4.90.1  FSLG Mission and Policy

Manual Transmittal

June 27, 2014

Purpose

(1) This transmits a Table of Contents and text for IRM 4.90.1, Federal, State and Local Governments, Mission and Policy.

Material Changes

(1) Minor editorial revisions and corrections made as needed.

(2) Revised 4.90.1.7, Congressional Correspondence.

Effect on Other Documents

This section supersedes IRM 4.90.1, dated May 9, 2013.

Audience

This IRM 4.90.1, Mission and Policy, provides guidance for FSLG Managers and Specialists and discusses the role of the Office of Federal, State and Local Governments (FSLG) and the responsibilities of its different work units and functions.

Effective Date

(06-27-2014)

Paul A. Marmolejo
Director, Federal, State and Local Governments

4.90.1.1  (06-27-2014)
Federal, State and Local Governments Program

  1. The Federal, State and Local Governments (FSLG) function of Tax Exempt and Government Entities (TE/GE) is responsible for oversight of compliance and education activities with respect to government units and their subordinate entities. FSLG promotes compliance with employment tax withholding/reporting and information reporting requirements. FSLG is also responsible for ensuring compliance with, and assisting in, the administration of social security and Medicare taxes under the provisions of Sections 210 and 218 of the Social Security Act.

  2. FSLG consists of three components:

    1. The Office of the Director;

    2. Compliance and Program Management (CPM); and

    3. Field Operations (FO)

  3. The responsibilities of each component are outlined below in IRM 4.90.1.3, FSLG Responsibilities.

4.90.1.2  (06-27-2014)
Goals

  1. The FSLG program combines compliance and enforcement initiatives with outreach and educational activities to accomplish the following goals:

    1. Improving service to make voluntary compliance easier

    2. Enforcing the law to ensure everyone meets their federal tax obligations

    3. Investing in high performance by maintaining a specially trained workforce through recruitment, training, and technical development

4.90.1.3  (06-27-2014)
FSLG Responsibilities

  1. The following describe the functions of the specific components of FSLG.

4.90.1.3.1  (06-27-2014)
Office of the Director, FSLG

  1. The Director, FSLG, is responsible for:

    1. Leading the FSLG management team in communicating a vision for the organization, creating new business solutions, maintaining and improving employee satisfaction, and delivering FSLG goals and objectives;

    2. Working directly with the various TE/GE functions to discuss and develop corporate strategies for various customer and compliance issues;

    3. Working with and maintaining effective communications with the governmental community and key stakeholder groups, such as the Social Security Administration (SSA), the TE/GE Advisory Committee (ACT), and the National Conference of State Social Security Administrators (NCSSSA) on service delivery and improving voluntary compliance;

    4. Working with the Operations Manager to ensure that our planning, strategy, and program delivery are in concert with our organizational goals and vision;

    5. Reviewing and responding to various controlled correspondence issues;

    6. Reviewing and executing closing agreements;

    7. Approving compliance initiatives, such as information gathering and examination projects;

    8. Approving and ensuring implementation of the annual work plan; and

    9. Reviewing published guidance proposed by the Office of Chief Counsel to determine the administrability of such guidance.

4.90.1.3.2  (06-27-2014)
FSLG Field Operations (FO)

  1. The FSLG Field Operations (FO) Manager is responsible for:

    1. Monitoring and oversight of the daily operations of all FSLG field groups, identifying emerging issues for nationwide consideration, and improving work process, system, and practices;

    2. Developing business goals of the organization including developing strategies to support the delivery of these goals by FSLG field and operations staff;

    3. Working with the FSLG Director and CPM Manager to develop the annual work plan, and directing the resources to achieve it;

    4. Working with the FSLG Director to ensure planning, strategies and program delivery are in concert with organizational goals, policies, and vision are communicated and that global FSLG communications are drafted for the Director when necessary;

    5. Briefing the FSLG Director on the status of operations on a regular basis;

    6. Coordinating and developing education and communication programs for the field groups;

    7. Acting as client to Counsel and liaison with Appeals on issues affecting FSLG;

    8. Reviewing closing agreements in examination cases in conjunction with the CPM Manager for approval of the FSLG Director;

    9. Collaborating with CPM to provide support for technical activities involving return classification, examination, and other special initiatives, such as statistical sampling and nationwide information gathering projects; and

    10. Collaborating with TE/GE Research and Analysis to identify potential noncompliance and in identifying the universe of FSLG taxpayers.

