This IRM is specifically created to address unagreed employment tax procedures. For additional information on report writing, see IRM 4.23.10, Report Writing Guide for Employment Tax Examinations.

Internal Revenue Code Subtitle C:

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, Servicewide Policies and Authorities, Policies of the Internal Revenue Service apply to all employment tax issues and examinations. Examiners should review these Policy Statements to properly perform their examination duties.

A website, Delegation Orders by Process, located at https://www.irs.gov/privacy-disclosure/delegation-orders-and-policy-statements-by-process, summarizes data contained in the applicable IRM sections under IRM 1.2, relating to Delegation Orders, in a single, electronic source.

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.

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

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

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.

Program Effectiveness: Program goals are measured with Employment Tax Embedded Quality Performance Reports that monitor whether quality attributes are applied uniformly and consistently.

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.

The following table lists commonly used acronyms and their definitions:

The following table lists the primary sources of guidance:

Helpful information sources include:

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 TBOR, see https://irssource.web.irs.gov/SitePages/Taxpayer%20Bill%20of%20Rights.aspx and IRM 1.2.10.36, Policy Statement 1-236, "Fairness and Integrity in Enforcement Selection."

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, TAS Operations Assistance Request (OAR) Process, for additional information.

Employment tax examiners should consider the disclosure provisions when preparing agreed and unagreed case reports. See the Privacy, Governmental Liaison and Disclosure web site at: https://irssource.web.irs.gov/PGLD/Pages/Home.aspx for additional information.

If the examiner and taxpayer are unable to reach agreement on one or more issues, the taxpayer should be encouraged to request early referral of these unagreed issues to Appeals. See IRM 8.26.4, Early Referral Procedures. Cases submitted to Appeals for Early Referral should have at least 365 days remaining on the statute of limitations since Appeals is taking jurisdiction over the issues submitted for Early Referral.

Certain employment tax issues that are appropriate for referral are described in Rev. Proc. 99-28, 1999-2 C.B. 109, and include:

The Fast Track Settlement Program (FTS) offers Examination personnel a way to resolve audit issues utilizing the settlement authority and mediation skills of Appeals while retaining jurisdiction of the case. FTS is designed to be completed within 120 days (for LB&I taxpayers) or 60 days (for SB/SE taxpayers). LB&I (or SB/SE), the taxpayer, and Appeals are active participants in the process, and all three parties must agree before a proposed resolution can be implemented. The Appeals FTS Official uses mediation techniques to lead LB&I (or SB/SE) and the taxpayer to self-determine the likely outcome of the dispute. For all cases:

For LB&I: See Rev. Proc. 2003-40, the "LB&I/Appeals Fast Track Settlement" web site at , and IRM 4.51.4, LB&I/Appeals Fast Track Settlement Program (FTS). Additional information can be found in Pub 4539, Fast Track Settlement Brochure. Also see IRM 8.26.1, Fast Track Settlement for Large Business and International (LB&I) Taxpayers.

For SB/SE: Instructions on the FTS program are provided in Pub 5022, Fast Track Settlement - A Process for Prompt Resolution of Small Business Self Employed Tax Issues which is provided to the taxpayer during the discussion of the issues and proposed adjustments. See IRM 4.10.7.5.5, SB/SE Fast Track Settlement, for FTS eligibility and procedures for SB/SE examination cases. Additional examination procedures include:

Examiners conducting employment tax examinations should follow the procedures in IRM 4.10.8.12.9.3, Request for Appeals Conference (SB/SE Field and Office Examiners only), when the taxpayer requests an Appeals conference.

The taxpayer’s written protest will be reviewed to determine whether the protest complies with the requirements outlined in Pub 5, Your Appeal Rights and How To Prepare a Protest if you Don’t Agree. See IRM 4.23.22.8.2, Review of Protests.

The protest should be returned to the taxpayer if it does not comply with the requirements as outlined in Publication 5 and additional time should be granted to perfect the protest. Use Letter 1025-P, Letter of Protest – Employment Tax, or Letter 1025-A, Letter of Protest (Claims), for this purpose.

