The objective of this material is to provide you with the necessary tools to:

This Guide is designed to be flexible enough to permit some latitude in presenting findings and at the same time establish consistency. The Guide will demonstrate how to effectively write your report.

The line by line instructions for completing the various forms will provide an in-depth description for use in a variety of situations.

A case can be closed either as a "Survey Before Assignment" or "Survey After Assignment" using a paperless closing only if the return in the case file is an electronic print, i.e., BRTVU, MACS, IMFOLT, or TXMOD.

This procedure applies to "Survey after Assignment" disposal code "32." It also applies to non-examined disposal codes 20 – 22, 25, 31, 35, and 42.

This procedure does not apply to an original return, an SFR, or if there is a freeze on an account, i.e., TC 976/977 or TC 640.

Form 5351, Examination Non-Examined Closing, or Form 5596, TE/GE Non-Examined Closings, is completed following the instructions in IRM 4.4.21.2.2.1. A summary of the steps:

The manager’s signature and date on Form 5351 is in lieu of the survey stamp. Form 3198 is not required on these non-examined closures.

The Form 5351 and Form 3210 are faxed to Centralized Case Processing (CCP) assigned to your PBC:

Indian Tribal Government (ITG) specialists send the Form 5596, TE/GE Non-Examined Closings, to the Brooklyn office.

If there is additional documentation that should be retained in Files at the Campus, the case file should be closed to CCP with an electronic print and the documentation for association with the survey.

In most reclassification cases, a taxpayer who is issued a Letter 3523 will have previously received a "30-day letter," which the Service sends 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 will receive a NDWC notice. If the taxpayer files a protest to Appeals and the IRC 7436 issues are not settled in Appeals, the taxpayer will be sent a NDWC notice. Tax Court proceedings seeking review of IRC 7436 issues may not be started prior to the time the Service sends the NDWC notice.

Tax Court Rule 34(b)(8) requires that the petition shall include a copy of the Notice of Determination and all relevant enclosures, as listed 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.

Enclosures with Notice of Determination — Every Notice of Determination ( 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 NDWC notice. The NDWC notice and Publication 3953 also advise taxpayers of the right to contact a Taxpayer Advocate.

Names of Reclassified Workers — Table 1 of the Notice of Determination must be completed to identify the workers the Service has determined should be classified as employees. The Tax Court has indicated that a NDWC notice that does not contain the names of reclassified workers is flawed.

Amount of Tax — Table 2 of the Notice of Determination must include the Service's 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.

Form 2504–WC — A Form 2504–WCmust be included as an attachment with Notice of Determination to provide taxpayers with an opportunity to agree to the proposed employment tax adjustment administratively. Form 2504–WC contains the statement that allows taxpayers to waive restrictions on assessments under IRC 7436(d) and IRC 6213(a). Therefore, the taxpayers must be informed that Tax Court review is not available for agreed cases. It 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 Service 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 Notice of Determination was mailed 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 Notice of Determination 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.

Early Referral — If, during the course of the employment tax examination, the taxpayer and examiner are unable to agree on worker classification and/or section 530 issues, the taxpayer should be strongly encouraged to request early referral of these unagreed issues to Appeals. The enactment of IRC 7436 does not change the early referral procedures. See IRM 4.23.5.12.1, "Alternative Dispute Resolution," for more information on early referrals.

LMSB/Appeals Fast Track Settlement Program (FTS) — FTS offers LMSB examination personnel a way to resolve audit issues in a way that utilizes the settlement authority and mediation skills of Appeals while retaining jurisdiction of the case. The FTS process allows people who developed the issue to have a voice in the settlement process. It also provides the taxpayer a way to resolve their case in a significantly shorter time span than the traditional Appeals process. See Rev. Proc. 2003-40, the LMSB/Appeals Fast Track Settlement web site and IRM 4.51.4, "LMSB/Appeals Fast Track Settlement Program (FTS)."

Fast Track Mediation (FTM) — Another method designed to expedite the resolution of tax disputes with taxpayers at the earliest opportunity is through Fast Track Mediation (FTM). Either the examiner or the taxpayer can propose mediation. See IRM 4.23.5.13.1, "Alternative Dispute Resolution," and Publication 3605, Fast Track Mediation - A Process for Prompt Resolution of Tax Issues, for more information on FTM. See also: http://appeals.web.irs.gov/tech_services/adr/ftm/Default.htm .

