IRS Won’t Assess Extra ’02 Taxes on FedEx

FedEx said the IRS’s audit team has decided not to assess federal employment taxes on FedEx Ground’s home delivery drivers, whom the company considers to be independent contractors.

The IRS had told the delivery giant in December 2007 that it considered the employees to be misclassified as independent contractors and ordered the company to pay back taxes and penalties (see FedEx Employees Misclassified, Says IRS). The IRS indicated to FedEx that it anticipated assessing tax penalties of $319 million plus interest for 2002, and was also conducting audits for subsequent years. The IRS withdrew that tentative assessment last year, but continued its employment tax audit for the 2002 calendar year (see IRS Withdraws Tax Penalties on FedEx).

In a new regulatory filing last Friday, FedEx revealed that the IRS’s audit team has provided the company with a revised notice of proposed adjustment with respect to the 2002 calendar year, and proposed that no assessment of federal employment tax be made for FedEx Ground’s independent contractors.

The audits of subsequent years are still ongoing, but FedEx is hopeful that the IRS will arrive at the same conclusion.