If a rebuttal is not prepared, when closing the case to Appeals, the examiner must prepare Letter 2280, Transfer to Appeals, to notify the taxpayer the case is being closed to Appeals. The letter must be signed by the group manager, and mailed to the taxpayer.

A taxpayer's protest generally will be reviewed at the group level, as designated by management, within seven calendar days of receipt to determine whether:

For formal protests, determine whether the taxpayer's written protest includes the following required elements:

After review of the protest, the examiner should prepare a rebuttal to address or clarify any new facts presented or arguments made by the taxpayer. This rebuttal will serve to supplement the information contained within the examiner's report and offer a constructive response to the taxpayer's arguments that were presented in the protest. If a rebuttal is prepared, a copy must be provided to the taxpayer. Examiners should use Letter 5072, Examiner’s Rebuttal, for this purpose.

The taxpayer should be given the opportunity to meet with the examiner's manager to attempt to resolve the unagreed issues. If the disagreements cannot be resolved at the manager's conference or the taxpayer declines to meet, the entire case should be transferred to Appeals.

If a protest concerning a non-IRC 7436 issue raises a worker classification or section 530 argument, then the issue will become an IRC 7436 issue. If this occurs, all procedures and reports for IRC 7436 issues must be followed with regard to the issue, including using the proper waiver forms, and addressing section 530, IRC 3509 rates, and CSP.

For additional information, see IRM 4.10.8.12, Unagreed Case Procedures (SB/SE Field and Office Examiners Only) or IRM 4.10.8.13, Unagreed Case Procedures: Preliminary (30-Day) Letters (LB&I Examiners only).

If the taxpayer does not file a small case request or formal written protest within the time allowed, but indicated their intent to do so, examiners should issue:

If the 30-day letter is returned as undeliverable, an attempt must be made to obtain the correct address (see IRM 4.10.2.8.4, Undeliverable Initial Contact Letters).

If the taxpayer doesn’t respond to the 30-day letter and the 30-day letter proposes an overassessment or disallowance of a claim with no change in tax liability, no follow-up action should be taken. The case should be closed as outlined in IRM 4.23.22.8.6(4) or (5).

If no response to a follow-up letter is received, the case will be processed as outlined in IRM 4.23.22.8.6, No Response to 30-Day Letter.

If the taxpayer provides additional information after a 30-day letter has been issued, the examiner should evaluate the information.

If there is no change to the examination report, or the corrected report reduces the previous report and no new issues are raised, solicit an agreement by sending one of the following:

If the corrected report raises new issue(s) or the proposed deficiency is increased, a new 30-day letter must be issued, if sufficient time remains on the statute of limitations. If sufficient time does not remain on the statute of limitations, follow the instructions in IRM 4.23.22.7, Unagreed Case Procedures – Insufficient Time Remaining on Statute of Limitations.

If a signed agreement form is received in response to the 30-day letter, the case will be closed from the group within 20 days from the date the agreement or full payment is received using agreed case closing procedures. See:

If the taxpayer indicates agreement to part of the report, solicit a partial agreement. If a partial agreement is received, process according to the procedures in IRM 4.23.10.15 , Partially Agreed Cases.

Cases must be closed from the group within 20 days after the expiration of the time (including extensions) allowed to file a protest.

If the taxpayer does not file a protest letter seeking review by Appeals, the proposed tax involving IRC 7436 issues may not be assessed. Instead, upon expiration of the 30-day period, the taxpayer must be issued Letter 3523 , Notice of Employment Tax Determination Under IRC Section 7436. This suspends the statute of limitations for employment taxes dependent on the IRC 7436 issues. The examiner must close the case to Technical Services for issuance of Letter 3523. Follow procedures in IRM 4.23.22.11, Special Procedures for Letter 3523 Under IRC 7436.

If the taxpayer does not respond to proposed adjustments involving only non-IRC 7436 issues, the case should be closed unagreed promptly for tax assessment after the 30-day suspense period (including extensions) has expired.

