SECTION 5. COLLECTION EARLY

REFERRAL PROCEDURES

.01 In general. Early referral to Appeals is also available for collection issues. Procedures for utilizing the early referral process are described in Publication 1660, “Collection Appeal Rights.” Each taxpayer subject to a lien, levy or seizure will receive a copy of Publication 1660. Early referral of collection issues is a different process than the due process procedures described in § 6320 for liens and § 6330 for levies. Specifically, denial of relief pursuant to the early referral pro

ifies that the determination of whether a business is entitled to relief under § 530 is not dependent upon whether the relevant workers are first determined to be employees. As a result, IRS examiners will now consider the taxpayer’s eligibility for relief under § 530 before initiating any examination of the relationship between a business and a worker.

(4) Taxpayers that disagree with the District’s position regarding the application of § 530 have the option of immediately requesting early referral of the issue from the District to Appeals. In attempting to resolve the § 530 issue, Appeals will follow the procedures set forth in this revenue procedure. If the § 530 issue remains unresolved, or if it is determined that the taxpayer is not eligible for relief under § 530, the case will be returned to the District for consideration of the worker classification issues. If the taxpayer and the District are unable to agree on the worker classification issues, the taxpayer will be encouraged strongly to request early referral of the unagreed issue from the District to Appeals. It is not necessary for a taxpayer to request early referral when the IRS examiner determines that the taxpayer is not entitled to relief under § 530. The taxpayer also may wait until the IRS examiner has determined the § 530 and worker classification issues before requesting early referral of the issues to Appeals.

(5) The Taxpayer Relief Act of 1997, Pub. L. No. 105–34, 111 Stat. 788, added § 7436 to the Code, which provides new judicial review rights concerning certain employment tax determinations. Generally, § 7436 became effective on August 5, 1997 and applies to employment tax cases in which the Service has determined that at least one worker should be reclassified as an employee and that the taxpayer is not entitled to relief under § 530. The law requires that any employment tax that depends upon such determinations cannot be assessed unless the taxpayer has been given an opportunity to file a petition for United States Tax Court review of the Service’s determinations on those two issues. In all cases involving worker classification and § 530 issues, the District will inform taxpayers about the opportunity to seek Tax Court review at the same time as they are informed of their appeal rights. See Notice 98–43, 1998-33 I.R.B. 13.

.02 In general. The early referral procedures in section 2 of this revenue procedure generally apply to employment tax issues. Sections 4.03 through 4.06 of this revenue procedure specifically apply to the early referral of employment tax issues.

.03 Appropriate issues for early re- ferral. Examples of appropriate employment tax issues for early referral include:

(1) Worker classification issues, including whether a worker is an employee or independent contractor under the common law; whether a worker is a statutory employee or statutory non-employee.

(2) Liability issues, including whether § 530 applies; whether § 3509 rates are appropriate; and whether the taxpayer qualifies for an interest-free adjustment.

(3) Other issues, including whether certain payments are excepted from the definition of “wages” (e.g., a fringe benefit that would be excludable from the employee’s gross income under § 132); and whether certain services are excepted from the definition of “employment.”

.04 Issuance of employment tax re- port. If an issue is approved for transfer from the District to Appeals, the District will prepare an employment tax report for each early referral issue approved pursuant to this revenue procedure, by following the procedures in section 2.11 of this revenue procedure. The issuance of the employment tax report is not treated as the first letter of proposed assessment of tax for purposes of computing increased interest under § 6621(c), or for the award of administrative costs under § 7430(c).

.05 Agreement reached. If an agreement is reached with respect to an employment tax early referral issue, a Form 2504, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment — Excise or Employment Tax, or a Form 2504 AD, Excise or Employment Tax — Offer of Agreement to Assessment and Collection of Additional Tax and Offer of Acceptance of Overassessment, should be labeled “Partial Agreement” and may be used for factual or non-complex issues that do not affect subsequent years. Notice 98–43 provides that if a taxpayer settles a § 530 or worker classification issue on an agreed basis, the taxpayer must formally waive the restrictions on assessment con

.06 Agreement not reached.

(1) If one or more of the early referral employment tax issues are unagreed, the case will be returned to the District. The employment tax dependent upon a § 530 or worker classification issue may not be assessed at that time. See § 7436(d)(1) and Notice 98–43. Instead, the District must send the taxpayer, via certified or registered mail, a “Notice of Determination Concerning Worker Classification Under Section 7436.”

July 19, 1999 112 1999–29 I.R.B.

cedures will not be reviewable in the Tax Court or in a U.S. District Court. In addition, the early referral procedures apply to a broader range of collection issues than the due process procedures.

.02 Appropriate issues for early re- ferral. Appropriate collection issues for early referral include proposed:

(1) notices of federal tax liens; (2) levies; (3) seizures; and (4) denials or terminations of installment agreements.