The Internal Revenue Service has withdrawn a tentative assessment of more than $319 million in tax penalties against FedEx.

In a filing with the Securities and Exchange Commission, the delivery giant said the IRS withdrew the tentative assessment on October 22. The assessment is for tax and penalties for the 2002 calendar year of $319 million plus interest against the company's subsidiary, FedEx Ground Package System Inc. It relates to the classification of FedEx Ground's drivers for federal employment tax purposes. The company calls them owner-operators and the IRS claims they are employees (see FedEx Prepares for IRS Audit).

However, the case is not settled. FedEx said in its filing that the IRS is continuing its employment tax audit of FedEx Ground for the 2002 calendar year.

"We are engaged in discussions with the IRS audit team regarding this matter," said the company. "We continue to believe that FedEx Ground's owner-operators are independent contractors and that no loss is probable in this matter."

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