If the taxpayer does not respond to proposed adjustments in a case involving both IRC 7436 issues and non-IRC 7436 issues, follow the quick/partial assessment procedures for the non–IRC 7436 issues before closing the case. See IRM 4.23.10.15.1, Partial Assessment/Quick Assessment Processing. This will ensure that the non-IRC 7436 issues are promptly assessed. For the IRC 7436 issues, follow the procedures in IRM 4.23.22.11.

If the taxpayer fails to respond to a 30-day letter advising of a proposed overassessment (adjustments that decrease the tax liability exceed the adjustments increasing the tax liability), the case will be closed out of the group to CCP for assessment of the overassessment.

If the taxpayer fails to respond to a 30-day letter advising them of a claim disallowance, a statutory notice of claim disallowance will be issued by Technical Services. If there is no change to the tax liability (neither a deficiency or overassessment), or the claim is disallowed in part with a resulting overassessment, close the case and check the "Statutory Notice of Claim Disallowance – Letters 905 and 906" box under the "Forward to Technical Services" section on Form 3198. See IRM 4.23.13.3.4, Form 2297 and Form 3363.

If the taxpayer responds to Letter 5153-F or 5153-P but fails to sign a statute extension allowing for more than 365 days on the statute of limitations, examiners should follow the same procedures for a no response case in IRM 4.23.22.8.6, No Response to 30-Day Letter.

In some instances, the taxpayer may provide new information or new evidence related to a disputed issue that the taxpayer did not previously share with the examiner. If the Appeals hearing officer believes the information merits additional analysis or investigative action by Examination, Appeals will release jurisdiction and return the case to the examiner to evaluate and make an audit determination. See IRM 4.10.8.12.11, Cases Returned from Appeals (SB/SE Field and Office Examiners Only), for procedures.

If the taxpayer raises a relevant new issue and there will be less than 210 days remaining on the statute of limitations when the originating function receives the case, Appeals will not return the case unless the taxpayer provides a consent to extend the statute of limitations. See IRM 8.6.1.7.4, Taxpayer Raises New Issue.

If Appeals previously released jurisdiction of the case and returned it to Examination for additional work, there must be at least 180 days remaining on the statute of limitations when the case is received in Appeals the second time. The group must allow a minimum of 30 days for shipping and processing a case through Technical Services. Therefore, 210 days must be remaining on the statute when the case is closed from the group.

Appeals will not return cases to Examination when the case is not fully developed and the taxpayer has not presented new information or evidence. Instead, Appeals will attempt to settle the case on factual hazards. See IRM 4.2.1.8.1, Cases Not Fully Developed.

In most IRC 7436 cases, a taxpayer who is issued a Letter 3523 will have previously received a "30-day letter," which is sent to taxpayers in unagreed examination cases. If the taxpayer does not respond to the 30-day letter by agreeing to the proposed adjustments or by filing a protest to Appeals, the taxpayer is sent Letter 3523 for IRC 7436 issues by Technical Services. If the taxpayer files a protest to Appeals and the IRC 7436 issues are not settled in Appeals, the taxpayer will be sent Letter 3523 by Appeals. After the IRS sends Letter 3523, the taxpayer may file a petition with the Tax Court for review of the IRC 7436 issues.

Tax Court Rule 34(b)(8) requires that the petition shall include a copy of Letter 3523 and all relevant enclosures, as listed in (3) below. Thus, if a case goes to the Tax Court, the explanatory paragraphs become a part of the basic pleadings for the Commissioner. They set the pattern upon which the Government's case may be tried, and care must be exercised in the statement of grounds for the determination of the asserted liability. For this reason, do not enclose a copy of the Form 886-A, Explanation of Items, with Letter 3523.

Enclosures with Letter 3523: Every Letter 3523 should have the following enclosures:

Taxpayer Notification:Letter 3523 advises the taxpayers of the opportunity to seek Tax Court review and provides information on how to do so. Publication 3953 contains additional information and should always be sent to the taxpayer as an enclosure with the Letter 3523. Letter 3523 and Publication 3953 also advise taxpayers of the right to contact a Taxpayer Advocate.

Names of Reclassified Workers: Table 1 of the Letter 3523 must be completed to identify the workers the IRS has determined should be classified as employees. A Letter 3523 that does not contain either the names of all the workers or the job categories may result in Tax Court procedural issues. If some or all of the names of the workers are unknown, job categories may be used (i.e., janitors, instructors). Examiners should include the names of each reclassified worker in Table 1 to the extent they are known.

