4.23.2 Employment Tax Responsibilities and Coordination with Other Functions.

Manual Transmittal

November 19, 2018

Purpose

(1) This transmits a revision to IRM 4.23.2, Employment Tax - Employment Tax Examination Objectives, renamed Employment Tax Responsibilities and Coordination with Other Functions.

Background

Updates are made to this section for organizational, procedural, and technical changes.

NOTE: IRM 4.23.2 has been extensively revised, in conjunction with revisions to IRM 4.23.1 and IRM 4.23.3. Topics have been consolidated and rearranged for consistency. The following is a cross-walk of the changed IRM sections, excluding the internal control sections detailed in Material Changes. See Material Changes for additional information:

IRM 4.23.2 IRM 4.23
4.23.2.1 Deleted Moved to IRM 4.23.1.3
IRM 4.23.2.2. Deleted Moved (1) and (2) to IRM 4.23.1.2 and (3) and (4) to new subsection IRM 4.23.2.2.1.1
4.23.2.2 - NEW: Coordination Between Operating Divisions Formerly 4.23.2.4
IRM 4.23.2.2.1 Deleted Moved to IRM 4.23.1.2.1
4.23.2.2.1 - NEW: Coordination within SBSE Formerly 4.23.2.6(4)
4.23.2.2.1.1 - NEW: Enterprise Wide Employment Tax Program (EWETP) Formerly (3) and (4) from IRM 4.23.2.2
4.23.2.2.1.2 - NEW: Employment Tax Returns Filed by LB&I Taxpayers Formerly IRM 4.23.2.6(2)
4.23.2.2.1.3 Formerly 4.23.2.4.4
IRM 4.23.2.2.2. Deleted Moved to IRM 4.23.1.2.2,
4.23.2.2.2 - NEW: Large Business & International (LB&I) Formerly 4.23.2.6(3)
4.23.2.2.3 - NEW title: Tax Exempt/Government Entities (TE/GE) Formerly 4.23.2.6(1) and (5)
4.23.2.2.3.1 Formerly 4.23.3.6.2
4.23.2.2.3.2 Formerly 4.23.2.13
4.23.2.2.4 Formerly 4.23.2.8
4.23.2.3. Deleted Moved to IRM 4.23.1.3.1
4.23.2.3 - NEW subsection: Coordination with Other Agencies NA
4.23.2.3.1 Formerly 4.23.2.9(2) and (3)
4.23.2.3.1.1 Formerly 4.23.2.10
4.23.2.3.1.2 Formerly 4.23.2.11
4.23.2.3.1.3 Formerly 4.23.2.12
4.23.2.3.2 Formerly 4.23.2.14
4.23.2.3.3 Formerly 4.23.2.16
4.23.2.4 Formerly 4.23.2.15
4.23.2.4 Deleted Moved to 4.23.2.2
4.23.2.4.1 Deleted Moved to 4.23.1.3.3
4.23.2.4.1.1 Deleted Moved to 4.23.1.3.3.1
4.23.2.4.1.2 Deleted Moved to 4.23.1.3.3.2
4.23.2.4.1.3 Deleted Moved to 4.23.1.3.3.3
4.23.2.4.2 Deleted. Moved to 4.23.1.3.4
4.23.2.4.3 Deleted Moved to 4.23.1.3.2
4.23.2.4.4 Deleted Moved to 4.23.2.2.1.3
4.23.2.5. Deleted Moved to 4.23.3.3.3
4.23.2.6. Deleted Moved to various other IRM sections
4.23.2.7. Deleted Included (3) in IRM 4.23.2.1.4.1
4.23.2.8. Deleted Moved to 4.23.2.2.4
4.23.2.9. Deleted Moved to 4.23.2.3.1.
4.23.2.10. Deleted Moved to 4.23.2.3.1.1.
4.23.2.11. Deleted Moved to 4.23.2.3.1.2
4.23.2.12. Deleted Moved to 4.23.2.3.1.3.
4.23.2.13. Deleted Moved to 4.23.2.2.3.2.
4.23.2.14. Deleted Moved to 4.23.2.3.2.
4.23.2.15. Deleted Moved to 4.23.2.4.
4.23.2.16. Deleted Moved to 4.23.2.3.3
Exhibit 4.23.2-1. New Exhibit Formerly Exhibit 4.23.3-2

Material Changes

(1) IRM 4.23.2.1. New subsection, Program Scope. Rearranged existing IRM content to place information involving internal controls for a program IRM under this subsection to conform to the new rules to ensure that the program’s internal controls are adequately expressed in the IRM.

(2) IRM 4.23.2.1.1. New subsection, Background. Formerly IRM 4.23.2.1.

(3) IRM 4.23.2.1.2. New subsection, Authority.

(4) IRM 4.23.2.1.3. New subsection, Responsibilities.

(5) IRM 4.23.2.1.4. New subsection, Program Objectives and Review.

(6) IRM 4.23.2.1.4.1. New subsection, Program Reports.

(7) IRM 4.23.2.1.5. New subsection, Terms and Definitions. Compiled a list of frequently used terms.

