Purpose: This section explains the procedures for statute control and extension periods on employment tax returns, including those filed for reporting the taxes due under the following:

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.

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

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.

Primary Stakeholders:

General Rule Federal employment taxes must be assessed within three years after the return is filed for FICA, FUTA, RRTA, FITW, and BUWH purposes. A proceeding in court for collection of such taxes may not begin following the expiration of the three-year period unless assessment of such taxes has occurred within such three-year period orIRC 7436 procedures are applicable.

The period of limitation is measured from the date the return is filed. Any return filed prior to the last day prescribed for the filing of such return is considered as filed on such last day. See Treas. Reg. 301.6501(a)-1 and (b)-1; IRC 6501(a) and (b).

Presumptive Rule Forms 941 are filed quarterly. Forms 943, 944, 945, and 1042 are filed annually. For purposes of the statute of limitations, IRC 6501(b)(2) provides a "deemed" filing date for taxes imposed by the following chapters of the Internal Revenue Code:

The Presumptive Rule does not apply to returns reporting FUTA taxes (Form 940) or RRTA taxes (Form CT-1). Form 940 is an annual return due January 31 of the next calendar year. Any return filed prior to January 31 is treated as if it were filed on January 31. If the return is filed on or after January 31 of the next calendar year, the period in which to assess is measured from the date the return is actually filed. Form CT-1 is an annual return due the last day of February of the next calendar year. Any return filed prior to this date is treated as if it were filed on the last day of February. If the return is filed on or after the last day of February of the next calendar year, the period in which to assess is measured from the date the return is actually filed.

Returns executed by Area Directors or other IRS personnel under authority of IRC 6020(b) do not start the running of the statutory period of limitations on assessment and collection. See IRC 6501(b)(3) and Treas. Reg. 301.6501(b)–1(c).

The following are among other exceptions to the statute of limitations rules found in IRC 6501(c):

See IRM 25.6.1.9.4, Returns That Begin the Period of Limitations, to determine what is a valid return which would start the running of the statute of limitations. See IRM 25.6.1.9.4.1, Valid Return, paragraph (2), if the taxpayer filed a return on the wrong tax form.

The statute of limitations for civil penalties is found in IRM 20.1.7.12.2.8, Civil Penalties Statute of Limitations.

Generally, the examination of an employment tax return is conducted in a timely manner to ensure that the case is closed prior to the expiration of the statutory period of limitations. In cases where there is a compelling business reason, a Form SS-10, Consent to Extend the Time to Assess Employment Taxes, may be solicited. An example is when a subsequent/related year is under examination and:

IRC 6501(c)(4) mandates that the IRS must notify the taxpayer of certain rights each time when requesting the taxpayer’s consent to extend the period for assessment. Examiners are required to follow the procedures in IRM 25.6.22.3, Notification of Taxpayer’s Rights.

The examiner must have managerial approval prior to requesting a consent. See IRM 25.6.22.2.1.

Detailed instructions on the preparation of Form SS-10 and statute controls are found in IRM 25.6.22.5, Preparation of Consent Forms – General Procedures, and IRM 25.6.23, Statute of Limitations - Examination Process - Assessment Statute of Limitations Controls, respectively. Form 10949, Statute Extension Checksheet, is available as a job aid for the preparation and issuance of consents, including necessary examiner and group manager actions.

IRM 25.1.4.4.8, Statute Protection, provides the procedures for Criminal Investigation and Examination to follow when allowing the expiration of a civil statute in a joint investigation case.

When submitting a case to:

If a case is closed with less than 90 days remaining on the statute of limitations, the following actions are required:

Procedures when not issuing a 30-day letter due to inadequate time remaining on the statute:

For LB&I cases, the team manager must prepare and deliver a memo to the Territory Manager that explains why the case was not closed within the appropriate time frames.

Form SS-10 is used to obtain the taxpayer's consent to extend the statutory period within which assessment may be made of FICA, FUTA, RRTA, FITW, and BUWH taxes. See IRM 25.6.22.6.10, Employment Taxes. Form 10949 is available as a job aid for the preparation and issuance of consents, including necessary examiner and group manager actions.

Form SS-10 is also used to obtain an employer’s consent to extend the assessment statute date for the FICA portion of domestic employment taxes (Schedule H taxes). An additional Form 872, Consent to Extend the Time to Assess Tax, is used to extend the assessment date for the FITW portion of Schedule H taxes.

Form SS-10 is also used to obtain the employee's consent to extend the statutory period for assessment of the employee's share of FICA taxes as well as the employee’s liability for AdMT on wages paid by an employer. In this case, the Form SS-10 should specifically refer to the employee's liability for the employee's share of FICA or AdMT on wages. See IRM 25.6.22.6.10.1, Employment Taxes - Employee’s Share of FICA and IRM 4.23.14.2.1.

