4.23.1. Employment Tax - Employment Tax Objectives, Organization, and IRM 4.23

(1) 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 IRS greatly reduces philosophical and procedural inconsistencies.

(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 IRS personnel regardless of operating division. The Policy Statements found in IRM 1.2.1, Servicewide Policies and Authorities, Servicewide Policy Statements, 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.

(1) Director, Specialty Examination Policy, is responsible for the procedures and updates addressed in this IRM.

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

(3) Chief, Employment Tax Examination, is responsible for ensuring employment tax examiners follow the guidance included in this IRM.

(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 National Quality and Embedded Quality (EQ/NQ) 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.

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

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

(1) The following table lists the primary sources of guidance:

(2) Other 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%20an%20employment%20tax%20case.

(3) The IRS adopted the Taxpayer Bill of Rights (TBOR) in June 2014. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. See IRC 7803(a)(3). For additional information about the Taxpayer Bill of Rights, see TBOR and IRM 1.2.1.2.36, Policy Statement 1-236, "Fairness and Integrity in Enforcement Selection."

(4) The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal procedures, or who believe that an IRS system or procedure is not working as it should. Pub 1546, Taxpayer Advocate Service - We Are Here to Help You, provides contact and additional information. The program is designed to alleviate taxpayer hardships that arise from systemic problems or the application of the Internal Revenue Code. In addition, see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria, and IRM 13.1.19, Advocating With Operations Assistance Requests (OARs), for additional information.

(1) The IRS recognizes the significant benefits that can accrue from working with taxpayers to understand problems and practices unique to a given industry. Voluntary compliance will improve if taxpayers understand their tax obligations.

(2) Compliance is achieved when a taxpayer makes a diligent effort to meet the requirements of the law. The law requires that the taxpayer take affirmative action to meet his/her legal obligations. Sometimes the taxpayer takes sufficient action to meet the requirements of the law but, because of some unforeseen intervening event, is unable to do so. Affirmative action recognizes that the obligation to comply with the law is ongoing and requires that the taxpayer continue to attempt to meet the requirements of the law.

(1) The IRS employs a fair and consistent approach to employment tax administration that ensures:

1. Consistency: In the application of employment taxes from one year to another, the IRS should apply the rules in a consistent way for all taxpayers. In dealing with the Government, taxpayers base their perceptions about the fairness of the system in major part on the information they receive from friends, relatives, and acquaintances. Thus, it is important that the IRS take into account how others have been treated in administering the employment tax system to ensure that the goal of administering employment taxes in a consistent manner is met.

2. Accuracy of results: This means arriving at the correct employment tax decision. The IRS must carefully consider all the available information needed to arrive at a correct resolution.

3. Communication: Taxpayers are given the opportunity to have their interests heard and considered. Taxpayers should have an opportunity to communicate with the IRS about specific details of the case. Internal procedural complexities should not make it more difficult for the taxpayer to resolve his or her case. IRS personnel need to take an active approach to case resolution and to the maximum extent possible, remove internal barriers so that the taxpayer’s case receives fair and expeditious consideration.

4. Correction of Errors: If an error is made in an employment tax determination and subsequent evidence shows that the employment tax was incorrectly asserted, the error will be corrected.

5. Proper purpose: Employees need to ensure that decisions on employment tax issues are guided by the applicable statutes, regulations, case law, and procedural instructions issued by the IRS.

(1) An effective Employment Tax Examination Program will:

1. Include the employment tax examination of a divergent group of taxpayers to encourage a high degree of taxpayer voluntary compliance,

2. Establish responsibilities for control and management that will maintain an effective and balanced examination program in the employment tax area,

3. Establish responsibility for providing revenue agents/examiners whose specialized training in employment tax techniques and technical knowledge will enable them to complete highly effective examinations and achieve the greatest possible uniformity in treatment of issues,

4. Ensure that employment tax specialists effectively participate, assist, or advise in the examination of cases involving employment tax matters, and

5. Ensure that employment tax specialists provide the necessary training and guidance to other examiners to enable them to effectively identify employment tax issues and to assist taxpayers who attempt to comply with the laws.

(2) These objectives are intended to improve and strengthen compliance with the employment tax provisions of the Internal Revenue Code. Improved compliance will not only produce immediate revenue in the year of adjustment, but will also result in future compliance.