4.90.1.3.3  (06-27-2014)
FSLG Compliance and Program Management

  1. CPM is responsible for delivery of inventory, program monitoring/analysis, technical support, quality measurement and many additional support and program functions. The primary goal of CPM is the development of the work plan, including developing strategies for delivery, and ultimately delivering the inventory driving the work plan. CPM is also responsible for continual monitoring and analysis of work plan performance. In addition, CPM also provides various services through program coordinators to support the overall FSLG mission.

  2. The CPM Manager is responsible for:

    1. Coordinating with the FO Manager to develop procedural guidance for field personnel;

    2. Selecting, classifying, and delivering returns, and non-return units such as compliance checks and information return examinations, for field examination to the field groups;

    3. Maintaining information item/referral procedures and records;

    4. Developing and maintaining a national education and outreach plan, including the development of publications and other educational products for distribution through the FSLG Internet, Intranet, and SharePoint sites;

    5. Formally reviewing examination cases designated for mandatory review, and quality review of closed examination cases;

    6. Working with the FSLG Director and FO Manager to develop the annual work plan;

    7. Coordinating a national education and outreach plan;

    8. Assisting the FSLG Director on guidance projects;

    9. Identifying and elevating trends in noncompliance, and coordinating special initiatives, such as statistical sampling and nationwide information-gathering projects;

    10. Supporting development of FSLG training courses;

    11. Monitoring proposed legislative changes affecting FSLG and implementing approved changes; and

    12. Coordinating with other functions (GE Closing Unit, TE/GE Call Site, etc.) regarding FSLG specific training and projects.

4.90.1.3.4  (06-27-2014)
FSLG Field Manager

  1. The Field Manager is responsible for the supervision of Specialists in his or her geographical area as well as for the overall coordination, under the overall direction of the FSLG Field Operations Manager, for management activities in that area.

  2. The Field Manager will make determinations of appropriate compliance activities within the assigned area, in conjunction with the Field Operations Manager.

4.90.1.3.5  (06-27-2014)
FSLG Specialist

  1. The FSLG Specialist (Specialist) has primary responsibility in an assigned geographical area for conducting compliance activities, including customer assistance, compliance checks, and examinations.

  2. The Specialist may be asked to perform other duties, either individually or as part of a team, directly for CPM or for the Office of the Director, based on individual expertise or abilities.

  3. The Specialist is expected to maintain working relationships with other federal, state, and local officials in his or her assigned geographical area in order to promote more efficient tax administration in that area.

4.90.1.4  (06-27-2014)
Compliance Strategy

  1. This section provides FSLG Managers and Specialists with an overview of the FSLG compliance strategy. The efforts of this strategy include pre-Filing, filing, and post-Filing activities.

4.90.1.4.1  (06-27-2014)
Pre-filing and Filing Activity

  1. Pre-filing and filing activities, which may generally be regarded as "outreach" , are defined as efforts directed toward increasing compliance by providing guidance on general requirements, rather than review of individual compliance history. The primary objective of outreach is to increase voluntary compliance by helping customers understand how to accurately and timely file employment tax returns and any other required returns. Outreach procedures are discussed in IRM 22.40.1, Federal, State and Local Governments, Outreach.

  2. To answer taxpayer inquiries, FSLG Specialists should consult approved outreach and educational materials and publications on the FSLG website, Intranet, and SharePoint sites.

  3. The Specialist should contact his or her manager or CPM, which can provide assistance with questions involving current policy or technical issues not addressed in available materials.