(8) IRM 4.23.2.1.6. New subsection, Acronyms. Compiled a list of frequently used abbreviations and their terms

(9) IRM 4.23.2.1.7. New subsection, Related Resources.

(10) IRM 4.23.2.1. Deleted, Employment Tax Policy Statements and Delegation Orders and moved to IRM 4.23.1.3, Employment Tax Program.

(11) IRM 4.23.2.2. Deleted, Comprehensive Program for Employment Tax Administration and Compliance and moved (1) and (2) to IRM 4.23.1.2, Comprehensive Program for Employment Tax Administration and Compliance. Moved (3) and (4) to new subsection IRM 4.23.2.2.1.1, Enterprise Wide Employment Tax Program (EWETP).

(12) IRM 4.23.2.2. New subsection, Coordination Between Operating Divisions. Formerly IRM 4.23.2.4, Employment Tax Program Responsibilities

(13) IRM 4.23.2.2.1 Deleted, Encouraging Voluntary Compliance and moved to IRM 4.23.1.2.1, Encouraging Voluntary Compliance.

(14) IRM 4.23.2.2.1. New subsection, Coordination Within SB/SE, introducing various coordination efforts. Formerly (4) in former IRM 4.23.2.6, Coordination Between Operating Divisions.

(15) IRM 4.23.2.2.1.1. New subsection, Enterprise Wide Employment Tax Program (EWETP), from former IRM 4.23.2.2 Comprehensive Program for Employment Tax Administration and Compliance (3) and (4).

(16) IRM 4.23.2.2.1.2. New subsection, Employment Tax Returns Filed by LB&I Taxpayers from IRM 4.23.2.6.(2).

(17) IRM 4.23.2.2.1.3. New subsection, Centralized Case Processing (CCP), formerly IRM 4.23.2.4.4.

(18) IRM 4.23.2.2.2. Deleted, Fair and Consistent Approach to Employment Tax Administration and moved to IRM 4.23.1.2.2, Fair and Consistent Approach to Employment Tax Administration.

(19) IRM 4.23.2.2.2. New subsection, Large Business & International (LB&I). From former IRM 4.23.2.6(3).

(20) IRM 4.23.2.2.3. Tax Exempt/Government Entities (TE/GE), formerly (1) and (5) from IRM 4.23.2.6, TE/GE Employment Tax Program Responsibilities. Expanded on the types of organizations covered by EO, and provided new procedure for case assignment. Deleted reference to FSLG, as FSLG was rolled under EO in the 2017 realignment. This paragraph is obsolete.

(21) IRM 4.23.2.2.3.1. New subsection, Referrals to Employee Plans and Exempt Organizations. Formerly IRM 4.23.3.6.2, Referrals to Employee Plans and Exempt Organizations. Added information on using the SRS system.

(22) IRM 4.23.2.2.3.2. New subsection, Churches, Conventions or Association of Churches formerly IRM 4.23.2.13. Changed contact procedure for IRC 7611 notification.

(23) IRM 4.23.2.2.4. New subsection, Coordination Concerning Appeals Determinations formerly IRM 4.23.2.8.

(24) 4.23.2.3. Deleted, Employment Tax Examination Program and moved to IRM 4.23.1.3.1, Effective Employment Tax Examination Program.

(25) IRM 4.23.2.3. New subsection, Coordination with Other Agencies, introductory subsection on interagency relations.

(26) IRM 4.23.2.3.1. New subsection, Coordination With Social Security Administration (SSA) formerly IRM 4.23.2.9 (2) and (3).

(27) IRM 4.23.2.3.1.1. New subsection, Employee Wage Data for SSA, formerly IRM 4.23.2.10.

(28) IRM 4.23.2.3.1.2. New subsection, Processing Delinquency or Correction Notices, Forms SSA–7010, formerly IRM 4.23.2.11.

(29) IRM 4.23.2.3.1.3. New subsection, Availability of SSA Program Operation Manual System, formerly IRM 4.23.2.12.

(30) IRM 4.23.2.3.2. New subsection, United States Citizenship and Immigration Services, formerly IRM 4.23.2.14.

(31) IRM 4.23.2.3.3. New subsection, Railroad Retirement Board (RRB) Coordination Agreement formerly IRM 4.23.2.16.

(32) IRM 4.23.2.4. Moved, Employment Tax Program Responsibilities to IRM 4.23.2.2, Coordination Between Operating Divisions.

(33) IRM 4.23.2.4. New subsection, Federal/State Exchanges, formerly IRM 4.23.2.15.

(34) IRM 4.23.2.4(4). Added "Internal Revenue Service (IRS) Small Business/Self-Employed Division (SB/SE) Specialty Tax" to specify that the agreements between the states only apply to (SB/SE) Specialty Tax, the signatory of the agreements.

(35) IRM 4.23.2.4.1. Deleted, Overview - SB/SE Employment Tax Program and moved to IRM 4.23.1.3.3, SB/SE Employment Tax Program Structure.

(36) IRM 4.23.2.4.1.1. Deleted, Specialty Policy - Employment Tax and moved to IRM 4.23.1.3.3.1, Specialty Policy - Employment Tax.

