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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.

Employment tax provisions are found at 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 1.2.1, Servicewide Policies and Authorities, apply to all employment tax issues and examinations. Examiners should review these Policy Statements to properly perform their examination duties.

A website, Search Servicewide Delegation Orders, provides a searchable list of Servicewide Delegation Orders issued by the Commissioner of the Internal Revenue, or on their behalf by the deputy commissioner. Delegation Orders pertaining to each IRS business process can be found in IRM 1.2.2, Servicewide Delegations of Authority.

Director, Specialty Examination Policy, is responsible for establishing policies that allow for the effective and fair application of Specialty Tax and Bank Secrecy Act laws.

Program Manager, Employment Tax Exam Policy, is responsible to establish effective policies and procedures, to support compliance with employment tax laws.

Director, Specialty Examination, is the executive responsible for examination operational compliance of excise tax, employment tax, estate and gift tax, and Bank Secrecy Act laws through Specialty Examination field programs.

Chief, Employment Tax Examination, is responsible for ensuring employment tax examiners follow the guidance included in the IRM, apply the tax laws with integrity and fairness, and to ensure employment tax examiners are familiar with and act in accord with taxpayer rights as afforded by IRC 7803(a)(3).

Director, Specialty Exam Case Selection, is responsible to provide process and procedural guidance to Field, Campus, Bank Secrecy Act, and Specialty Examination on selection of cases and delivery of inventory, provide input on the work plan, and set direct assignment criteria for routing of examination work.

Program Manager, Employment Tax Workload Selection and Delivery, is responsible to manage the selection, classification and delivery for Specialty Examination, Employment Tax.

Program Goals: The processes and procedures provided in this IRM are consistent with the objectives or goals addressed in IRM 1.1.16.5.3.3, Employment Tax Examination, and IRM 1.1.16.5.5.2.2, Employment Tax Policy.

Program Effectiveness: Program goals are measured with Employment Tax National Quality and Embedded Quality (EQ/NQ) 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.

Program Reports: Information regarding the reporting of program objectives are included on, but not limited to, the following reports:

The Quarterly Business Performance Review (BPR) provides updates on the status of the Whistleblower claims in Operating Division SME (OD-SME) status.

All information management systems have safeguard measures in place that address key components of Information Technology (IT) security requirements to restrict access to sensitive data.

The Employment Tax program has established a separation of duties of users’ roles:

The Issue Management System (IMS) is required to be used during employment tax examinations by examiners assigned to Specialty – Employment Tax Examination.

Unless instructed otherwise, examiners will use the Employment Tax Lead Sheets (ETLS) developed specifically for employment tax cases.

SB/SE ET examiners working ET Large Cases will use Large Case Lead Sheets (LCLS). LCLS are developed specifically for large case employment tax cases. Examiners working ET Large Cases will follow workpaper preparation, specific audit techniques, and case closing procedures unique to these types of audits.

The following chart contains terms and their definitions used in this IRM:

The following table lists commonly used acronyms and their definitions:

The following table lists the primary sources of guidance:

Other helpful information sources include:

The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the IRC, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. See IRC 7803(a)(3). For additional information about the TBOR, see Pub 5170, Taxpayer Bill of Rights, or Taxpayer Bill of Rights (SharePoint.com).

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS, led by the National Taxpayer Advocate. Its job is to protect taxpayers’ rights by striving to ensure that every taxpayer is treated fairly and knows and understands their rights under the TBOR. TAS offers free assistance to taxpayers when they face financial difficulties due to an IRS problem, when they are unable to resolve tax problems on their own, or when they need assistance to address an IRS system, process, or procedure that is not functioning as it should. TAS has at least one taxpayer advocate office located in every state, the District of Columbia, and Puerto Rico.

Employment tax examiners should consider the disclosure and privacy provisions when preparing agreed and unagreed case reports. For further information, see the Privacy, Government Liaison and Disclosure (PGLD) knowledge base at Disclosure and Privacy Knowledge Base Homepage (SharePoint.com).

Overall responsibility for civil penalty programs is assigned to the Office of Servicewide Penalties (OSP). OSP is charged with coordinating policy and procedures concerning the civil penalty program administration, ensuring consistency with the penalty policy statement, reviewing and analyzing penalty information, researching penalty effectiveness on compliance trends, and determining appropriate action necessary to promote voluntary compliance. For further understanding of the civil penalty program and penalty relief, refer to the Penalties Knowledge Base Homepage (SharePoint.com).

