4.23.2. Employment Tax Responsibilities and Coordination with Other Functions.

(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 is interpreting the sections of the Code applicable to these taxes. The IRS 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 IRS 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.

(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 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, Search Servicewide Delegation Orders, located at https://irm.web.irs.gov/imd/del/search.aspx provides a searchable list of Servicewide Delegation Orders issued by the Commissioner of the Internal Revenue, or on their behalf the deputy commissioners. Delegation Orders pertaining to each IRS business process can be found in IRM 1.2.2, Servicewide Delegations of Authority.

(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 IRS greatly reduces philosophical and procedural inconsistencies.

(1) Director, Specialty Examination 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) 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 1.1.16.5.3.3, Employment Tax Examination and for Employment Tax Policy, found in IRM 1.1.16.5.5.2.2, 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) Helpful information sources include:

• The SB/SE Employment Tax Small Business Knowledge Base home page is located at https://irsgov.sharepoint.com/sites/ETD-KMT-KB014.

• 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 Employment Tax Policy Contacts.

(3) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3). For additional information about the TBOR, see https://www.irs.gov/taxpayer-bill-of-rights or https://irssource.web.irs.gov/SitePages/TaxpayerBillOfRights.aspx.

(4) The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service (IRS), led by the National Taxpayer Advocate. Its job is to protect taxpayers’ rights by striving to ensure that every taxpayer is treated fairly and knows and understands their rights under the TBOR. TAS offers free help to taxpayers, including when taxpayers face financial difficulties due to an IRS problem, when they are unable to resolve tax problems they haven’t been able to resolve on their own, or when they need assistance to address an IRS system, process, or procedure that is not functioning as it should. TAS has at least one taxpayer advocate office located in every state, the District of Columbia, and Puerto Rico.

(5) Examiners should consider the disclosure and privacy provisions when preparing agreed and unagreed case reports. For further information, see the Privacy, Government Liaison and Disclosure (PGLD) maintained knowledge base at https://irsgov.sharepoint.com/sites/ETD-KMT-KB003.

(6) Overall responsibility for civil penalty programs is assigned to the Office of Servicewide Penalties (OSP). OSP is charged with coordinating policy and procedures concerning the civil penalty program administration, ensuring consistency with the penalty policy statement, reviewing and analyzing penalty information, researching penalty effectiveness on compliance trends, and determining appropriate action necessary to promote voluntary compliance. For further understanding of the civil penalty program and penalty relief refer to the Penalties Knowledge Base Homepage (https://irsgov.sharepoint.com/sites/ETD-KMT-KB015).

(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 SRS 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 Audit Information Management System (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.

(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 SRS 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 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. 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.

(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.

(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 Examinations (EOE) has compliance responsibility for IRC 501(c) organizations, IRC 521 organizations, IRC 527 organizations, and IRC 529 organizations.

2. Federal State Local / Employment Tax (FSL/ET) has compliance responsibility for Federal government entities, U.S. Possessions, state agencies, local governments, and quasi-governmental entities.

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. All IRS employees are required to contact ITG before making initial contact on Indian tribal government or enterprise. When consultation or assistance is required examiners will make a submission through the SRS (https://srs.web.irs.gov). See IRM 4.70.11.2.6, Indian Tribal Governments Consultation Policy and Protocol Requirements.

Note: Employee Plans (EP) does not conduct employment tax examinations but will coordinate with the above functions when the employment tax examinations of the above entities affect retirement plans, such as IRC 403(b) or IRC 457 plans.

Note: The Tax Exempt Bond (TEB) office has compliance responsibility for municipal debt issuances, including tax-exempt bonds, tax credit bonds, and direct pay bonds.

(1) Each business unit should establish mutually satisfactory procedures for resolving disagreements arising from subsequent review of Independent Office of Appeals (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 8.6.4.2.10, Disagreements with 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 8.6.1.7.4, Taxpayer Raises New Issue, and IRM 8.6.1.7.5, Taxpayer Provides New Information.

(1) Refer a taxpayer to TAS (see IRM Part 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria) and you cannot resolve the taxpayer's issue the same day. The definition of same day is within 24 hours. Same day cases include cases you can completely resolve in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issue.

(2) When making a referral to TAS, the employee must prepare Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), and forward to TAS in accordance with local procedures. For more information regarding referral to TAS see IRM 13.1.16.8.4, Referrals from IRS Operating Divisions/Functions.

(3) Do not refer a case to TAS unless it meets TAS criteria, you have informed the taxpayer regarding the existence and role of TAS and the taxpayer asks to be transferred to TAS. See IRM 13.1.7.5, Same Day Resolution by Operations.

(1) The Internal Revenue Service imposes and administers employment taxes that directly affect SSA. An important phase of the administration of employment taxes, including the self-employment tax, is interpreting the sections of the IRC applicable to these taxes and issuing rulings and technical advice that clarify the intent of the sections within these chapters:

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

• Chapter 2, Tax on Self-Employment Income

(2) The IRS 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 IRS. 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.

(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 Employment Tax - Workload Selection and Delivery (ET-WSD), and classified for potential employment tax examination.

(1) The 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 IRS and the administration of the Railroad Retirement Act by the Railroad Retirement Board. For more information and resources refer to the LB&I Industry Knowledge Base Homepage (https://irsgov.sharepoint.com/sites/ETD-KMT-KB025).

(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.