(37) IRM 4.23.2.4.1.2. Deleted, Exam Case Selection Support - Employment Tax Workload Selection and Delivery (ET-WSD) and moved to IRM 4.23.1.3.3.2.

(38) IRM 4.23.2.4.1.3. Deleted, Examination Operations, Specialty Examination, Employment Tax and moved to IRM 4.23.1.3.3.3.

(39) IRM 4.23.2.4.2. Deleted, Responsibilities of Compliance Personnel Regarding Employment Tax Examinations and moved to IRM 4.23.1.3.4.

(40) IRM 4.23.2.4.3. Deleted, TE/GE Employment Tax Program Responsibilities and moved to IRM 4.23.1.3.2, Tax Exempt/Government Entities (TE/GE).

(41) IRM 4.23.2.4.4. Moved, Centralized Case Processing (CCP), to IRM 4.23.2.2.1.3.

(42) IRM 4.23.2.5. Deleted, SS-8 Program, and moved to IRM 4.23.3.3.3, SS-8 Program.

(43) IRM 4.23.2.6. Deleted, Coordination Between Operating Divisions and moved to various other IRM sections.

(44) IRM 4.23.2.7. Deleted, Feedback of Employment Tax Information and included (3) in IRM 4.23.2.1.4.1, Program Reports.

(45) IRM 4.23.2.8. Moved, Coordination Concerning Appeals Determinations to IRM 4.23.2.2.4, Coordination Concerning Appeals Determinations.

(46) IRM 4.23.2.9. Moved, Coordination With Social Security Administration (SSA) to IRM 4.23.2.3.1.

(47) IRM 4.23.2.10. Moved, Employee Wage Data for SSA to IRM 4.23.2.3.1.1.

(48) IRM 4.23.2.11. Moved, Processing Delinquency or Correction Notices, Forms SSA–7010 to IRM 4.23.2.3.1.2.

(49) IRM 4.23.2.12. Moved, Availability of SSA Program Operation Manual System, to IRM 4.23.2.3.1.3.

(50) IRM 4.23.2.13. Moved, Churches, Conventions or Association of Churches to IRM 4.23.2.2.3.2.

(51) IRM 4.23.2.14. Moved, United States Citizenship and Immigration Services to IRM 4.23.2.3.2.

(52) IRM 4.23.2.15. Moved, Federal/State Exchanges to IRM 4.23.2.4.

(53) IRM 4.23.2.16. Moved, Railroad Retirement Board (RRB) Coordination Agreement to IRM 4.23.2.3.3.

(54) Exhibit 4.23.2-1. New Exhibit, Employee Plans (EP) Referral Checksheet, formerly Exhibit 4.23.3-2, Employee Plans (EP) Referral Checksheet.

Effect on Other Documents

This material supersedes IRM 4.23.2, dated December 7, 2016. IRM 4.23.2 has been extensively revised, in conjunction with revisions to IRM 4.23.1 and IRM 4.23.3. Topics have been consolidated and rearranged for consistency.

Audience

This section contains instructions and guidelines for Large Business & International (LB&I), Tax Exempt/Government Entities (TE/GE), and Small Business/Self Employed (SB/SE) employees dealing with employment tax issues.

Effective Date

(11-19-2018)

Lisa M. Piehl
Acting Director, Examination - Specialty Policy
Small Business/Self-Employed

Program Scope

  1. Purpose: This section details the coordinated programs both internally and externally of the Employment Tax organization.

  2. Audience: This section contains instructions and guidelines for all Large Business & International (LB&I), Tax Exempt/Government Entities (TE/GE), and Small Business/Self-Employed (SB/SE) employees dealing with employment tax issues.

  3. Policy Owner: Director, Examination - Specialty Policy of the Small Business/ Self-Employed Division.

  4. Program Owner: Program Manager - Employment Tax Policy. The mission of Employment Tax Policy is to establish effective policies and procedures, to support compliance with employment tax laws.

  5. Primary Stakeholders:

    • Employment Tax – Workload Selection and Delivery (SE:S:E:HQ:ECS:S:ETEGCS:EWSD)

    • Specialty Examination - Employment Tax (SE:S:E:SE:ET)

    • Examination - Specialty Policy, Employment Tax Policy (SE:S:E:HQ:SP:ET)

    • Other areas that are affected by these policies and procedures include Appeals, Counsel, SB/SE Examination, LB&I, and TE/GE.

Background

  1. The Internal Revenue Service administers the employment taxes imposed by Chapters 21 through 25 of the Internal Revenue Code and the self-employment taxes imposed by Chapter 2. An important phase of administration of employment taxes, including the self-employment tax, is interpreting the sections of the Code applicable to these taxes. The Service refers questions relating to:

    1. Eligibility for and computation of social security benefits ▸ to the Social Security Administration (SSA), Baltimore, Maryland, or to their nearest local field office.

    2. Unemployment benefits ▸ to the appropriate State Unemployment Compensation Board.

    3. Railroad employee retirement benefits ▸ to the Railroad Retirement Board (RRB), Chicago, Illinois.

  2. In carrying out these duties, the Service shares with these agencies a joint responsibility for administering the tax aspects of these programs. This requires close coordination between the IRS and these agencies at the national level to assure uniform interpretation and application of the various provisions of the law.