4.90.1.4.2  (06-27-2014)
Post-Filing Activity

  1. Post-filing activity consists primarily of compliance checks and examinations. It also includes any other contacts the Specialist has with the customers that are not voluntary in nature. Examples of post-filing activity cases that are included in the classification and case selection system include:

    1. Claim for refund

    2. Referral from the Exempt Organizations Coordinated Examination Program

    3. Follow-up on a customer assistance case

    4. Follow-up on a Worker Classification Determination (SS-8)

    5. Follow-up on a closing agreement

    6. Follow-up on a Section 218 Compliance Initiative case

4.90.1.5  (06-27-2014)
Customer Assistance

  1. Customer assistance is defined as assistance to individual entities. This may occur in response to contact between FSLG and a government entity, and may be initiated by either party. Examples of customer assistance include the following situations:

    1. An entity identifies a reporting problem and requests that FSLG provide assistance to correct the error.

    2. FSLG secures information regarding an entity that indicates that it may not be in compliance, and contacts the entity to offer assistance to correct the apparent error.

    3. An entity requests telephone assistance relating to an individual compliance problem.

  2. If a customer declines customer assistance, or customer assistance is provided and there is a disagreement on the outcome, or it is determined that the entity has significant compliance issues and needs substantial assistance with filing or amending returns, the entity may be considered for an examination or a compliance check. The Specialist should complete Form 5666, TE/GE Referral/Information Report, and send it with the customer assistance case file to CPM for classification and assignment prior to conducting a compliance check or examination. These situations will be treated as referrals, as discussed in IRM 4.90.6, Federal, State and Local Government, Referrals.

4.90.1.5.1  (06-27-2014)
Federal Government Market Segment

  1. There are significant employment tax issues in the federal segment that the IRS had not addressed prior to the creation of FSLG. These include labor settlement payments, taxable fringe benefits, information reporting, payments to foreign persons and worker classification. These issues continue to require educational guidance as well as enforcement activities.

  2. The federal agency tax compliance group has lead responsibility to identify and coordinate federal agency issues. The other FSLG groups will also assist in delivering outreach or other activities to federal agency field offices (i.e., payroll offices, military bases, procurement offices, regional and local offices, etc.).

  3. Employment tax and information return reporting are critical concerns with federal agencies. The entities in this market are few, but they have significant revenue impact due to the high volume of expenditures, both payroll and nonpayroll, and their involvement with public and private employers and employees.

  4. There are unique protocol issues for federal agencies, including the military. The Specialists should consult the FSLG Federal Group Manager or the Field Operations Manager for guidance in cases where appropriate protocol appears to be an issue.

  5. The Specialist should also consider coordinating outreach with the Regional Social Security Administration office.

4.90.1.5.2  (06-27-2014)
State and Local Government Market Segment

  1. Many state and local government employees are covered under social security and Medicare (FICA) through Section 218 of the Social Security Act ("Section 218 Agreement" ), which first provided coverage of governmental employees in 1951. In 1997 the Assistant Commissioner, Examination approved a national compliance initiative (State and Local FICA Compliance Initiative) to address the FICA compliance of state and local governmental entities. This outreach initiative continued until the end of 1999 with diminishing activity by the districts in 2000. The responsibility for this initiative passed to FSLG at that time.

  2. There has been significant uncertainty by many government employers concerning the existence of an agreement with the Social Security Administration (SSA) for FICA coverage and how the Section 218 Agreement was administered. The primary methodology of the 1997 initiative was to work with SSA to provide education to state and local governments (i.e., counties, cities, special districts, townships, villages, school districts, etc.). During 2001, FSLG continued this initiative by contacting former District Section 218 Coordinators and identifying follow-up actions to close the gap in service due to the IRS restructuring.

  3. Local governments make up a majority of FSLG’s customers (more than 87,000 entities and 12 million employees). Consequently, most of FSLG's resources will be devoted to local government entities.

  4. Among the noncompliance risk factors that may be associated with local governments include the complexities of Section 218, lack of experience with tax-related issues, and frequent turnover of employees and elected officials. Addressing Section 218 is but one of many compliance issues FSLG addresses with state and local governments.

  5. When first assigned to a state, or upon the appointment of a new State Social Security Administrator (SSSA) for that state, the FSLG Specialist should arrange to meet with the SSSA and exchange information with the administrator to become familiar with the state Section 218 Agreement, and the major issues related to Section 218 in the state. The Specialist should also review the role of FSLG with respect to Section 218 and answer any questions the SSSA may have about federal tax law and IRS jurisdiction.

  6. The FSLG Specialist is responsible for contacting state and local government customer groups (i.e., association of school board officials, etc.), as well as government associations, such as the Government Financial Officers (GFOA), National Association of School Business Officers (NASBO), National Association of State Auditors, Comptrollers, and Treasurers (NASACT), etc., and should offer to present information during their meetings.