Erroneous Assessment — If the Service erroneously makes an assessment of taxes attributable to any IRC 7436 issues without issuing a Notice of Determination or obtaining a waiver of restrictions on assessment (e.g., Form 2504–WC) from the taxpayer, the taxpayer is entitled to an automatic abatement of the assessment. However, once any such procedural defects are corrected, the Service may reassess the employment taxes to the same extent as if the abated assessment had not occurred.

Statute of limitations — Mailing of the Notice of Determination by certified or registered mail will suspend the statute of limitations only for assessment of the employment taxes that are dependent upon the worker classification and section 530 issues. The restrictions on assessment in IRC 7436(d) and IRC 6213 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 statute 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 statute of limitations 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 Notice of Determination, 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 Service's 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 tax and has filed a claim for refund. If the taxpayer contests the worker classification/section 530 issues in Tax Court, the Tax Court only has jurisdiction over IRC 7436 issues and may not consider other employment tax issues. Following a determination by the Tax Court of the worker classification and section 530 issues, there is nothing to preclude the taxpayer from later filing a refund suit with respect to other issues that were not previously considered by the Tax Court, assuming the taxpayer has satisfied the jurisdictional prerequisites of paying the tax and filing a timely claim for refund pursuant to IRC 6532. However, res judicata principles will preclude the taxpayer from relitigating the Tax Court's determinations with respect to worker classification and section 530 for the same tax periods in the refund suit.

Interest Free Adjustments — The taxpayer is not eligible for interest-free adjustments after receipt of a Notice of Determination. The taxpayer may make a designated deposit per IRC 6603 to stop the accrual of any interest. See IRM 4.23.8.3, "Interest Free Adjustments, " 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 treatment, 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).

Notices of determination of worker classification (Notice of Determination) in field examination cases will generally be issued 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 Notice of Determination is based on an examination of a retained copy of the taxpayer's return, the Notice of Determination will be issued without securing the original return. A transcript (BMFOLT) must be obtained to insure that the tax shown on the retained copy is the same as the tax assessed as tax shown on return.

The Notice of Determination writer will review the case to the extent needed to prepare a proper Notice of Determination.

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 Commissioner is authorized to send a Notice of Determination to such person. The Service will issue a Notice of Determination only after the Service has determined both that the taxpayer is not entitled to section 530 treatment and that one or more individuals performing services for the taxpayer are employees for purposes of subtitle C. The amount of employment tax under those determinations will also be determined and set forth in the Notice of Determination.

The Territory Manager for Technical Services and other designated officers are specifically authorized to prepare, sign, and mail the statutory Notice of Determination (see Delegation Order No. 251) on behalf of the Commissioner. The Notice of Determination may be issued at any time it appears that the taxpayer is seeking merely to prolong consideration and to postpone final action by dilatory tactics or by raising frivolous issues.

In the context of a IRC section 7436 proceeding, IRC 7436(d)(1) provides that the Notice of Determination is treated like a notice of deficiency for purposes of IRC 6213. Thus, if a Notice of Determination is addressed to the 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, Acknowledgement of Protests, Correspondence and Requests for Interviews, may be used to acknowledge receipt of protests, correspondence, and requests for interview or conference which are received by the Area Director after the issuance of a Notice of Determination.

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 Notice of Determination.

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 Notice of Determination contains an obvious error of omission or commission and if correction will properly reflect the position of the Area Director and permit an immediate closing of the case. Neither will it apply to a case in which Appeals has waived jurisdiction. See IRM 4.23.10.9.6 for procedures in such cases.

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

If, during the 90-day period the taxpayer executes a Form 2504–WC to waive the restrictions on the assessment and collection of the employment tax adjustments proposed in the Notice of Determination 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 assessment of employment taxes as a partial agreement.

After necessary action in this latter case, the waiver and the return or returns will be returned for restoration to the file of the case. If the file in the meantime has been transmitted to Appeals, the waiver and the return or returns should be transmitted to that office upon receipt by Examination.