Authority

  1. Employment tax provisions are found at Internal Revenue Code Subtitle C:

    • Chapter 21, Federal Insurance Contributions Act (FICA),

    • Chapter 22, Railroad Retirement Tax Act (RRTA),

    • Chapter 23, Federal Unemployment Tax Act (FUTA),

    • Chapter 24, Federal income tax withholding (FITW), and

    • Chapter 25, General Provisions relating to employment taxes and collection of income taxes at source.

  2. The Employment Tax Program is governed by Policy Statements and other internal guidance that apply to all Service personnel regardless of operating division. The Policy Statements found in IRM 1.2.1, Servicewide Policies and Authorities, Policies of the Internal Revenue Service, apply to all employment tax issues and examinations. Examiners should review these Policy Statements to properly perform their examination duties.

  3. A website, Delegation Orders by Process, located at https://www.irs.gov/uac/delegation-orders-by-process1, summarizes data contained in the applicable IRM sections under IRM 1.2, relating to Delegation Orders, in a single, electronic source.

  4. IRM 4.23 provides Servicewide instructions for all operating divisions with employees involved with the correct filing, reporting, and payment of employment taxes. IRM 4.23 serves as the foundation for consistent administration of employment taxes by various IRS operating divisions. By providing one source of authority for all operating divisions, the Service greatly reduces philosophical and procedural inconsistencies.

Responsibilities

  1. Director, Examination - Specialty Policy is responsible for employment tax policy and procedures, including updates addressed in this IRM.

  2. Director, Specialty Examination is the executive responsible for examination operational compliance.

  3. The IRS adopted the Taxpayer Bill of Rights in June 2014. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3). For additional information about the Taxpayer Bill of Rights, see https://irssource.web.irs.gov/SitePages/Taxpayer%20Bill%20of%20Rights.aspx and IRM 1.2.10.37, Policy Statement 1-236,"Fairness and Integrity in Enforcement Selection."

Program Objectives and Review

  1. Program Goals: The processes and procedures provided in this IRM are consistent with the objectives or goals for Employment Tax - Examination that are addressed in IRM 1.1.16.3.3.3, Employment Tax Examination and for Employment Tax Policy, found in IRM 1.1.16.3.5.2.2, Employment Tax Policy.

  2. Program Effectiveness: Program goals are measured with Employment Tax Embedded Quality Performance Reports that monitor whether quality attributes are applied uniformly and consistently.

  3. Annual Review: Employment Tax Policy - Program Manager, is responsible for reviewing the information in this IRM annually to ensure accuracy and promote consistent tax administration.

Program Reports
  1. Program Reports: Information regarding the reporting of program objectives are included on, but not limited to, the following reports:

    • Headquarters Examination Monthly Briefing,

    • Program Manager Monthly Briefing,

    • Examination Operational Review, and

    • Business Performance Reviews.

  2. The quality of the examinations will be measured by reviewers utilizing the Embedded Quality Review System (EQRS).

Terms and Definitions

  1. The following chart contains terms and their definitions used in this IRM:

    Term Definition
    Delegations of Authority The official documents used by the Service to delegate authority are published as Delegation Orders.
    Policy Statements Publicize specific values of the Internal Revenue Service, guide the administration of the Internal Revenue Service, and form the basis for procedures and instructions in the Internal Revenue Manual (IRM)
    SRS System The purpose of the SRS system is to request the assistance of a specialist from one of the available specialties by submitting a referral or a request for consultation.

Acronyms

  1. The following table lists commonly used acronyms and their definitions:

    Acronym Definition
    ACM Appeals Case Memorandum
    AIMS Audit Information Management System
    BOD Business Operating Division
    CCP Centralized Case Processing
    EO Exempt Organizations
    EPR Exam, Programs and Review
    ET-WSD Employment Tax - Workload Selection and Delivery
    EWETP Enterprise Wide Employment Tax Program
    FICA Federal Insurance Contributions Act
    FinCEN Financial Crimes Enforcement Network
    FITW Federal Income Tax Withholding
    FSL/ET Federal, State & Local/ Employment Tax Area, EO Examination
    FUTA Federal Unemployment Tax Act
    IRM Internal Revenue Manual
    ITG Indian Tribal Governments
    LB&I Large Business & International
    POMS Program Operation Manual System
    QETP Questionable Employment Tax Practices
    RRB Railroad Retirement Board
    ROE Revenue Officer Examiner
    RRTA Railroad Retirement Tax Act
    SB/SE Small Business/Self-Employed
    SRS Specialist Referral System
    SSA Social Security Administration
    SWA State Workforce Agencies
    TBOR Taxpayer Bill of Rights
    TE/GE Tax Exempt/Government Entities
    TEB Tax Exempt Bond
    USCIS United States Citizenship and Immigration Services

Related Resources

  1. Helpful information sources include:

    • The SB/SE Knowledge Management home page for Employment Taxes https://portal.ds.irsnet.gov/sites/VL014/Pages/default.aspx.

    • The Specialist Referral System (SRS) home page: https://srs.web.irs.gov/.

    • A list of SB/SE Employment Tax Policy Analysts, their contact information and program assignments, are found at: Policy Analysts.