Names of Workers for IRC 7436 Wage Issues: Table 2 of the Letter 3523 must be completed to identify the workers who received additional wages where the issue has been determined to be an IRC 7436 wage issue. A Letter 3523 that does not contain either the names of all the workers or the job categories may result in Tax Court procedural issues. If some or all of the names of the workers are unknown, job categories may be used (i.e., janitors, instructors). Examiners should include the names of each reclassified worker in Table 1 to the extent they are known.

Amount of Tax: Table 3 of the Letter 3523 must include the IRS determination of the proper amount of employment tax, additions to tax, and/or penalties that arise from treating the workers listed in Table 1 as employees. Table 4 of Letter 3523 must include the IRS determination of the proper amount of employment tax, additions to tax, and/or penalties that arise from treating the workers listed in Table 2 as employees:

Form 2504–T: A Form 2504–Tmust be included as an attachment with Letter 3523 to provide the taxpayer with an opportunity to agree to the proposed employment tax adjustment. The Form 2504–T contains a statement whereby taxpayers waive restrictions on assessments under IRC 7436(d) and IRC 6213(a), as a taxpayer must be informed that Tax Court review is not available for agreed cases. A Tax Court review can only be sought if there is a controversy with respect to the proper amount of tax under the determinations of worker classification and/or section 530 issues, i.e., an unagreed case.

Last Day to File a Tax Court Petition: On the front page of Letter 3523, the IRS will provide the taxpayer with the date that represents the last day on which a timely Tax Court petition may be filed by the taxpayer. A taxpayer must file its petition with the Tax Court before the 91st day after the date the Letter 3523 was mailed to the taxpayer by certified or registered mail. That means that the last day on which a timely Tax Court petition may be filed by the taxpayer is the 90th day after the date the Letter 3523 is mailed by certified or registered mail. If, however, that 90th day falls on a Saturday, Sunday, or legal holiday in the District of Columbia, the last day to file a petition is the next day which is not a Saturday, Sunday, or legal holiday in the District of Columbia. See IRC 7503 and Pub 15, (Circular E) Employer's Tax Guide.

Erroneous Assessment: If the IRS erroneously makes an assessment of taxes attributable to any IRC 7436 issues without issuing a Letter 3523 or obtaining a waiver of restrictions on assessment (e.g., Form 2504–T) from the taxpayer, the taxpayer is entitled to an automatic reversal of the assessment. However, once any such procedural defects are corrected, the IRS may reassess the employment taxes if the statutory period of limitations for assessment has not expired.

Period of limitation: Mailing of the Letter 3523 by certified or registered mail will suspend the period of limitation only for assessment of the employment taxes that are dependent upon the IRC 7436 issues. The restrictions on assessment in IRC 7436(d) and IRC 6213(a) and the suspension of the limitations period for assessment in IRC 6503(a) generally apply in the same manner as if a notice of deficiency had been issued. Thus, the period is suspended for the 90-day period during which the taxpayer can begin a suit in Tax Court plus an additional 60 days thereafter. If the taxpayer does file a suit, the period of limitation for assessment will be suspended during the Tax Court proceedings and for 60 days after a final court decision. To ensure that no assessment is made during the 90-day period following mailing of the Letter 3523, follow the same suspense procedures that apply after a statutory notice of deficiency is issued.

Effect on Refund Litigation: The taxpayer may file a refund suit in District Court or Court of Federal Claims to contest the IRS employment tax determinations (including worker classification and section 530) as an alternative to filing a Tax Court petition. The District Court or Court of Federal Claims do not have jurisdiction over worker classification or section 530 issues unless the taxpayer has paid the employment tax assessment attributable to at least one employee for any one period, has filed a claim for refund, and brings the suit within the period of the limitation under IRC 6532. If the taxpayer contests the worker classification/section 530 issues or other employment tax issues in Tax Court, the Tax Court only has jurisdiction over IRC 7436 issues and may not consider other employment tax issues. If the taxpayer contests the worker classification or section 530 issues in Tax Court, there is nothing to preclude the taxpayer from later filing a refund suit in District Court or Court of Federal Claims with respect to other issues that were not previously considered by the Tax Court, assuming the taxpayer has satisfied the jurisdictional prerequisites. However, the taxpayer may not litigate worker classification and section 530 for the same tax periods in the Tax Court and in the refund suit.