4.90.1.5.3  (06-27-2014)
Coordinating with Other Operating and Business Units

  1. FSLG shares customers and issues with Governmental Liaison and Disclosure (GLD), Wage and Investment (W&I), Small Business and Self Employed (SB/SE), Large Business and International (LB&I), the Taxpayer Advocate Service (TAS), and other business units within Tax Exempt and Government Entities (TE/GE). There is often a need to coordinate activity within IRS so that all customers in a transaction are served.

  2. For example, if a potential collection issue is discovered on a customer assistance case, the Specialist should consider contacting the local SB/SE Compliance group and seek the assistance of a Revenue Officer. The Specialist must contact SB/SE if a case has been assigned for collection.

4.90.1.5.4  (06-27-2014)
Governmental Liaison and Disclosure

  1. The office of Governmental Liaison and Disclosure (GLD) has a role distinct from the role of FSLG. The Governmental Liaisons (GLs) serve as the primary point of contact with federal, state and local agencies for developing and implementing cooperative tax administration activities between IRS and these entities. FSLG deals with government entities in their roles as taxpaying entities.

  2. In their daily activities, GLs notify FSLG Specialists whenever compliance issues arise. Conversely, FSLG personnel contact GLs if they receive an inquiry about partnerships or joint projects with IRS.

4.90.1.6  (06-27-2014)
Contacting SSA Regional Offices on Section 218 Coverage Issues

  1. FSLG Specialists may contact the SSA for Section 218 Agreement coverage issues. These procedures supplement the 2002 Memorandum of Understanding (MOU) between the Social Security Administration and the Internal Revenue Service for State and Local Government Compliance Issues.

  2. The MOU between SSA and IRS provides that SSA is the arbiter of coverage issues relating to Section 218 Agreements. Under the authority of Sections 210 and 218 of the Social Security Act, SSA is responsible for determining the social security coverage of state and local government employees covered under a state's Section 218 Agreement and modifications, in addition to determining coverage for social security and Medicare benefits. Therefore, SSA has sole responsibility for the interpretation of Section 218 Agreements and modifications.

  3. Before contacting SSA for the interpretation of Section 218 coverage issues, the Specialist should first analyze the facts to determine whether the worker meets the definition of "employee" under IRC 3401(c) and Treas. Reg. 31.3401(c)-1. If it is determined that the worker is an employee, the Specialist should proceed to answer the following questions for each position:

    • What is the effective date of the state's Section 218 Agreement?

    • What is the effective date of all subsequent modifications?

    • Is the position in question included in the existing Section 218 Agreement/modifications?

    • Is the position or service optionally excluded from coverage (i.e. do federal or state laws allow the position or service to be excluded from coverage)?

    • Is the individual worker excluded from mandatory Medicare because of membership in a public retirement system?

    • Was the position created subsequent to the effective date of the Section 218 Agreement (including all modifications)? (See SSA Program Operations Manual System 30001.380, Continuation of Coverage Rules).

  4. Many Specialists use informal telephone contacts with both their local state administrators and regional SSA office contacts to resolve coverage issues. This avenue should continue to be the first type of contact for such coverage questions. If the Specialist determines that the worker at issue is an employee subject to FICA covered by a Section 218 Agreement, SSA should be contacted nevertheless to obtain an informal concurrence with the determination. If SSA agrees with the determination, the Specialist should properly document the case file. This paragraph will suffice for agreed cases.

  5. The taxpayer may not agree with the Specialist's proposed adjustment that the worker is covered under the Section 218 Agreement. The case will require a formal written interpretation from SSA regarding Section 218 social security coverage for the positions in question. For example, a Section 218 Agreement exists but it is not clear concerning which positions are covered or excluded. In some instances, the position in question may not have existed at the time the Agreement was executed. In order to determine the proper social security and Medicare coverage, the Specialist must contact the regional SSA official (SSA Coverage Specialist) to request a formal written interpretation of the Agreement. To accommodate a formal request, SSA has provided a list of Coverage Specialists and their email addresses. The Specialist should use the appropriate SSA Coverage Specialist to request formal written interpretations of coverage issues. Because encrypted emails cannot be sent to SSA, taxpayer information must be redacted before sending a formal request to SSA offices. Include a statement with the email such as "Taxpayer identifying information can be provided by telephone, fax, or mail as required."