When answering questions from taxpayers or representatives on Notice of Determination, the data should be taken from the administrative file rather than referring to AIMS. See IRM 4.23.10.9.6 for procedures on preparing a revised examination report based on additional information received after the issuance of the Notice of Determination.

Delegation Order No. 66 (as revised) vests settlement jurisdiction in Appeals offices during the 90-day period in all protested cases in which the Area Director issued the Notice of Determination. The delegation order permits the Area Director of Appeals to relinquish this jurisdiction by waiver to the office of the Area Director which issued the notice, except in those cases in which criminal prosecution is pending or the ad valorem fraud penalty is involved. Similarly, the Area Director of Appeals may relinquish jurisdiction to the office of the Director, Compliance, if that office issued the Notice of Determination. Appeals may waive jurisdiction in all cases which were handled by the Examination function, regardless of the amount involved.

When issued, the waiver of jurisdiction operates to vest in the office of the Area Director complete jurisdiction of the case during the 90-day period, including the authority to transfer the case to another area.

All communications addressed to taxpayers in Notice of Determination cases should clearly state that reconsideration of the case will in no way serve to suspend or extend the 90-day period in which a petition for redetermination may be filed with the Tax Court.

Waiver of jurisdiction over these cases does not increase the authority of an Examination function examiner. The authority of an examiner in a Notice of Determination case is the same as his/her authority in any other case.

Nothing herein is to be construed so as to deny any taxpayer a hearing before Appeals if he/she desires one and sufficient time remains during the 90-day period. Situations arising in this area should be coordinated with Appeals on a case-by-case basis.

If additional information is received that would change the Notice of Determination, prepare a revised examination report. On this revised report, adjust the amounts as shown on the original tax return. It is not necessary to prepare a supplemental report showing the amounts "as previously adjusted."

Clearly label the top of this revised examination report "Supplement to the Notice of Determination of Worker Classification. " This revised report does not nullify or supersede the original notice, nor does it extend the statutory period for filing a petition with the Tax Court. Use Letter 555-T, Reconsideration after Statutory Notice, or Letter 555, Notification of Findings based upon Taxpayer's Recent Data re Tax Liability, to send the revised report to the taxpayer.

If it is ascertained that an agreement cannot be reached during the 90-day period, the taxpayer will be notified in writing sufficiently in advance of the expiration of the 90-day (or 150-day period if the NDWC is addressed to a taxpayer outside the United States) so as not to jeopardize his/her right to file a timely petition with the Tax Court. This contemplates expeditious consideration of such cases in Examination.

To ensure that timely information is provided to determine whether a petition has been filed within the prescribed time in Notice of Determination cases, Chief Counsel’s office will furnish 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 assessment of employment taxes on any defaulted Notice of Determination is made within the statutory period. If any case, in which the Area or Campus issued the notice, does not appear on the docketed cases list during the 90-day period plus an additional period of 30 days for Areas and Campuses, the case will be transmitted immediately for assessment of the proposed assessment of employment taxes.

Any such case in which a timely petition has been filed should be transmitted within 10 calendar days on Form 3210, Document Transmittal, by Technical Services to the Appeals office which serves the Area or Campus making the determination of tax liability. In unusual cases, the reason 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 Notice of Determination 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 Notice of Determination was presented for mailing. All questions, including those relating to petitioned tax periods, should be referred to TE/GE Area Counsel.

Special instructions relating to the preparation of Notice of Determination involving tax liability of transferees under IRC 6901, as well as the preparation of letters involving bankruptcy and receivership cases, can be found in the Bankruptcy Handbook, IRM 4.27.

If the taxpayer is a debtor in bankruptcy, the automatic stay provision (i.e., 11 U.S.C. § 362(a)(8)), precludes "the commencement or continuation of a proceeding before the United States Tax Court." Thus, the taxpayer may not file a petition contesting the Service’s Notice of Determination without first obtaining relief from the automatic stay in bankruptcy court. Publication 3953 contains language advising the taxpayer of this fact. However, the Service is permitted to issue a Notice of Determination 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 have the common characteristic that, prior to assessment, it is determined 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 Policy Statement 4–88, where a jeopardy assessment may be necessary to protect the government's interest. It is important to note that the conditions set forth in Policy Statement 4–88 must exist for a jeopardy assessment to be considered.