    • The web site "Examining an Employment Tax Case" at: https://portal.ds.irsnet.gov/sites/vl014/pages/home.aspx?bookshelf=examining an employment tax case.

    • IRM 4.23: IRM sections owned by SB/SE Examination - Specialty Policy. Provides Servicewide instructions for employees of all operating divisions involved with the correct filing, reporting, and payment of employment taxes. IRM 4.23 serves as the foundation for consistent administration of employment taxes by various IRS operating divisions.

Coordination Between Operating Divisions

  1. Every function in the IRS has a role in proper employment tax administration. It is essential that each function conduct operations with an emphasis on promoting voluntary compliance. Appropriate reviews should be conducted to ensure consistency with the employment tax policy statements and philosophies. Attention should be given to the coordination of employment tax programs between operating divisions to ensure approaches are consistent.

  2. Information should be continuously reviewed to suggest changes in employment tax compliance and examination programs, training courses, educational programs, and employment tax administration.

  3. All employees should keep the following guidelines in mind when handling each employment tax case:

    1. Treat taxpayers in a consistent manner,

    2. Give each taxpayer the opportunity for their interests to be heard and considered,

    3. Strive to make a substantially correct initial decision. A wrong decision, even though eventually corrected, negatively impacts voluntary compliance,

    4. Properly document actions, correspondence, and both taxpayer and government positions to reflect the reasons for decisions and to best enable effective enforcement, if necessary,

    5. Provide the opportunity for taxpayer rebuttal, and ensure the rebuttals are adequately considered,

    6. Enforce employment tax laws in an impartial manner,

    7. Educate taxpayers to help them understand their legal obligations and rights,

    8. Assist the taxpayer in understanding their appeal rights and, in all cases, observe the taxpayer’s procedural rights,

    9. Endeavor to promptly process and resolve each taxpayer’s case,

    10. Resolve each employment tax case in a manner which promotes voluntary compliance, and

    11. Identify systemic problems and recommend ways to reduce taxpayer burden.

  4. Managers will work together in a cross-functional, cooperative manner to ensure that cases referred from one division to the other are evaluated and assigned in a manner consistent with improving taxpayer compliance while making the best use of available resources. If agreement cannot be reached regarding the acceptance of a referral, the next-level managers will work together to resolve the dispute.

Coordination Within SB/SE

  1. SB/SE Employment Tax coordination with other SB/SE examination functions:

    1. If another SB/SE examination function determines that SB/SE Employment Tax support is needed for an examination, a request will be made to the appropriate SB/SE employment tax manager via the Specialist Referral System to determine the type and level of support that can be provided.

    2. If SB/SE Employment Tax determines it will provide consultation services only, the employment tax returns will be controlled on AIMS by the referring SB/SE examination function.

    3. If SB/SE Employment Tax determines it will provide examination support beyond consultation services, the employment tax returns will be controlled on AIMS by the SB/SE employment tax group. Identification of the returns and periods to be examined will be jointly determined by the SB/SE Employment Tax manager and referring SB/SE examining function.

Enterprise Wide Employment Tax Program (EWETP)
  1. Coordination is necessary to effectively and efficiently administer the employment tax law. Through the EWETP Team, the IRS will continue to develop and strengthen the Enterprise Wide Employment Tax Program by working across Business Operating Division (BOD) lines. The EWETP will apply a corporate approach utilizing current enforcement techniques, prospective approaches, enhanced automation, improved systems and process changes, as well as appropriate legislative recommendations. It is based on the following guiding principles:

    1. Aligning filing, reporting, and payment compliance on a national level,

    2. Matching employee skill sets with work streams,

    3. Considering both downstream and upstream consequences,

    4. Leveraging current IRS systems and processes,

    5. Providing balanced coverage within approved workplans,

    6. Promoting front-end compliance,

    7. Increasing 3rd party information reporting,

    8. Addressing known gaps in IRS processes,

    9. Leveraging federal and state relationships,

    10. Supporting internal and external communication,

    11. Supporting outreach and education,

    12. Committing to multi-year research, and

    13. Developing measures of success.

  2. The employment tax program's emphasis on work streams and activities identified by the Enterprise Wide Employment Tax Program (EWETP) will reduce the tax gap across a broad spectrum of noncompliance, including:

    1. Non-filers,

    2. Worker classification,

    3. Officer compensation,

    4. Fringe benefits,

    5. Tip income reporting, and

    6. Payment of amounts due.

Employment Tax Returns Filed by LB&I Taxpayers
  1. SB/SE has the primary compliance responsibility for the employment tax returns filed by SB/SE and LB&I taxpayers. The SB/SE Employment tax web site has current information regarding group locations and geographic areas of responsibility. See Employment Tax Groups and Locations.

  2. The Specialist Referral System should be used by non-employment tax employees to request examination resources and/or consultation services from employment tax specialists. See https://srs.web.irs.gov/.