Interest-Free Adjustments: The taxpayer is not eligible for interest-free adjustments after receipt of notice and demand for payment or after receipt of a Letter 3523. The taxpayer may make a deposit to stop the accrual of any interest. See IRM 4.23.8.3, Interest-Free Adjustments - In General, for more information on interest-free adjustments.

Effect on Self-Employment Taxes: If a taxpayer files a suit in Tax Court concerning the worker classification and/or section 530 relief, the statute of limitations for its workers to file claims for refund for self-employment (SECA) taxes is extended until the last day of the second year after the calendar year in which such Tax Court determination becomes final. See IRC 6511(d)(7).

Letter 3523 in field examination cases will generally be issued by Technical Services within 60 days after the expiration of the 30–day period specified in the 30–day letter or any extensions. In office examination cases, notices will generally be issued within 45 days of receipt by Technical Services.

If a Letter 3523 is based on an examination of a retained copy of the taxpayer's return, the Letter 3523 will be issued by Technical Services without securing the original return. A transcript (BMFOLT) must be obtained to insure that the tax shown on the retained copy is the same amount as the tax assessed on the return.

Technical Services will review the case to the extent needed to prepare a proper Letter 3523.

Under IRC 7436, if, in connection with an audit of any person, there is an actual controversy involving a determination by the Secretary as part of an examination that:

The Territory Manager for Technical Services and other designated officers are specifically authorized to prepare, sign, and mail the statutory Letter 3523 (see Delegation Order 4-26, Authority to Issue and Execute Notices of Determination Concerning Worker Classification under IRC 7436, formerly Delegation Order No. 251) on behalf of the Commissioner. The Letter 3523 may be issued at any time if it appears that the taxpayer is seeking merely to prolong consideration and to postpone final action by dilatory tactics or by raising frivolous issues.

IRC 7436(d)(1) provides that the principles of IRC 6213(a) apply to proceedings brought under IRC 7436 as if the IRC 7436 determination were a notice of deficiency. Thus, if a Letter 3523 is addressed to a taxpayer outside the United States, the taxpayer has 150 days after the mailing in which to file a petition with the Tax Court.

Letter 556-A, Acknowledgement of Protests, Correspondence and Requests for Interviews - Employment Tax, may be used to acknowledge receipt of protests, correspondence, and requests for interview or conference received after the issuance of a Letter 3523.

Following acknowledgment, the protest, correspondence, or request will be transmitted with the administrative file (or a statement of the pertinent facts if the files are extremely bulky) to the area Appeals office which serves the area responsible for the Letter 3523.

Examination control records will be kept open pending either the return of the files or notification that Appeals will consider the case during the 90-day period. The foregoing will not apply if the Letter 3523 contains an obvious error of omission or commission and if correction will properly reflect the position of the IRS and permit an immediate closing of the case. Neither will it apply to a case in which Appeals has waived jurisdiction. See IRM 4.23.22.11.6, Appeals Refusal of Jurisdiction in Non-Docketed IRC 7436 Cases, for procedures.

If, during the 90-day period, the taxpayer executes a Form 2504–T to waive the restrictions on assessment and collection of the employment tax adjustments proposed in Letter 3523 in full, associate all employment tax issues independent of those in the Letter 3523 and transmit immediately to the Campus for assessment of the proposed adjustment of employment taxes.

If, during the 90-day period, the taxpayer executes a Form 2504–T to waive the restrictions on the assessment and collection of the employment tax adjustments proposed in the Letter 3523 in part, Examination will transmit the waiver and the return or returns which may be involved to the Campus for assessment of the agreed portion of the proposed adjustment of employment taxes as a partial agreement.