  6. To ensure that formal requests are submitted in a consistent manner, a referral form must be used when submitting a formal request to SSA. The form should be completed for each request and attached to the email sent to the SSA Coverage Specialist. The FSLG Specialist should send a copy of the email to the group manager. SSA will use this mailbox system to manage its workload and control responses to FSLG. The Specialist can expect to receive an acknowledgement within five workdays and a written response within 60 days. If there has been no response within 60 days, initiate a follow-up contact. If SSA does not respond to the follow-up contact, the Specialist should discuss the situation with his/her manager. The written response may be received by any means necessary (i.e. fax, email, or regular mail). The response will be used as the primary supporting documentation for the proposal of additional FICA tax on the specific positions at issue.

  7. IRC 6103(l)(1)(A) authorizes the IRS to share information with SSA with respect to taxes imposed by IRC chapters 2, 21, and 24, as necessary, for purposes of SSA's administration of the Social Security Act. Any return information in the possession of IRS with respect to these three chapters, including results of an examination or compliance check, can be disclosed to SSA for its use in administering the Social Security Act. The information that is authorized to be disclosed is not limited to specific items of information; it is limited only to information with respect to taxes imposed by specified chapters of the Code. However, SSA's use of the information is limited to administration of the Social Security Act. IRS should not disclose information it knows that SSA does not need or cannot use in connection with this purpose. Additionally, this contact with SSA is not considered a third-party contact under IRC 7602(c). Form 12175, Third Party Contact Report Form, is not required.

4.90.1.7  (06-27-2014)
Congressional Correspondence

  1. This section outlines procedures for responding to congressional correspondence. As a matter of policy, the National Director for Legislative Affairs controls all inquiries via the e-trak system, assigns them for response, and reviews responses prepared for the Commissioner's (or representative's) signature. See IRM 11.5.3.1.1, E-trak Coordinator Responsibilities (Correspondence that falls under these procedures includes responses to any member of Congress or his or her staff. The Director, Government Entities, coordinates all congressional responses involving government entities and will forward inquiries involving FSLG entities to the FSLG Director. The FSLG Director coordinates with the CPM Manager and analyst on all congressional inquiries and responses involving FSLG entities.

  2. If congressional correspondence is received by an FSLG employee, it should be immediately faxed to the CPM Manager. The original document should be mailed to the CPM Manager. CPM will submit a copy to the Director, Government Entities for control on the e-trak system.

  3. The CPM Manager will review and oversee the assignment of the congressional e-trak with the CPM analyst and any other FSLG manager to gain insight into the e-trak inquiry.

  4. The CPM Manager will determine whether the TP involved is or was under audit with FSLG. If so, the CPM manager will alert and coordinate with the FSLG Operations Manager and the appropriate FSLG Manager.

  5. The CPM Manager and Analyst coordinates with the FSLG Director on all congressional inquiries and responses involving FSLG entities. The FSLG Director will confer with the Assistant Deputy Commissioner, GE/SS, as needed.

  6. Once the e-trak is assigned, the CPM Analyst will obtain all the needed details regarding the inquiry and will draft the response. The CPM Analyst will share the draft with the FSLG Director for review/concurrence. Once reviewed by the Director, the CPM Analyst will forward the draft to the Executive Secretary, Correspondence Office in Legislative Affairs (when required by the e-trak), for review and incorporate any recommended changes. The CPM Analyst will forward the draft via email to *Executive Secretariat E-Review 5 days before the due date with attached incoming documents and the e-trak control number.

  7. The CPM analyst will send the final draft letter to the FSLG Director and CPM Manager for review and for the signature of the FSLG Director.

  8. The FSLG Director will sign the letter and forward to the CPM Analyst and Manager, and Staff Assistant.

  9. CPM analyst will mail the final letter and send a copy of the final letter with the Director’s signature and any notes to the GE e-trak Coordinator with a copy to the FSLG Director, CPM Manager and Staff Assistant to close out the e-trak.


More Internal Revenue Manual