Centralized Case Processing (CCP)
  1. Centralized Case Processing (CCP) in Florence, KY, will be responsible for processing all closed case files submitted from field employment tax groups located within SB/SE Examination, Specialty, Employment Tax (Area 212). In addition, CCP will process:

    • Form 3870, Request for Adjustment, and Form 2363, Master File Entity Change, on all cases worked by employment tax examiners, and

    • Partial requests and prompt assessments made on open employment tax examinations.

  2. Employment tax cases closed by groups outside of Examination - Specialty, Employment Tax (Area 212) will be closed to their respective CCP area for closure.

Large Business & International (LB&I)

  1. SB/SE Employment Tax coordination with LB&I:

    1. When SB/SE Employment Tax independently selects a taxpayer identified as part of a controlled LB&I case, the SB/SE Employment Tax manager will confer with the appropriate LB&I manager to determine the degree of coordination necessary.

    2. If an LB&I manager determines that SB/SE Employment Tax support is needed for an LB&I examination, a request will be made to the appropriate SB/SE employment tax manager via the Specialist Referral System to determine the type and level of support that can be provided.

    3. If SB/SE Employment Tax determines it will provide consultation services only, the employment tax returns will be controlled on the Audit Information Management System (AIMS) by LB&I.

    4. If SB/SE Employment Tax determines it will provide support beyond consultation, the employment tax returns will be controlled on AIMS by the SB/SE Employment Tax group. Identification of which returns and periods to be controlled will be jointly determined by the SB/SE Employment Tax manager and LB&I.

    5. SB/SE and LB&I Exam can and should address employment tax issues identified on their cases even if an Employment Tax specialist is not available to perform consultation or examination activities.

Tax Exempt/Government Entities (TE/GE)

  1. SB/SE and TE/GE have been assigned the similar task of developing their own employment tax programs. To ensure consistency both in the approach and in the interpretation and application of law, on-going communication between the operating divisions is essential. The operating divisions may develop their own systems to accomplish this coordination.

  2. TE/GE has primary compliance responsibility for the employment tax returns filed by TE/GE taxpayers. TE/GE work units responsible for employment tax compliance include the following functions:

    1. The Exempt Organizations (EO) office has primary compliance responsibility for employment tax returns filed by IRC 501(c) organizations, IRC 521 organizations, IRC 527 organizations, IRC 529 organizations, U.S. Possessions, state agencies, local governments, and quasi-governmental entities. All referrals and/or information items received by EO Examinations must be processed through Compliance Planning and Classification (CP&C) Referrals Group prior to assignment to the field groups.

    2. Employee Plans (EP) will coordinate with Exempt Organizations (EO) for their examination of the above entities where it is anticipated that their assistance will be needed in the review of employment tax returns such as on IRC 403(b) and IRC 457 examinations.

    3. The Indian Tribal Governments (ITG) office has compliance responsibility for employment tax and all other aspects of Federal tax administration as it applies to Indian and Alaska Native tribal governments. See IRM 4.86.1.6, Tax Administration. All IRS employees are required to contact the local area ITG Specialist before making initial contact on Indian tribal government cases.

    4. The Tax Exempt Bond (TEB) office has compliance responsibility for municipal debt issuances, including tax-exempt bonds, tax credit bonds, and direct pay bonds. See IRM 4.81.1, Tax Exempt Bonds Examination Process Overview.

Referrals to Employee Plans and Exempt Organizations
  1. The relief provisions under section 530 apply only to the relief of federal employment taxes for the employer; therefore, the worker should be treated as an employee for all other purposes. If an examiner encounters an employer entitled to the relief provisions of section 530, there remains the potential that an Employee Plans (EP) issue exists and a referral should be considered. See Exhibit 4.23.2-1, Employee Plans (EP) Referral Checksheet.

  2. If a referral to TE/GE - EP is required as a result of a compliance check or an examination, the examiner will report the findings on Form 3449, Referral Report, and mail to:

    IRS - EP Classification

    9350 Flair Drive

    4th Floor

    El Monte, CA 91731

  3. If an employer is recognized as a tax-exempt organization, files a Form 990 series return, or is a federal, state or local government, make a referral to TE/GE Exempt Organizations (EO). If an employer files no annual return, but claims to be:

    • A church

    • Affiliated with a church

    • A non-exempt charitable trust described under IRC 4947(a)(1)

    • A non-exempt charitable split-interest trust described under IRC 4947(a)(2)

    • Affiliated with a governmental unit

    • A political organization described under IRC 527

    • A taxable private foundation

    • A subordinate organization in a group exemption

    Make a referral, or contact TE/GE EO Examination by using Specialist Referral system (https://srs.web.irs.gov) , to ascertain jurisdiction of the audit.

  4. If a referral/consultaion cannot be made for what ever reason, the examiner will complete Form 5666, TE/GE Referral Information Report, and mail to:

    IRS – EO Referrals Group

    Mail Code 4910 DAL

    1100 Commerce St.

    Dallas, Texas 75242

Churches, Conventions or Association of Churches
  1. IRC 7611 provides guidelines and a procedural framework for certain examinations of churches. Also see Treas. Reg. 301.7611-1.

  2. IRC 7611 procedures apply to employment tax inquiries. Examiners should not initiate any examinations on a church. If for some reason an employment tax examiner encounters a church employment tax issue, the examiner should immediately contact TE/GE Exempt Organizations Examinations using SRS.