After necessary action in this latter case, the waiver and the return(s) will be returned for restoration to the file of the case. If the file was transmitted to Appeals during this time period, the waiver and the return(s) should also be transmitted to Appeals upon receipt by Examination.

When answering questions from taxpayers or representatives on a Letter 3523, the data should be taken from the administrative file rather than referring to AIMS. See IRM 4.23.22.11.6, Appeals Refusal of Jurisdiction in Non-Docketed IRC 7436 Cases, for procedures on preparing a revised examination report based on additional information received after the issuance of the Letter 3523.

Delegation Order 8-8 (Rev. 1), "Authority of Appeals in Protested and Tax Court Cases" , authorizes Appeals to settle certain protested cases. The Appeals Area Director has the authority to refuse jurisdiction of any case not docketed in the Tax Court in which a Letter 3523 was issued by the originating office and the taxpayer requests Appeals’ consideration. Situations arising in this area during the 90-day period for a Compliance-issued Letter 3523 should be coordinated with Appeals on a case-by-case basis. Likewise, the Appeals Area Director will coordinate with the Compliance Area Director during the 90-day period for a similar situation where Appeals issued Letter 3523. For general procedures involving Appeals consideration post issuance of a statutory notice, see IRM 8.2.2.2, Appeals Jurisdiction on a Compliance Issued Statutory Notice of Deficiency (SND).

When issued, the refusal of jurisdiction operates to vest in the issuing office complete jurisdiction of the case during the 90-day period, including the authority to transfer the case to another area. See IRM 4.8.10.9.3.2, Correspondence Received, for procedures when the taxpayer submits correspondence during the 90-day period.

To ensure timely information is provided to determine whether a petition has been filed within the prescribed time in Letter 3523 cases, Chief Counsel’s office furnishes a daily list of newly-docketed Tax Court cases. The docket list reflects the following information:

It will be the responsibility of the designated office, by reference to the above docket list, to take the necessary action to ensure that assessment of the proposed adjustment of employment taxes on any defaulted Letter 3523 is made within the statutory period. For any case for which the Area or Campus issued the notice which does not appear on the docketed cases list during the 90-day period (plus an additional period of 30 days, if needed), the case will be transmitted immediately for assessment of the proposed adjustment of employment taxes.

Any such case in which a timely petition has been filed should be transmitted within 10 calendar days using Form 3210, Document Transmittal, by Technical Services to the Appeals office servicing the Area or Campus making the determination of tax liability. In unusual cases, the reason(s) for failure to meet the deadline will be documented.

A dummy case file will be assembled by Technical Services and should contain the required number of copies (usually four) of the Letter 3523 and statement. If an untimely petition appears to have been filed (for this purpose field offices should assume that the petition was filed approximately three days prior to its appearance on a docketed cases list), the dummy case file should be forwarded to Appeals containing information to show the exact date on which the Letter 3523 was presented for mailing. All questions, including those relating to petitioned tax periods, should be referred to TEGEDC.

Special instructions relating to the preparation of Letter 3523 involving tax liability of transferees under IRC 6901, as well as the preparation of letters involving bankruptcy and receivership cases, can be found in IRM 4.27.1, Bankruptcy - Examiner Responsibilities and Procedures.

If the taxpayer is a debtor in bankruptcy, the automatic stay provision in 11 U.S.C. 362(a)(8) precludes "the commencement or continuation of a proceeding before the United States Tax Court" for a taxable period the bankruptcy court may determine in the case of a corporate debtor and for a pre-petition tax period in the case of an individual debtor. If section 362(a)(8) of the automatic stay applies, the taxpayer may not file a petition in Tax Court while the stay remains in effect. Publication 3953, Q & A's About Tax Court Proceedings for Determination of Employment Status Under IRC 7436, contains language advising the taxpayer of this fact. However, the Service is permitted to issue Letter 3523 while the automatic stay is in effect and should do so to prevent expiration of the statute of limitations on assessment, which continues to run during the bankruptcy proceeding.

All jeopardy assessments for employment taxes have the common characteristic that collection will be endangered if regular assessment and collection procedures are followed. Jeopardy assessments should be used prudently and care should be taken to avoid excessive and unreasonable assessments.