It is incumbent upon all examiners to be alert for conditions as set forth in Policy Statement 4–89, where a termination assessment may be necessary to protect the government’s interest.

All field examiners responsible for disposition of cases at any stage will take every precaution necessary to protect the Government against expiration of the statutory period for assessment. Refer to IRM 25.6.22, "Extension of Assessment Statute of Limitations By Consent."

No case in which such period will expire in less than 180 days (including reference returns where the period for assessment should be protected) will be transmitted to Appeals by the Area Director unless a consent sufficiently extending the statutory period has been filed. If an appropriate and timely consent was not filed in any such case, a Notice of Determination will be issued or other necessary steps taken to protect the Government’s interests.

A Notice of Determination may be issued before referring a case to Appeals if it is determined that acceptance of a consent will be injurious to the Government's interests because of provisions 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 you believe a jeopardy or termination assessment is appropriate, contact TE/GE Area Counsel.

Examination personnel should follow normal closing procedures even though the return is magnetically or electronically filed. This includes issuance of the Notice of Determination.

Notice of Determinations 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, to the taxpayer liable for the payment of the tax, legal notice that such controversy exists. It is therefore necessary that notices be issued in compliance with the provisions of the statute. Although the statute authorizes that notices be sent by certified or registered mail, it does not preclude manual or other means of delivery. Any Notice of Determination issued by other than certified or registered mail should be approved by TE/GE Area Counsel prior to issuance.

A Notice of Determination 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 address of the taxpayer be secured when a Notice of Determination is being sent.

Be very careful in determining the address to be used. A thorough search of the administrative file should be made. The rule of law provides that unless the taxpayer has clearly and concisely notified the Service 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 the taxpayer's identification number (TIN), which is generally the employer identification number (EIN). The taxpayer's EIN and social security number (SSN) should be researched for sole proprietors. Research the address using CFOL command code INOLE. If there is any doubt as to what constitutes the last known address of the taxpayer, duplicate original Notice of Determination 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 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 a Notice of Determination is returned to the Area Director because of an incorrect address, it will be remailed to the correct address by certified mail; in such cases, the date of remailing is the effective date of the notice.

At times, questions arise as to the date on which the Notice of Determination 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 Area Director showing the date on which the Notice of Determination was sent by certified mail.

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

The record of certified mailing of Notice of Determination should be kept on Postal Service Forms 3877 (P.S. Forms 3877), which are 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, provided an average of three or more letters are mailed at one time. In the interest of legibility it is preferable that P.S. Forms 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: "NDWC notice, for the years indicated, have been sent to the following taxpayers."

A rubber stamp, such as shown below, will be used by the designated Service employee to stamp the envelope containing the 90-day letter:

The Service employee will then enter the certified number on the envelope, and list the same number together with the name and address of the addressee on P.S. Form 3877.

If a Notice of Determination is forwarded by certified mail and cannot be delivered by the U.S. Postal Service because the addressee has moved and left no forwarding address, the Area Director will, provided there is sufficient time remaining on the statute, follow the procedures for locating taxpayers.

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

In such cases where there is not sufficient time to reissue the notice or where the address on the latest filed return is the address to which the notice was delivered, upon expiration of the 90-day period, the employment taxes will be 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 such envelope (and letter) are evidence that the Internal Revenue Service has complied with the law and mailed the notice by certified mail to the taxpayer's last known address.

If correspondence sent by the Service that solicits or requires a response by the taxpayer is returned to the Service by the taxpayer with corrections marked on the taxpayer's address information, the 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 examiner should not abbreviate the country name.

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

The elements of a new complete address are as follows:

The examiner should make a record on the contact sheet of the telephone conversation or interview with the taxpayer or representative about the new address. The record should contain the date of the phone call or interview and the name and phone number of the caller (employee/relative/representative). The record should also contain the taxpayer's full name, old address, social security number and/or employer identification number and the new address.

The examiner should determine whether the taxpayer is establishing a separate address from his or her spouse (for Schedule H audits).

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

Form 2848, Power of Attorney and Declaration of Representative, may be used to grant authority to a person. This form provides that a person has to fall into one of the following categories:

Unenrolled return preparers have limited authority. See Publication 470, Limited Practice without Enrollment, and Rev. Proc. 81-38 for more information.