Coordination Concerning Appeals Determinations

  1. Each business unit should establish mutually satisfactory procedures for resolving disagreements arising from subsequent review of Appeals determinations. Formal dissents by Compliance are not appropriate in an Appeals case where "hazards of litigation" were considered in the settlement of the case. Any decision to reopen a case rests solely with Appeals. Appeals is guided by Policy Statement P-8-3 (formerly P-8-50), which covers reopening cases closed by Appeals. See IRM 8.6.4.1.9, Disagreements to Appeals Determinations, for more information.

  2. For each case closed by Appeals, a copy of the Appeals Case Memorandum (ACM) will be provided to the Employment Tax Policy Analyst Appeals liaison, who will forward the ACM to the SB/SE Chief, Employment Tax Operations for distribution to the proper examination group. The ACM will usually be the only feedback vehicle.

  3. Where Appeals feels some aspect of a closed case warrants special attention in addition to the ACM, feedback will be provided in separate memorandum.

  4. Appeals will return the case if the taxpayer presents new information or new evidence or raises a relevant new issue that was not previously shared with the examiner, and, in the judgment of the Appeals hearing officer, merits additional analysis or investigative action by Examination. See IRM 8.6.1.6.4, Taxpayer Raises New Issue, and IRM 8.6.1.6.5, Taxpayer Provides New Information.

    Note:

    Appeals does not return cases for further development.

Coordination with Other Agencies

  1. This subsection details employment tax coordination with other federal agencies.

Coordination With Social Security Administration (SSA)

  1. The Internal Revenue Service imposes and administers employment taxes that directly affect SSA:

    • Chapter 21, Federal Insurance Contributions Act, for employer and employee contributions,

    • Chapter 2, Tax on Self-Employment Income

    An important phase of the administration of employment taxes, including the self-employment tax, is interpreting the sections of the Code applicable to these taxes and issuing rulings and technical advice that clarify the intent of these sections.

  2. The Service refers all questions of eligibility for and computation of social security benefits to the Social Security Administration in Baltimore, Maryland, or to their nearest local field office.

  3. Coverage and earnings provisions are contained in both the Internal Revenue Code and the Social Security Act. Provisions in one are related to provisions in the other. If a taxpayer produces evidence of a conflicting determination made by the Social Security Administration, either as to a worker’s status as an employee or concerning the taxability of any fringe benefit, the examiner must ascertain the current position of the Service. Every effort should be made to coordinate and resolve such difference by consultation or exchange of views at the field level. If the difference of opinion cannot be resolved so as to render consistent the views of the Area office and the SSA’s field office regarding the tax and benefit status of a particular case, the matter will be referred to the Office of Chief Counsel for appropriate technical advice. See IRM 4.23.15.5, Coordination of Employment Tax Rulings with Social Security Administration, for additional instructions.

Employee Wage Data for SSA
  1. The IRS makes available any information returns to the Social Security Administration for use in administering the benefit provisions of the Social Security Act. Neither the Code nor the Social Security Act requires the preparation of information returns by the Service.

  2. Wage information is reported by the taxpayer on Form W–2, Wage and Tax Statement, which is sent to the Social Security Administration. When correcting an omission or error in a return, the taxpayer is required to file Form W–2c, Corrected Wage and Tax Statement.

  3. If the correction of error is a result of an examination by the Service, the taxpayer is required to prepare and file Form W–2 or Form W–2c and file them with the area office that conducted the examination. If required to be filed electronically, the filing will be with SSA. Refer to IRM 4.23.8.10, Delinquent Forms W–2/W–2c, for additional instructions.

  4. IRM 4.23.8.11, Information Return Penalty Case File, contains instruction on the information return penalty package.

Processing Delinquency or Correction Notices, Forms SSA–7010
  1. Notices on Form SSA–7010, Notice of Determination of SSA Wages, are sent to the Philadelphia Campus by the Social Security Administration to report errors in employer or employee accounts discovered by the SSA. Most of these notices are processed in a Campus, however, the Campus forwards to the Area Director any Form SSA–7010 case which involves a ruling question or other issue of essentially an examination nature. The Area Director will handle all cases referred under this procedure.

Availability of SSA Program Operation Manual System
  1. The Social Security Administration (SSA) Program Operation Manual System (POMS) is available to IRS personnel from SSA field offices.

  2. Examiners will find the POMS helpful, particularly the examples that are provided throughout the text and the manner in which the text relates SSA actions to IRS law and procedures.

United States Citizenship and Immigration Services

  1. There is ongoing contact between the United States Citizenship and Immigration Services (USCIS) and the IRS. The programs are generally divided into two categories, those dealing with aliens legally admitted to the U. S. and those dealing with aliens who are present in the U.S. without proper documentation.

    1. Certain programs ensure that nonresident aliens who are authorized by USCIS to enter the U.S. are aware of Federal tax requirements and are meeting their obligations. These programs are outside the scope of Employment Tax Examination.

    2. Other efforts are geared to aliens who have entered the country without proper documentation and are apprehended by USCIS personnel. Many of the undocumented aliens are paid low wages and have limited tax potential. However, those with significant tax potential are referred to the IRS. When a referral indicates employer noncompliance, it will be routed to ET-WSD, and classified for potential employment tax examination.