All examiners should be alert for conditions, as set forth in IRM 1.2.1.5.27, Policy Statement 4-88 (Formerly P-4-86), "Jeopardy assessments to be used sparingly and assessment to be reasonable in amount," where a jeopardy assessment may be necessary to protect the government's interest. It is important to note that the conditions set forth in the policy statement must exist for a jeopardy assessment to be considered.

All examiners responsible for disposition of cases at any stage will take every precaution to protect the government’s interest relative to the expiration of the statutory period of limitations for assessment. Refer to IRM 25.6.22, Extension of Assessment Statute of Limitations By Consent.

Cases closed to Appeals (including reference returns where the period for assessment requires protection) require at least 365 days on the statute of limitations when they are received in Appeals. If insufficient time remains on the statute of limitations and an appropriate and a timely consent to extend the statute was not secured by the examiner, the case will be closed to:

For purposes of employment tax case processing, examiners should be aware of the 365-day requirement and plan accordingly when issuing a 30-Day Letter. Examiners should allow 30 days for shipping and processing a case through Technical Services before being sent to Appeals. This would then require at least 395 days remaining on the statute when closed from the group (IRM 4.10.8.12.1, 30-Day Letters (SB/SE Field and Office Examiners Only)) and 425 days (365+30+30) on the statute when issuing the 30-Day Letter. Examiners should also account for time needed to review the protest, prepare any rebuttal, and close the case from the group.

Letter 3523 may be issued before referring a case to Appeals if it is determined that acceptance of a Form SS-10, Consent to Extend the Time to Assess Employment Taxes, will be injurious to the government's interests because of IRC 6511(c)(1). Alternatively, area officials may take any other appropriate action to protect the government’s interests before accepting the consent and referring the case to Appeals.

If the examiner believes a jeopardy assessment is appropriate, contact TEGEDC.

Examination personnel should follow normal closing procedures even though the return is electronically filed, including issuance of the Letter 3523.

Letter 3523 will be sent by certified mail to the last known address of the taxpayer. Registered mail will be used when the address of the taxpayer is outside the United States. The notice is intended to furnish legal notice of the Secretary’s determination to the taxpayer liable for the payment of the tax. It is therefore necessary that notices be issued in compliance with the provisions of the statute.

Letter 3523 may be held invalid if it is not addressed to the proper taxpayer or is mailed to the wrong address. Therefore, it is very important that the correct last known address of the taxpayer be secured when a Letter 3523 is being sent.

Be very careful in determining the address to be used; a thorough search of the administrative file should be made. Unless the taxpayer has clearly and concisely notified the IRS of a change of address, the address on the most recently filed (and reasonably processed) tax return is the last known address of the taxpayer.

A check of the Master File must be made by Taxpayer Identification Number (TIN), which is generally the employer identification number (EIN). The taxpayer's EIN and SSN should be researched for sole proprietors. Research the address using CC INOLE. If there is any doubt as to what constitutes the last known address of the taxpayer, duplicate original Letter 3523 should be sent by certified mail to each known address.

Other IDRS command codes should be utilized only if adequate computer research is provided and as necessary to secure the correct last known address for the taxpayer. For instance, CC INOLE does not show when an address was input into the computer records. However, CC TXMOD will show pending transactions.

Copies of all IRS computer searches should be retained in the administrative file.

If Letter 3523 is returned to the issuing office because of an incorrect address, it will be re-mailed to the correct address by certified mail.

At times, questions arise as to the date on which the Letter 3523 is mailed. The burden of proof in establishing the date is on the Commissioner. Accordingly, it is necessary that a record be maintained by each issuing office showing the date on which the Letter 3523 was sent by certified or registered mail.

It is important that employees in each office, responsible for the recording and sending of certified mail, are fully informed as to the applicable regulations of the postal service.

The record of certified mailing of Letter 3523 should be kept on Postal Service Form 3877 (P.S. Form 3877), which is supplied in booklet form by the U.S. Postal Service. These books, together with a series of certified numbers, may be obtained from the local postmaster (or through the USPS web site at https://about.usps.com/forms/ps3877.pdf, provided an average of three or more letters are mailed at one time. In the interest of legibility it is preferable that P.S. Form 3877 be removed from the book and the information entered thereon be typewritten. The following heading will be typed or imprinted by rubber stamp across the first line of each page of P.S. Form 3877: "Letter 3523, for the years indicated, has been sent to the following taxpayers."

