part4-419
- 4.90.1.1
FSLG Roles and Responsibilities - 4.90.1.2
FSLG Operations - 4.90.1.3
Compliance Strategy - 4.90.1.4
Contacting SSA Regional Offices on Section 218 Coverage Issues - 4.90.1.5
Congressional Correspondence
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The Office of Federal, State, and Local Governments has responsibility
for providing federal tax compliance assistance to four distinct customer
market segments:-
Federal agencies
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State agencies
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Local governments
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Quasi-governmental entities
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In addition to the taxpaying customer market segments, there are two
other customer segments that are vital in serving our primary customers:-
Government associations
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Government practitioners
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Because FSLG customers are generally exempt from federal income tax,
our compliance efforts are generally focused on employment tax and information
return reporting. -
Where specific procedural guidance on employment tax issues is not provided
in IRM 4.90, FSLG employees should refer to IRM 4.23.
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This section discusses the principal functions within FSLG.
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The Office of Compliance and Program Management (CPM) is charged with
overall operational development, planning and program monitoring for FSLG,
including the following:-
Development and/or approval of customer education products and FSLG website
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General policy guidance to Specialists and Field Managers
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Compliance planning
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Quality review
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Maintenance of an employment tax workload classification system
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Development and implementation of quality measurement systems for outreach,
compliance checks, and examinations -
Development of internal training materials and products for Specialist
use -
Coordination of special project teams of Specialists and Field Managers
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Technical research assistance to Specialists
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Communication and negotiation with other IRS offices concerning issues
that affect FSLG
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The office of Governmental Liaison and Disclosure (GLD) has a role distinct
from the role of FSLG. The Governmental Liaisons (GLs) serve as the primary
point of contact with federal, state and local agencies for developing and
implementing cooperative tax administration activities between IRS and these
entities. FSLG deals with government entities in their roles as taxpaying
entities. -
In their daily activities, GLs notify FSLG contacts whenever compliance
issues arise. Conversely, FSLG personnel contact GLs if they receive an inquiry
about partnerships or joint projects with IRS.
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The FSLG Specialist has primary responsibility in an assigned geographical
area for conducting compliance activities, including customer assistance,
compliance checks, and examinations. -
The Specialist may be selected by CPM to perform duties, either individually
or as part of a team, directly for CPM or the Office of the Director, based
on individual expertise or abilities. -
The Specialist is expected to maintain working relationships with other
federal, state, and local officials in his or her assigned geographical area
in order to promote more efficient tax administration programs in that area.
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The Field Manager is responsible for the supervision of Specialists
in his or her geographic area as well as the overall coordination, under the
overall direction of Director, FSLG, of management activities for that area. -
The Field Manager will make determinations of appropriate compliance
activities within the assigned area, in conjunction with CPM.
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This section provides FSLG Managers and Specialists with an overview
of the FSLG Compliance Strategy. The efforts of this strategy include Pre-Filing,
Filing, and Post-Filing activities.
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Pre-Filing and Filing activities are defined as efforts directed toward
increasing compliance by providing guidance on general requirements, rather
than review of individual compliance history. Pre-filing and filing activities
are considered “outreach”
. The primary objective of outreach
is to increase voluntary compliance by helping customers understand how to
accurately and timely file employment tax returns and any other required returns.
Outreach activities are discussed in IRM 22.40.
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Post-filing activity consists primarily of compliance checks and examinations.
It also includes any other contacts the Specialist has with the customers
that are not voluntary in nature, such as a Worker Classification Determination
Letter (Form SS-8). Examples of Post-filing activity cases that are included
in the classification and case selection system include:-
Claim for refund
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Referral from the Exempt Organizations Coordinated Examination Program
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Follow-up on a customer assistance case
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Follow-up on a Worker Classification Determination (SS-8)
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Follow-up on a closing agreement
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Follow-up on a Section 218 Compliance Initiative case
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Customer assistance is defined as assistance to individual entities.
This may occur in response to contact between FSLG and a government entity,
and may be initiated by either party. Examples of customer assistance include
the following situations:-
An entity identifies a reporting problem and requests that FSLG provide
assistance to correct the error. -
FSLG secures information regarding an entity that indicates that it may
not be in compliance, and contacts the entity to offer assistance to correct
the apparent error. -
An entity requests telephone assistance relating to an individual compliance
problem.
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If a customer declines customer assistance, or customer assistance is
provided and there is a disagreement on the outcome, or it is determined that
the entity has significant compliance issues and needs substantial assistance
with filing or amending returns, the entity may be considered for an examination
or a compliance check. The Specialist should complete Form 5666, TE/GE Referral/Information
Report, and send it with the customer assistance case file to CPM for classification
and assignment prior to conducting a compliance check or examination. These will
be treated as referrals as discussed in IRM 4.90.6.
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Historically, the federal government has applied very limited field
compliance resources to address its tax issues. Employment tax and information
return reporting are concerns with federal agencies. The entities in this
market segment are few, but they have a significant revenue impact due to
the high payroll and nonpayroll expenditures and involvement with public and
private employers and employees. -
The federal agency tax compliance group has lead responsibility to identify
and coordinate federal agency issues. The FSLG Compliance and Program Management
office will also be involved in the overall strategy to work with federal
agencies and support the federal agency tax compliance group. The other FSLG
groups will also assist in delivering outreach or other activities to federal
agency field offices (i.e., payroll offices, military bases, procurement offices,
regional and local offices, etc.). -
FSLG will offer ongoing outreach and customer assistance as part of
its annual work plan to federal agencies. -
There are unique protocol issues for federal agencies, including the
military. The Specialists should consult the CPM Manager for guidance in cases
where appropriate protocol appears to be an issue. -
There are significant employment tax issues in the federal segment that
the IRS has not addressed previously. These include labor settlement payments,
taxable fringe benefits, and worker classification, which will require guidance
and enforcement activities. -
The Specialist should also consider coordinating outreach with the Regional
Social Security Administration office.