Railroad Retirement Board (RRB) Coordination Agreement

  1. The Internal Revenue Service (IRS) has responsibility for the processing of Form CT-1, Employer's Annual Railroad Retirement Tax Return, and Form CT-2, Employee Representative's Quarterly Railroad Tax Return. The IRS also provides information to the Railroad Retirement Board (RRB) for the administration of the Railroad Retirement Act of 1974 (RRA), as amended.

  2. On October 14, 2014, the IRS and RRB signed an agreement titled "Agreement between the Railroad Retirement Board and the Internal Revenue Service" (RRB/IRS Agreement). This agreement provides the basis for coordinating the administration of the Railroad Retirement Tax Act by the Internal Revenue Service and the administration of the Railroad Retirement Act by the Railroad Retirement Board. Refer to the LB&I Railroad Industry Technical Guidance web site for access to various industry resources and contacts. See https://portal.ds.irsnet.gov/sites/vl025/Lists/Railroad/LandingView.aspx.

  3. The parties agreed to explore and adopt mutually acceptable techniques and modes of information exchange to improve administration with the least possible interruption of their respective operating routines and with strict adherence to laws, regulations, and rules for protecting the confidentiality of exchanged information.

  4. The IRS and RRB will review the RRB/IRS Agreement annually to evaluate the existing data exchange, examine the continuing need for, and uses of, the exchanged data, and determine whether the provisions of the RRB/IRS Agreement require amendment or revision.

  5. Inquiries relating to railroad employee retirement benefits are sent to the Railroad Retirement Board in Chicago, Illinois.

Federal/State Exchanges

  1. IRC 6103(d) authorizes disclosures to States for tax administration purposes. Notwithstanding the provisions of IRC 6103 or IRC 4102, the disclosure of certain returns and return information is prohibited by law. Prior to disclosure of a record or document to any authorized state or local agency representative, data related to the following must be identified and removed from the file:

    1. Information obtained pursuant to tax treaty,

    2. Wagering tax information as defined in IRC 6103(o)(2) and IRC 4424,

    3. Grand jury information obtained in accordance with an order issued pursuant to Rule 6(e) of the Federal Rules of Criminal Procedure, unless the terms of such order permit such disclosure, and

    4. FinCEN Report 112, Currency Transaction Report, http://bsaefiling.fincen.treas.gov/main.html (formerly Form 4789 - obsolete), or any other Title 31, Bank Secrecy Act report (e.g., FinCEN Report 111, Suspicious Activity Report.

    Note:

    FinCEN has mandated that the required reports (formerly" forms" ) are to be filed electronically through the BSA E-Filing System beginning July 1, 2012.

  2. For all such cases, Form 3198, Special Handling Notice, will be attached to the front of the case file with a notation "Federal/State Exchange."

  3. Any exchange agreements require the involvement and approval of the Disclosure Office.

  4. Questionable Employment Tax Practices (QETP): The Internal Revenue Service (IRS) Small Business/Self-Employed Division (SB/SE) Specialty Tax has Memoranda of Understanding (MOUs) with various states. The MOUs allow the IRS and the State Workforce Agencies (SWAs) to exchange audit reports and audit plans and to participate in side-by-side examinations, when appropriate. The MOUs also allow for the receipt of information and the reciprocal sharing of information to the states.

    1. Employment Tax (ET) referrals will be forwarded to the states through the Employment Tax Centralized Workload Selection and Delivery (ET-WSD) unit located in Florence, KY. This will provide consistent, meaningful information to the states and allow monitoring and tracking of outgoing referrals.

    2. Examiners are in the best position to determine which work papers are essential to development of the worker classification issue. Therefore, prior to closing these cases, examiners will photocopy pertinent case information, mark the copies "QETP Information for State Examination," and place them in an envelope clearly marked "For QETP" to remain in the case file.

    3. The Employment Tax group manager will ensure the state copies are included in the case files when closing to CCP. CCP will accumulate the copies and provide them to the ET-WSD.

    4. ET-WSD will forward the referrals to the respective states on a monthly basis and send a disclosure accounting to a central Disclosure contact.

    5. SB/SE SP - Employment Tax will capture pertinent data on outgoing referrals and collaborate with the states to develop a reporting format to measure results stemming from the use of ET data.

  5. Inquiries relating to unemployment benefits are referred to the State Unemployment Compensation Board.

Employee Plans (EP) Referral Checksheet

INSTRUCTIONS: Any yes answer warrants a referral to TE/GE —Employee Plans (EP).

Question: Action:
1) Were any non-employees reclassified as employees? If yes, please attach a list of those employees.
2) Were any plan participants’ compensation adjusted? If yes, please attach a list of the participants, their compensation, and the adjustment amount.
3) Does the employer offer plan participation of individuals other than common law employees or self-employed individuals treated as employees pursuant to IRC section 401(c)(1)? If yes, secure a copy of the plan.
4) Are there any employees who are covered by the section 530 safe haven who have been excluded from participation in the plan? If yes, please attach a list of the names of those employees.