A rubber stamp with "CERTIFIED MAIL" indicated, will be used by the designated IRS employee to stamp the envelope containing the 90-day letter:

The IRS employee enters the certified number on the envelope, and lists that same number together, with the name and address of the addressee, on P.S. Form 3877.

If a Letter 3523 sent by certified mail cannot be delivered by the U.S. Postal Service because the addressee moved and left no forwarding address, the issuing office will, provided sufficient time remains on the statute, follow the procedures for locating taxpayers.

The Master File address will be considered the taxpayer's last known address or address of record if the taxpayer cannot be located or a new address is not provided or verified by the taxpayer. Research the address using CC INOLE or by requesting CC MFTRA to determine if the address was updated after the notice was mailed. If Master File shows a different address the notice should be re-mailed to that address.

In such cases where there is insufficient time to reissue the notice or where the address on the latest filed return is the address to which the notice delivery attempts were made, upon expiration of the 90-day period, the employment taxes are assessed by default in the absence of a petition to the Tax Court or an agreement. The envelope in which the letter was originally mailed and the notice itself should be securely stapled in the taxpayer's file, as they are evidence that the IRS has complied with the law and mailed the notice by certified mail to the taxpayer's last known address.

If IRS correspondence solicits or requires a taxpayer response and it is returned to the IRS by the taxpayer with corrections to the taxpayer's address information, that correspondence will constitute clear and concise notification of a change of address.

If a taxpayer's address is outside of the United States or its possessions or territories, the following information is required: number, street, city, province or state, postal code, name of country, and apartment/room/suite number if applicable. The country name should not be abbreviated.

A new complete address provided over the telephone or in an interview with the taxpayer or their representative will suffice as "clear and concise notification" if there is an ongoing examination and there is no reason to believe that the caller or person interviewed is not the taxpayer or an authorized representative.

The elements of a new complete address are:

Once the clear and concise notification of the address change is received, Form 2363, Master File Entity Change, must be submitted to update the internal records with the correct address. The completed Form 2363 is forwarded to CCP by fax or mail. For CCP mailing address information, refer to the appropriate Field Liaison or the Team 101 Manager at: http://mysbse.web.irs.gov/examination/cp/default.aspx. See IRM Exhibit 4.4.11-1 , Form 2363 Name Change and Address Change Requirements, for instructions on completing Form 2363.

Treas. Reg. 301.6212-2 and Rev. Proc. 2010-16 provide guidance regarding procedures for making a change of address and defining "clear and concise notification."

The telephone conversation or interview with the taxpayer or representative about the new address must be recorded on the contact sheet. The record should contain the date of the phone call or interview and the name and phone number of the caller (employee/representative). The record should also contain the taxpayer's full name, old address, SSN and/or EIN and the new address. Also, indicate the date Form 2363 was prepared and sent to CCP for processing.

Attach Form 3198 to the case file and indicate in "Other Instructions" of the Special Features section that "Address has been changed from Return." See IRM 4.4.11.5, Group Responsibilities.

The examiner must determine whether the taxpayer is establishing a separate address from the spouse (for Schedule H, Household Employment Taxes, audits). Prepare separate Forms 2363 for each spouse. See IRM 4.4.11.2, Name, Address, and Marital Status Changes.

An authorized representative is an individual granted the authority to represent a taxpayer before the IRS.

Form 2848, Power of Attorney and Declaration of Representative, is used to grant authority to a person. This form provides that the person to which the IRS may disclose otherwise confidential taxpayer information must fall into one of the following categories:

Unenrolled return preparers have limited authority. See Pub 947, Practice Before the IRS and Power of Attorney, Rev. Proc. 81-38 is modified and superseded by Rev. Proc. 2014-42 (Annual Filing Season Program) for tax returns and claims for refund prepared and signed (or prepared if there is no signature space on the form) after December 31, 2015.