In agreed worker reclassification cases that are not subject to the CSP procedures of IRM 4.23.6, "Classification Settlement Program (CSP)," the examiner will advise the employer to prepare Forms W-2 for the converted workers. See IRM 4.23.8.10.1, "Delinquent Forms W–2/W–2c Secured By Examiner," for procedures on delinquent Form W-2's secured by the examiner. IRM 4.23.8.10.2, "Delinquent Forms W–2/W–2c Not Secured by Examiner," addresses procedures when the delinquent returns are not secured.

In addition, the examiner will request the employer to notify all affected workers of the determination, so as not to deprive them of any legal benefits of a state or other regulatory agencies afforded to an employee. If the employer agrees to notify the workers, the examiner will clearly document this fact in the workpapers.

The examiner will provide the employer with copies of Notice 989, Commonly Asked Questions When IRS Determines Your Worker Status is "Employee," for use by the employer in the employee notification process. See Exhibit 4.23.10-8, "Filing Instructions for Reclassified Workers," for an example of a letter that the employer could issue to employees.

For cases subject to the CSP procedures, workers do not become treated as employees until the prospective date of the CSP agreement. Thus, there is no requested employee notification by the employer. In addition, delinquent Forms W-2 are not required and are not to be solicited by the examiner or filed by the employer in a CSP case.

A report of re-examination will be submitted when a taxpayer's books and records are re-examined.

A supplemental report is submitted as a supplement to an original report when adjustments are made from information on hand or obtained without re-examining the taxpayer's books and records.

An information report is a complete report that does not set up tax liability but merely furnishes information concerning a taxpayer to other persons who have a need for such information. Information reports will usually be submitted in connection with offers in compromise and requests for information from the Headquarters Office and other area offices.

Generally, the type of report or method of disposing of the case will be indicated in capital letters on the transmittal letter of the report in the following form:

If Form SS–8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, is submitted for status determination, the examination of any records regarding this determination does not constitute an examination of any Federal tax return. If the periods concerned have been examined, it will not constitute a re-examination under the reopening procedures.

The report writing instructions for FICA tax examinations apply generally to RRTA tax examinations. However, references on report forms to FICA should be changed to RRTA. If RRTA and income tax withholding are both being adjusted by the examination, a separate Form 4668 will be prepared for each type of tax, as income tax withholding is reported quarterly on Form 941 and the RRTA tax liability is reported annually on Form CT-1, Employer's Annual Railroad Retirement Tax Return. In addition, Form CT-2, Employee Representative's Quarterly Railroad Tax Return, is a quarterly return filed by employee representatives to pay Tier 1 and Tier 2 taxes as provided in IRC 3211, Rate of Tax, and IRC 3212, Determination of Compensation.

When using Form 4668 for either CT-1 or CT-2 adjustments in an RRTA examination, the following additional modifications are necessary to encompass the various taxes unique to railroad examinations. These include:

Any additional modifications may be made to adapt existing report forms to RRTA examinations. The case file will include a memorandum to the Railroad Retirement Board (RRB) stating each employee's name and SSN, the name of the railroad employer, and the increase or decrease in the amount of compensation subject to railroad retirement tax for each employee. Due to disclosure concerns, this memorandum should not contain any references to income tax withholding, FICA wage, or FICA tax adjustments.

In RRTA examinations involving the conversion of an employee from FICA coverage to RRTA coverage, the examiner will advise the taxpayer to file a protective claim under IRC 3503, Erroneous Payments, and the regulations thereunder. No action should be taken on these claims until all administrative and judicial proceedings have been resolved. See IRM 4.23.8.6.2, "Special Rules Relating to FICA and RRTA Taxes," for additional procedures on RRTA conversion cases.

Upon closing a case converting workers from FICA coverage to RRTA, Form 3198 should include instructions on correct processing and the case should be flagged "Stop 537G Large Corp/Technical" for processing in the Covington, KY, processing center. The Form 3198 should also indicate that copies of the report should be forwarded to the RRB.

Any questions involving railroad employment taxes should be directed to the Technical Advisor, Railroads, found in the LMSB Technical Advisors listing under Railroads. The railroad website, Railroad Technical Guidance, includes sections for Resources, Issues, Hot Topics, and a link to the Technical Advisor.