(1) The TE/GE Division includes the following functions:

• Exempt Organizations (includes Federal, State & Local/Employment Tax Area - FSL/ET)

• Employee Plans

• Indian Tribal Governments

• Tax Exempt Bonds

(2) The TE/GE Division 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:

• Employee Plans (EP)

• Exempt Organizations (includes Federal. State & Local/Employment Tax Area - FSL/ET)

• Indian Tribal Governments (ITG)

(3) The EO and ITG Directors have compliance responsibility for coordinating an effective employment tax program in their areas by:

1. Developing an employment tax work plan,

2. Developing, implementing, and coordinating employment tax education and compliance programs,

3. Identifying the requirements for an effective program and coordinating the identification of necessary resources,

4. Identifying and assigning appropriate workload in consultation and in conjunction with managers,

5. Ensuring that adequate employment tax training is available to meet the needs of all technical personnel involved,

6. Serving as the liaison to, and meeting with, IRS national stakeholder groups involved with employment tax administration, and

7. Developing improvements to promote quality examinations.

(4) The EO and ITG Managers are responsible for:

1. Ensuring that the examiner performs a quality examination, and

2. Providing technical guidance and assistance.

(1) The SB/SE Employment Tax Program is part of SB/SE Examination Operations and is divided into three separate and distinct functions:

1. Specialty Examination Policy, Employment Tax Policy,

2. Examination Case Selection Specialty, Employment Tax Workload Selection and Delivery (ET-WSD), and

3. Specialty Examination, Employment Tax.

(2) The SB/SE Employment Tax Program supports the mission of the IRS by providing program leadership for all IRS employment tax matters, including the development, execution, and evaluation of quality multi-functional compliance and assistance programs on a nationwide basis in a manner that promotes the highest degree of public confidence in the tax system's integrity, efficiency, and fairness.

(1) Employment Tax Examiners (ET Examiners) within Examination/Specialty Programs/Employment Tax, collectively consist of:

• Employment Tax Specialists (Revenue Agents)

• Revenue Officer Examiners (ROE)

• Tax Specialists

• Tax Compliance Officers (TCO)

• Tax Examiners

(2) To ensure an efficient Employment Tax Program, it is important that all ET Examiners be aware of their responsibilities to enforce the employment tax provisions of the Internal Revenue Code (IRC) in accordance with provisions set forth in the Internal Revenue Manual (IRM). ET Examiners will carry out their responsibilities during any examination by properly raising, developing, and resolving any employment tax issue.

(3) Examiners outside of SB/SE Employment Tax that identify employment tax issues can work the employment tax examination unassisted or make a referral to an ET Examiner using the Specialist Referral System (SRS).

(1) The IRS maintains IRM 4.23 as a consolidated employment tax manual that serves as the source of technical and procedural information, as well as internal and external training material.

(2) IRM 4.23 is in a user-friendly format and is comprised of sections describing major employment tax themes, including processes, technical issues, and procedures.

(3) All employment tax examiners should be familiar IRM 4.23, as it is designed for use as an everyday reference guide and serves as the single official compilation of policies, procedures, instructions, and guidelines relating to employment taxes.

(4) Revenue agents, revenue officer examiners, tax examiners, tax auditors, and tax compliance officers should also be aware of important procedures in other sections of the Internal Revenue Manual affecting their examination responsibilities.

(1) The Director, Specialty Examination Policy, owns IRM 4.23 and has overall responsibility for approving any updates to IRM 4.23.

(2) The responsibilities of the Program Manager, Employment Tax Policy, include:

1. Initially determining the need for an amendment of, or announcement calling attention to, a provision in IRM 4.23.

2. Decision-making as to whether an amendment shall be in the form of Manual Transmittal for a direct and immediate amendment to the Manual or a Interim Guidance Memorandum prescribing procedures for a trial implementation period before inclusion in the Manual (direct amendment by Manual Transmittal is preferable whenever feasible).

3. Verifying accuracy and completeness of any amendment and providing a statement as to its effect on outstanding Employment Tax documents or provisions of the Manual.

4. Conforming amendments and announcements to the style and format of the IRM.

5. Drafting Manual Transmittals and Interim Guidance Memorandum for the review of the Director, Specialty Examination Policy; Director, Specialty Examination; and other required reviewers.

6. Coordinating proposed amendments and announcements with other IRS components, as appropriate.

(1) When a need for procedural or systemic changes is identified, inform management. To request a change or improvement to procedures or a data processing system, use the Servicewide Electronic Research Program (SERP) Feedback site, located at: http://serp.enterprise.irs.gov/Feedback_Instructions/Feedback.htm.

(2) Submit proposed changes or corrections to contents of IRM 4.23 to the policy analyst responsible for the applicable program or the policy analyst assigned IRM 4.23 oversight. See IRM 4.23.1.1.7, Related Resources, for a link to the resource page. In addition, see IRM 1.11.6.6, Providing Feedback About an IRM Section - Outside of Clearance.

(3) Recommended corrections or improvements to forms used by Employment Tax examiners may also be submitted under these procedures.

(1) IRM 4.23 is available on the website Product Catalog Information, at: http://publish.no.irs.gov/catlg.html. The most current chapter revisions are available at the SERP IRM website at: http://serp.enterprise.irs.gov/databases/irm.dr/irms.html.