TE/GE employees conducting an employment tax examination must refer to IRM 4.70.13, Executing the Examination, IRM 4.70.14, Resolving the Examination, and IRM 4.70.17, Claims and Abatements, for guidance and procedures for TE/GE employment tax examinations. TE/GE employee may submit TE/GE employment tax questions to the TE/GE Employment Tax Knowledge Management Team using the "Contact an Expert" feature at New item - Ask a Question.

The IRS recognizes the significant benefits that can accrue from working with taxpayers to understand problems and practices unique to a given industry. Voluntary compliance will improve if taxpayers understand their tax obligations.

Compliance is achieved when a taxpayer makes a diligent effort to meet the requirements of the law. The law requires that the taxpayer take affirmative action to meet their legal obligations. Sometimes the taxpayer takes sufficient action to meet the requirements of the law but, because of some unforeseen intervening event, is unable to do so. Affirmative action recognizes that the obligation to comply with the law is ongoing and requires that the taxpayer continue to attempt to meet the requirements of the law.

The IRS employs a fair and consistent approach to employment tax administration that ensures:

An effective Employment Tax Examination Program will:

These objectives are intended to improve and strengthen compliance with the employment tax provisions of the Internal Revenue Code. Improved compliance will not only produce immediate revenue in the year of adjustment, but will also result in future compliance.

The TE/GE Division includes the following functions:

TE/GE has primary compliance responsibility for the employment tax returns filed by TE/GE taxpayers. TE/GE work units responsible for employment tax compliance include EP, EO Exam, FSL/ET and ITG.

The EO Exam, FSL/ET, and ITG Directors have compliance responsibility for coordinating an effective employment tax program in their areas by:

The EO Exam, FSL/ET, and ITG group managers are responsible for:

The SB/SE Employment Tax Program is part of SB/SE Examination Operations and is divided into three separate and distinct functions:

The SB/SE Employment Tax Program supports the mission of the IRS by providing program leadership for all IRS employment tax matters, including the development, execution, and evaluation of quality multi-functional compliance and assistance programs on a nationwide basis in a manner that promotes the highest degree of public confidence in the tax system's integrity, efficiency, and fairness.

Employment Tax examiners (ET examiners) within Examination Specialty Programs - Employment Tax, collectively consist of:

To ensure an efficient Employment Tax Program, it is important that all ET examiners be aware of their responsibilities to enforce the employment tax provisions of the IRC in accordance with provisions set forth in the Internal Revenue Manual (IRM). ET examiners will carry out their responsibilities during any examination by properly raising, developing, and resolving any employment tax issue.

Examiners outside of SB/SE Employment Tax that identify employment tax issues can work the employment tax examination unassisted or make a referral for a consultation or assistance from an ET examiner using the SRS.

The IRS maintains IRM 4.23 as a consolidated employment tax manual that serves as the source of technical and procedural information, as well as internal and external training material.

IRM 4.23 is in a user-friendly format and is comprised of sections describing major employment tax topics, including technical issues and procedures.

All ET examiners should be familiar IRM 4.23, as it is designed for use as an everyday reference guide and serves as the single official compilation of policies, procedures, instructions, and guidelines relating to employment taxes.

All ET examiners should also be aware of important procedures in other sections of the IRM affecting their examination responsibilities.

The Director, Specialty Examination Policy, owns IRM 4.23 and has overall responsibility for approving any updates to IRM 4.23.

The responsibilities of the Program Manager, Employment Tax Policy, include:

Employment Tax Policy intends to review and publish eight IRM sections each fiscal year. They are selected based on the following criteria:

When a need for procedural or systemic changes is identified, inform management.

Employees or affected program offices may suggest corrections or content changes to the IRM. See IRM 1.11.6.5, Providing Feedback About an IRM Section - Outside of Clearance, for the various methods to give feedback. IRM authors evaluate all change requests and respond to requests for substantive IRM changes to ensure the quality and consistency of IRM procedures. A change is substantive if it involves a procedural or operational matter. This includes requesting a change or improvement to a procedure, a broken link, or a data processing system.

Proposed changes or corrections to contents of IRM 4.23 may be submitted to the policy analyst responsible for the applicable program or the policy analyst assigned IRM 4.23 oversight. See IRM 4.23.1.1.7 (2) for a link to the resource page.

Recommended corrections or improvements to forms used by ET examiners may also be submitted under paragraph (3) directly to the analysis assigned oversight.

The most current revisions to IRM 4.23 are available on the IRM Online and SERP IRM. IRM 4.23 is not printed; however, the electronic version is available on the Product Catalog at IRM Numerical Index.