Form SS-10 is completed in duplicate. The form is typewritten or computer generated; hand-printing in ink is discouraged. See IRM 25.6.22.5.2, Preparation of Consents. Letter 907, Request to Extend Assessment Statute, accompanies the Form SS-10 when mailed or delivered to the taxpayer, as well as Publication 1035, Extending The Tax Assessment Period. If the taxpayer does not return the executed Form SS-10 within 10 days, issue Letter 928, Request to Extend Statute - Follow-up Letter, as a reminder. See IRM 25.6.22.4.2, Letters and Publications Sent with Consents. Once the Form SS-10 is secured, the examiner forwards all copies to the individual delegated to execute consents to extend the statute for assessment; generally, the group/team manager. See IRM 1.2.2.15.2, Delegation Order 25-2 (Rev. 3) (formerly DO-25-2 and DO-42, Rev. 28), Authority to Execute Agreements to Extend the Period of Limitations on Assessment or Collection and to Accept Form 900, Tax Collection Waiver.

The IRS employee requesting the consent will document in the case file on Form 9984 or other appropriate form, as specified by the procedures of the particular operating division or function, that the required notification of rights was made. The specifics to be notated are:

If the taxpayer is represented, a copy of any documents mailed to the taxpayer should be mailed to the properly authorized representative using Letter 937, Transmittal Letter for Power of Attorney.

If a taxpayer exercises his/her right to refuse to extend the statute, the taxpayer and representative, if any, will be notified that issuance of a Letter 3523 or other appropriate action will be taken to assess tax. The refusal and resulting procedures will be explained to the taxpayer and must be documented in the case file.

IRS allows for the acceptance of Taxpayer and/or Taxpayer’s Representative signatures by fax on consents to extend the time to assess tax. Refer to IRM 25.6.22.5.1, Fax Signatures, for the conditions that are required for a signed consent to extend the time to assess tax via fax. If these conditions are met, the faxed consent will be considered an original consent form with original signature(s) for the purposes of IRM 25.6.22, Statute of Limitations, Extension of Assessment Statute of Limitations by Consent.

The original consent, executed by both the taxpayer and the delegated Service official, will be securely attached to the back of page one of the return for the latest year covered by the consent. A copy of the consent will be securely attached to the back of each page one of all other returns covered by the consent. See IRM 25.6.22.5.6.1, Multiple Tax Periods. One original signed/executed Form SS-10 is returned to the taxpayer accompanied by Letter 929.

In situations where multiple entities require statute extension forms, such as in parent and subsidiary relationships, it is recommended that a separate Form SS–10 be obtained for each entity. The use of a consolidated consent Form SS-10 is authorized by Rev. Proc. 72-38, as modified by Rev. Proc. 82-6, and IRM 25.6.22.6.2.3, Parent and Subsidiary Corporations. If a consolidated consent form is used, confirm the signing authority of the person signing the consent, because not all corporate officials have signing authority for each entity.

IRM 25.6.22.6.2, Corporations, and following subsections provide extensive information on the preparation of consents for corporations, including those with changes in composition including mergers, acquisitions, etc. Local TEGEDC (Division Counsel) is available if there are questions with regard to the correct preparation.

For purposes of extending the period for FICA, RRTA, and withholding taxes, the line "from BLANK through BLANK" includes all the periods being covered under the extension. More than one period may be covered by one Form SS-10. The term "withholding taxes" includes FITW and BUWH.

In the case of a sole proprietorship (Schedule C business), the primary taxpayer’s name as shown on the employment tax return will be input on the Form SS–10 followed by "dba" ( "doing business as." ) If the taxpayer filed a joint return, the primary taxpayer is the person who owns the business, or exercises substantially all of the management and control of the trade or business. See IRM 25.6.22.6.10, Employment Taxes.

On railroad conversion issues, where FICA coverage is converted to RRTA coverage and Form CT–1 has been filed, care should be taken to cover both taxes (FICA and RRTA) on Form SS-10. Note that the statute date for RRTA is three years from the last day of the second month following the end of the tax year, or the date the Form CT-1 is filed, whichever is later.

Except for the FICA tax on tip wages not reported by the employee to the employer and the employee liability for AdMT attributable to the Form 1040, discussed at IRM 4.23.14.2.4, the regulations under IRC 6011 require the employee's share (and the employer's share) of FICA taxes to be reported by the employer on Form 941. Therefore, in the absence of fraud, the statute of limitations for assessment of the employee's share of FICA tax is determined by the statute date of the Form 941 filed by the employer. This is true even when the employer omits all wages paid to a particular employee and does not report any FICA taxes for the employee. This must be considered if the examiner intends to pursue the assessment against an individual employee. The statute date of the employee's share of FICA tax corresponds to the statute date of the employer's Form 941, not the employee's Form 1040 statute date.

FICA tax on tips not reported by an employee to the employer is reported on the employee’s income tax return using Form 4137. If income tax and FICA tax on tips were reported on the same return, the statute of limitations for assessment of additional FICA tax is the same as the statute of limitations for the income tax. See IRM 25.6.22.6.10.2, FICA Tax on Tips Not Reported to Employer. Form 872 is used to extend the time to assess tax for the income tax return. However, if Form 4137 was not filed and no FICA tax on tips was reported on the employee’s income tax return, no consent to extend the period of limitations is necessary because the period of limitations has not begun to run, as no return is considered to have been filed. See Rev. Rul. 79-39, 1971-1 C.B. 435. See also IRM 25.6.1.9.4.3, Forms Reporting More Than One Item of Tax.

