IRS Guidance on Issuing Notice of Employment Tax Determination

The IRS has provided guidance on when and how it will issue a notice of employment tax determination under Code Sec. 7436, and how taxpayers petition for Tax Court review of certain IRS determinations under Code Sec. 7436.

Under the guidance, the IRS will issue a Section 7436 notice as part of an audit if one or both of the following determinations is made and there is a controversy regarding the determination: (1) one or more individuals performing services for the taxpayer are to be reclassified as employees for federal employment tax purposes; or (2) the taxpayer is not entitled to “section 530” relief. Even if a Section 7436 notice is not issued, a taxpayer can petition the Tax Court on an IRS determination on worker reclassification or “section 530” relief to the extent that the determination meets the requirements set forth in Tax Court opinions as explained in the guidance.

Other determinations by the IRS in connection with proposing employment tax adjustments are not subject to review by the Tax Court.

Effective Date

This revenue procedure is effective on February 7, 2022.

Effect on Other Documents

Notice 2002-5, 2002-1 CB 320, is modified and superseded, and Rev. Rul. 2009-39, I.R.B. 2009-52, 951, is modified.