS Project would work well in conjunction with the EZ Pay Proposal since there is a probability that a first year filer would have incurred a penalty.

On that note, Johnson began to speak about the notices/letters that Knispel had previously faxed to them. CP 515 and CP 518 are computer-paragraph letters sent to non-filers.

Kerrigan briefed Johnson on the Education and Outreach Subcommittee's interest on these notices. She said that the previous Program Manager Leatherman suggested they tackled these notices and simplify them. Oatley requested the entire package aimed to non-filers including publications such as Publication 594 and any other enclosures should be considered for review and simplification.

Nagel asked, “Do you believe that a non-filer might be overwhelmed with all this information?” – Kerrigan said that this was Leatherman's concern.

Johnson asked the Education & Outreach Subcommittee members if they would object to inviting Sid Gardner to participate at their next meeting. Gardner is a TEC Analyst who could better explain these notices. All subcommittee members agreed to invite him.

Subcommittee Reports

Payment Issues
Fish said that the subcommittee is currently looking for issues to consider. He mentioned that at their last meeting an issue that surfaced was whether the TAP is supposed to advocate for taxpayers or assist the IRS with its enforcement efforts. Nagel asked DFO Ramirez for her input. Ramirez was not privy to the Program Owner's recommendations to the subcommittee, but from what she learned of this issue from emails, she suggests that the subcommittee follow the Program Owner's directions on assignments.

Hanna expressed his objection to assisting in enforcement issues by saying that his understanding was that the TAP is to encourage the public's tax compliance and advocate for the taxpayer. He feels that assisting the IRS in enforcement is the antithesis to this. Kerrigan clarified for Ramirez that the Program Owner made no specific recommendation on enforcement or that any assignment was given; she only asked for ideas on encouraging equality in compliance. Kerrigan agreed with Hanna that the TAP's mission is not aligned with assisting the IRS in enforcement issues.

Fish suggested that the Program Manager/Owner give this subcommittee members a specific assignment. Johnson said that she understood that the communication was two-way whereby the Program Owner would give the Committee assignments and the Committee would give the Program Owner grassroots communication. She added that she would not like the Committee to be entirely directed by the Program Owner.

Outreach and Filing
Kerrigan briefed the members on Oatley's suggestions on the OIC Program and its effects on non-filers. Oatley said that he would like the OIC Program offer clear and concise language on the payment options offered to non-filers. This issue, Kerrigan noted, may be of interest to both subcommittees. Nagel said that he is currently working with Knispel on researching OIC language.

Kerrigan also mentioned Nagel's idea to increase the Schedule C-EZ income limitation as a possible issue.

Greenberg has been very busy spreading the word of tax compliance to high school programs and works closely with SPEC's Chicago Territory Manager Pat Kirk and her office to accomplish this. On February 24th, he will be meeting with a group of high school students at Roosevelt University to speak about the different tax returns and educate them on the responsibilities of reporting wage and tip income as well as income reported on the Schedule C. These high school students are currently taking a human resources college course geared for the hospitality industry. If Greenberg's efforts are successful with this group, future educational possibilities to educate other students will be available. Through a contact to Kirk's office, Greenberg has also scheduled another educational opportunity to students of Curie High School on April 7th. He will teach these students how to complete Form 1040 EZ and educate them on other forms including Schedule C and C-EZ. These high school students are the future independent contractors and entrepreneurs and tax compliance education is essential. Greenberg noted that he appreciates the cooperation and assistance of Pat Kirk and her office in scheduling these educational opportunities.

Admiring Greenberg's educational efforts, Hanna asked Greenberg for his recommendations to be shared with other Committee members so that they all have the success of bringing tax compliance and education to their local communities.

Ramirez reminded members to market the TAP Program in their outreach.

New Business
Nagel asked that the new issue was whether we should advocate for the IRS or the taxpayer? Oatley expressed his opinion saying that the TAP is independent. If we get involved in enforcement, we lose that independence. Fish does not think that the issue should be avoided altogether. Kerrigan added that the TAP's mission clearly states what we must do. Discussion ensued.

Nagel requested that Johnson participate at the next subcommittees' meetings next month.

Johnson presented a new issue to the members: Sometimes Schedule C non-filers who apply for an EIN indicate on the SS4 that they will have employees because of fear that the application might be rejected if they do not indicate this. The IRS tracks these applications and spends much time and money to find that many applicants never had employees and thus never needed EINs. The question is how to eliminate the confusion of these new business owners and indicate that there is no need to have employees to apply for an EIN? - Johnson wants to avoid the IRS's efforts to track these applicants who never had the filing requirements of an employer.

DFO Report
It was decided at the last Joint Committee meeting, Ramirez said, that those members who volunteered to remain in the TAP for a third year will do so. Recruitment will soon begin in those states where vacancies are planned. Currently, the National Office is working on the TAP website and other recruitment efforts such as the list of alternate members. She asked that all Schedule C Non-Filer Issue Committee members diffuse the word of the TAP recruitment in their local communities and to people they know.

Public Input
Pryde thanked the members for allowing her to participate. She noted that it was a very interesting meeting on a very interesting topic and added that many of Kiplinger's subscribers are concerned with this issue.

Closing Assessment
Nagel thanked all the members for their participation and motioned to close the meeting. Hanna seconded this motion.

Action Items
Johnson will invite Sidney Gardner to participate at the next Outreach & Filing Subcommittee meeting.

NEXT MEETING
Teleconferences on March 9, 2004 for:

• Payment Issues Subcommittee at 11:00 AM ET
• Outreach and Filing Subcommittee at 2:00 PM ET.

Teleconference on Tuesday, April 13, 2004 at 11:00 AM ET for the Schedule C Non-Filer Committee.