There are special circumstances when mitigation rules under IRC 6521 would allow an offset between the employee’s share of FICA tax and self-employment tax. In these instances, the timing of the FICA tax assessment or the Self-Employment Contribution Act (SECA) tax deficiency in relation to the expiration of the statute of limitations on Form 941 and Form 1040 becomes critical. Examiners are advised to take a conservative approach and protect the statute of limitations rather than relying on mitigation rules. See Rev. Rul. 78-127, 1978-1 C.B. 436.

For statute control on Form 1040, Alpha Code "II" can be used to designate that the period for assessment has not expired for "Other Taxes," including Social Security and Medicare on tip income not reported to the employer. See IRM 25.6.23-3, Instructions for Updating the Statute on AIMS.

In all cases where the Trust Fund Recovery Penalty (TFRP) provided by IRC 6672 is, or can be, imposed, the examiner must secure the waiver Form 2750, Waiver Extending Statutory Period for Assessment of the Trust Fund Recovery Penalty, along with the Form SS-10.

Form 2750 is used to extend the period of limitations for assessment of the TFRP under IRC 6672. All examiners are responsible for protecting the statute of limitations. Form 2750 is obtained from all persons who appear responsible for, but did not collect, account for and/or pay the taxes.

Form 2750 must be secured when the TFRP statute expires within one year for agreed cases, or two years for unagreed cases. The waiver should provide for extension of the statutory assessment period to allow ample time during which issues bearing on assertion of the penalty may be resolved, so that normally it is necessary to secure only one waiver from each responsible officer. Care should be exercised in determining the date to which the statute of limitations is extended. In the absence of unusual circumstances, this date is December 31 of the year following the year in which the statutory period will expire.

If the potentially responsible person(s) refuses to extend the statute of limitations for Trust Fund Recovery Penalty, a memorandum accompanies Form 6238, Referral Report for Potential Trust Fund Recover Penalty Cases, stating this fact and the reasons given for refusal to extend the statute.

Completion of various line items on Form 2750 are self-explanatory. Items 1 through 4 on the waiver are completed by the examiner. Items 5 and 6 are signed and dated by the person potentially responsible if he/she agrees to extend the statute of limitations. The examiner’s manager completes Item 7. See IRM 1.2.2.15.2, Delegation Order 25-2 (Rev. 3) (formerly DO-25-2 and DO-42, Rev. 28), Authority to Execute Agreements to Extend the Period of Limitations on Assessment or Collection and to Accept Form 900, Tax Collection Waiver. After the manager completes the signature portion of the waiver, Part 2 is given to the responsible person concerned. The remaining copies are forwarded with Form 6238 to Collection.

For information on TFRP, see:

Form 4016, Consent Fixing Period of Limitation Upon Assessment of Employment or Miscellaneous Excise Taxes Against A Transferee, is used in extending the statutory period of limitation upon assessment of employment taxes against a transferee, arising on liquidation of a corporation or partnership, or on a reorganization within the meaning of IRC 368(a). See:

Form 872 or Form 872-A, Special Consent to Extend the Time to Assess Tax, is used to extend the period of limitations for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.

Line (1) of Form 872 should be modified to read as follows:

See IRM 25.6.22.6.14, Form 1042 Withholding on U.S. Income of Foreign Persons, and IRM 4.10.21, U.S. Withholding Agent Examinations - Form 1042, for additional information.

When a taxpayer refuses to sign a consent on Form SS-10 and the assessment statute expiration date (ASED) is 180 days or less, a protective assessment is made to protect the government's interest. The examiner should determine the probable additional tax due. Any over-assessment will be adjusted after the examination has been completed. Quick assessment procedures are used to protect the statute. See IRM 4.23.11.10, Quick Assessments.

When a taxpayer refuses to sign a consent on Form 2750 do not make a protective assessment. A preliminary notice may be issued under IRC 6672(b) to protect the government's interest. The examiner should determine the probable additional tax due. If collection is in jeopardy, the procedures described in IRM 4.23.11.12, Jeopardy Assessments, may be used.

Procedures for processing barred statute cases are covered in IRM 25.6.1.13, Barred Assessments/Barred Statute Cases.

Procedures for processing LB&I barred statute cases are covered in IRM 25.6.1.13.2.9, Statute Expiration Reporting Responsibilities and Procedures for LB&I Field Operations and LB&I Campus Employees.

IRC 6665(a)(1) provides that these penalties are assessed, collected, and paid in the same manner as taxes, and IRC 6665(a)(2) states that any reference to "tax" shall also be deemed to refer to penalties. See also IRC 6671.

There is no form designed to accommodate an extension of the statute of limitation on IRC 6721 (Failure to file correct information returns) or IRC 6722 (Failure to furnish correct payee statements) penalties.

Form 872 is used to extend the statute of limitations on IRC 6721 and IRC 6722 penalties. The following will be entered on the "kind of tax" line: