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

June 22, 2004

Opening of the Meeting
Nagel opened the meeting and announced that Susan Leatherman was joining our meeting on behalf of Rebecca Johnson. Nagel spoke about the 1099 Matching Program information package sent to all the members. This Program is an issue for the Payment Issues Subcommittee, he said.

Roll Call

Panel Members Attending

• Patrick Castleberry, Edmond, OK
• Walter Fish, Bellmore, NY
• Chris Forzano, La Center, WA
• Richard Greenberg, Hinsdale, IL
• Karen Kerrigan, Oakton, VA, Vice Chair
• Paul Nagel, Glen Cove, NY, Chair
• Owen Oatley, Holly Hill, FL
• Teresa Smedley, Salem, IN
• Robert Taylor, Pittsburgh, PA

Absent

• Edward Hanna, Tampa, FL
• Charles Taylor, Los Angeles, CA
• Rebecca M. Johnson, SBSE Program Manager

Quorum was met.

TAP Staff and IRS Staff Attending

• Audrey Jenkins, TAP Program Analyst
• Susan Leatherman, Acting SBSE Program Manager
• Sandra Ramirez, Brooklyn, NY, DFO

Review and Approval of Minutes
Greenberg moved to approve the minutes of the February 10th meeting and Fish seconded the motion. Oatley asked that a sentence quoting him on page 4 of the April 22, 2004 minutes be removed. Oatley said that either the attribution to him is incorrect or he may have said more than indicated in the minutes. Pending this correction, all members conceded to approve the April 22nd minutes.

Program Owner Presentation
Again, Nagel introduced Leatherman as the Program Manager for this meeting in Johnson’s absence. Leatherman added that Johnson’s backup, Barbara Loos, was also unable to join the teleconference due to illness. She stated that she had no information to share with the members but she would gladly answer any of their questions if possible or share them with Johnson for future response.

Nagel reminded everyone that there would be no official teleconference in August due to our face-to-face meeting in Denver. He added that Knispel had made arrangements with a hotel near the IRS building where the meeting will be held. He is working closely with her on the agenda and logistics for this meeting. He also requested that if anyone had suggestions for the agenda to send them to Knispel.

DFO Ramirez reminded all the members that they will be working with Management Assistant Odom to make their travel arrangements for the Denver meeting.

Nagel spoke about the issue of the 1099 Matching Program and writing a proposal on this issue. He added that there will be subcommittee teleconferences in July to follow up on the respective issues. Castleberry explained that he missed the last teleconference of the Payment Issues Subcommittee but remembered that they were working on the issue of the Form SS-4. He believes this issue is very interesting and the Subcommittee should continue its work unless it has already been resolved. Oatley explained this is an issue that is being worked by the Notices Issue Committee. Nagel agreed this is issue is not within our scope and added that our new issue is that of creating specific instructions for Form W-9 addressing the independent contractors.

Ramirez asked for clarification on the Committee’s specific issue of interest on the Form SS-4 when Nagel said that this Form is beyond the scope of the Committee. When asked for her opinion, Leatherman disagreed and explained that this Form is definitely an issue for the Schedule C Non-Filer Committee to explore. The issue, she said, affects new small business owners applying for an Employer Identification Number (EIN) who may incorrectly state in their application that they will have employees in their business. An incorrect statement on the SS-4 will cause problems when the IRS expects the applicant to fulfill his/her tax filing requirements accordingly. The filing requirements for a small business with employees are different than those for a small business without employees. The IRS wants to avoid this problem. Castleberry added that this is an issue not only affecting Schedule C users but one that extends beyond.

Nagel said that the Outreach & Education Subcommittee was working on revising the Schedule C-EZ. He asked Leatherman if she could suggest any other issues of possible interest for the Committee. Leatherman had none.

Castleberry commended Greenberg on his educational curriculum and said that it would be a great idea for all trade schools to include this type of curriculum within their own curricula as most of their students will probably be self-employed sometime in their future. Fish added that a recent newsletter from the New York State Society of CPAs dealt with the tax professionals’ awareness of the current lack of literacy in trade schools. He added that some of these schools (such as those located in Brooklyn, NY) have taken steps to revise their curricula to include educational programs similar to Greenberg’s. The question, Fish said, is how to extend the same education nationwide.

Next, Greenberg discussed his educational curriculum. He explained that he was in Atlanta on May 17th attending a meeting of the Volunteer Testing Program for the IRS’s VITA and TCE/AARP Programs. While in Atlanta, Greenberg met Elaine Beck, Chief of Education and Product Development for the IRS’s SPEC (Stakeholder Partnerships, Education and Communication) organization. Greenberg showed Beck a 30-minute curriculum he has developed using SPEC’s educational training modules to deliver tax literacy to high school and trade school students. The curriculum would greatly help students who are employed and unnecessarily pay preparers to file a basic Form 1040EZ when they could easily learn how to prepare and file the Form themselves. Others who work unknowingly as independent contractors also need to learn their tax obligations. Beck has expressed interest in using Greenberg’s curriculum as part of the SPEC’s program to accomplish this. However, in order to teach this curriculum, volunteers with tax preparation knowledge are needed. Greenberg also approached an AARP representative at this meeting to discuss the curriculum and the possibility of using AARP’s 15,000 tax counselors for the elderly as potential classroom instructors. The representative was interested in Greenberg’s curriculum and will present the idea to the AARP. Whether or not AARP joins in the effort of delivering this curriculum to classrooms, Beck has indicated that other organizations may be interested in joining the teaching effort.

Fish added that the Area 1 Committee chair, Jim Grimaldi, is also working on the issue of expanding financial literacy. He is currently working with the Brooklyn Borough President to form a coalition to accomplish this. Fish and Nagel will share the curriculum and its purpose with Grimaldi.

DFO Ramirez asked Greenberg whether his curriculum should be formally presented to the IRS. Greenberg indicated that Beck is interested in the curriculum regardless of whether or not the TAP recommends it - so essentially, the issue has already been presented to the IRS. Ramirez suggested that Greenberg write a formal proposal on this curriculum in order to forward it to the Schedule C Non-Filer Program Owners. Ramirez also asked Greenberg which organizations, other than the AARP, would be interested in the curriculum. Greenberg said Beck mentioned professional organizations and societies like the AICPA might be interested. Fish added that based on the newsletter he referred to previously, CPAs and tax professionals have the expertise to teach this curriculum.

Nagel requested that Ramirez suggest to the TAP Director and TAP Managers the idea of sharing Greenberg’s curriculum with the newly selected TAP members that have no tax experience – for example, having a tax workshop for them using this curriculum at the TAP’s Annual Meeting. Ramirez promised to share the idea with them at their next staff teleconference. Nagel and Kerrigan also suggested informing NTA Nina Olson of Greenberg’s accomplishments in order for him to be recognized for his excellent work.

Subcommittee Reports

Payment Issues Chair Fish suggested the members appoint a new subcommittee chair at the face-to-face meeting in Denver. He also said that the only issue on the subcommittee’s table at this time is that of the IRS’s 1099 Matching Project. Nagel recommended that the members of this Subcommittee obtain the opinion of non-tax professionals such as those of acquaintances and members of the Outreach & Education Subcommittee on this issue.

Nagel also presented a new issue: The income reporting obligations of E-bay and other e-commerce sellers- Do they know how to file and report their income? With the increasing trend of buying and selling on the net, Nagel wondered if the IRS is educating these people. Leatherman explained that there is a separate IRS office dedicated to e-commerce. She did not know, however, what this office is currently doing. Smedley commented that she was not sure whether or not the IRS could pressure the commercial organizations to inform commercial users of their tax reporting obligations in the absence of a requirement for these organizations to do so. Leatherman suggested that an explanation on reporting the income from casual sales (such as E-bay) is as simple as adding a line to the Form 1040 Instructions. Smedley said that it would be interesting to know what the IRS is currently doing on this issue. A way to educate these e-commerce users, she said, is simply accomplished by the IRS participating in their meetings and conventions. Nagel requested that Knispel research the initiatives and studies accomplished by the IRS’s e-commerce office on this issue.

Outreach & Education Kerrigan discussed the suggestions the Subcommittee members made on Nagel’s issue of Schedule C-EZ. The Subcommittee will follow up by writing a proposal to be shared and approved with the full Committee and subsequently addressed to the IRS. Kerrigan added that this Subcommittee is interested in revising their original proposal on the FYI box of Form W-9. Although the IRS did not accept their original recommendation, the members feel that a modification to their recommendation might be accepted.

Closing/ Assessment
Nagel asked that the subcommittee finalize their proposals and share them with the full Committee at the Denver meeting in order to achieve consensus and address them to the IRS.

Oatley wants to follow up on the issue of informing filers about alternate means of paying their taxes, such as installment payments, temporary collection stays, offer in compromise, etc. Knispel will follow up on this issue before the subcommittee’s teleconference on July 13th.

Nagel reminded the members that although he will remain as TAP member for a third year, the members should re-elect another chair for this Issue Committee.

Public Input
None.

Action Items
Ramirez will share with TAP Director and Managers the Committee’s suggestion to share Greenberg’s educational curriculum with the TAP members who are not tax professionals- as an educational workshop.

Payment Issues Subcommittee will finalize their comments and recommendations on the 1099 Matching Project.

Outreach & Education Subcommittee will finalize their proposal on revising the Schedule C-EZ.

Greenberg will write a proposal to recommend his educational curriculum.

Knispel will follow up on the Outreach & Education Subcommittee’s decision on the alternate ways to pay federal income tax- description of payment information on instructions, publications, etc. before the next Subcommittee’s teleconference on July 13th.

Knispel will research the activities of the IRS office that deals with e-commerce. Their education programs, studies, etc.

NEXT MEETING:
Teleconferences on July 13 2004 for:

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

Face-to-face meeting of the Schedule C Issue Committee in Denver, August 20 and 21, 2004.