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Many state and local government employees are covered under social security
(FICA) through Section 218 of the Social Security Act, enacted in 1951. In
1997 the Assistant Commissioner, Examination approved a national compliance
initiative (State and Local FICA Compliance Initiative) to address FICA compliance
by state and local government entities. This outreach initiative continued
until the end of 1999 with diminishing activity by the districts in 2000. -
There has been significant uncertainty by many government employers
concerning the existence of an agreement with the Social Security Administration
(SSA) for FICA coverage and how the Section 218 Agreement was administered.
The primary methodology of the 1997 initiative was to work with SSA to provide
education to state and local governments (i.e., counties, cities, special
districts, townships, villages, school districts, etc.). During 2001, FSLG
continued this initiative by contacting former District Section 218 Coordinators
and identifying follow-up actions to close the gap in service due to the IRS
restructuring. -
Local governments make up a majority of FSLG’s customers (more
than 87,000 entities and 12 million employees). Consequently, most of our
resources will be devoted to local government entities. -
Among the noncompliance risk factors that may be associated with local
governments include the complexities of Section 218, lack of experience with
tax-related issues, and frequent turnover of employees and elected officials.
Addressing Section 218 is no longer an initiative, but is one of many compliance
issues we will address with state and local governments. -
When first assigned to a state, or upon the appointment of a new State
Social Security Administrator (SSSA) for that state, the FSLG Specialist should
arrange to meet with the SSSA to become familiar with the state Section 218
Agreement, and the major issues related to Section 218 in the state. The Specialist
should also review the role of FSLG with respect to Section 218 and answer
any questions the SSSA may have about federal tax law and IRS jurisdiction. -
The FSLG Specialist is responsible for contacting state and local government
customer groups (i.e., association of school board officials, etc.), as well
as government associations, such as the Government Financial Officers (GFOA),
National Association of School Business Officers (NASBO), National Association
of State Auditors, Comptrollers, and Treasurers (NASACT), etc. and offering
to present information during their meetings.
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FSLG shares customers and issues with Governmental Liaison and Disclosure
(GLD), Wage and Investment (W&I), Small Business and Self Employed (SB/SE),
and Large and Mid-Size Business (LMSB), and other business units within Tax
Exempt and Government Entities (TE/GE). There is often a need to coordinate
activity within IRS so that all customers in a transaction are served. -
For example, if a potential collection issue is discovered on a customer
assistance case, the Specialist should consider contacting the local SB/SE
Compliance group and seek the assistance of a Revenue Officer. The Specialist
must contact SB/SE if a case has been assigned for collection.
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FSLG Specialists may contact the Social Security Administration (SSA)
for Section 218 Agreement coverage issues. These procedures supplement the
Memorandum of Understanding (MOU) between the Social Security Administration
and the Internal Revenue Service for State and Local Government Compliance
Issues. -
The MOU between SSA and IRS provides that SSA is the arbiter of coverage
issues relating to Section 218 Agreements. Under the authority of Sections
210 and 218 of the Social Security Act, SSA is responsible for determining
the social security coverage of state and local government employees covered
under a states Section 218 Agreement and Modifications, in addition to determining
coverage for social security and Medicare benefits. Therefore, SSA has sole
responsibility for the interpretation of Section 218 Agreements and Modifications. -
Before contacting SSA for the interpretation of Section 218 coverage
issues, the Specialist should first analyze the facts to determine whether
the worker meets the definition of “employee”
under IRC
3401(c) and Treas Reg 31.3401(c)-1. If it is determined that the worker is
an “employee”
, the Specialist should proceed to answer
the following questions for each position:-
What is the effective date of the states Section 218 Agreement?
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What is the effective date of all subsequent Modifications?
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Is the position in question included in the existing Section 218 Agreement/Modifications?
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Is the position or service optionally excluded from coverage (i.e. do
federal or state laws allow the position or service to be excluded from coverage)? -
Is the individual worker excluded from mandatory Medicare because of membership
in a public retirement system? -
Was the position created subsequent to the effective date of the Section
218 Agreement (including all Modifications)? (See SSA Program Operations Manual
System 30001.380 Continuation of Coverage Rules).
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Many Specialists employ the use of informal telephone contacts with
both their local state administrators and regional SSA office contacts to
resolve coverage issues. This avenue should continue to be the first type
of contact for such coverage questions. If the Specialist determines that
the worker at issue is an employee subject to FICA covered by a Section 218
Agreement, SSA should be contacted nevertheless to obtain an informal concurrence
with the determination. If SSA agrees with the determination, the Specialist
should properly document the case file. This paragraph will suffice for agreed
cases. -
The taxpayer may not agree with the Specialists proposed adjustment
that the worker is covered under the Section 218 Agreement. The case will
require a formal written interpretation from SSA regarding Section 218 social
security coverage for the positions in question. For example, a Section 218
Agreement exists but it is not clear concerning which positions are covered
or excluded. In some instances, the position in question may not have existed
at the time the Agreement was executed. In order to determine the proper social
security and FICA coverage, the Specialist must contact the regional SSA official
(SSA Coverage Specialist) to request a formal written interpretation of the
Agreement. To accommodate a formal request, SSA has provided a list of Coverage
Specialists and their E-mail addresses. The Specialist should use the appropriate
SSA Coverage Specialist to request formal written interpretations of coverage
issues. Because encrypted E-mails cannot be sent to SSA, taxpayer information
must be redacted before sending a formal request to SSA offices. Include a
statement with the E-mail such as “Taxpayer identifying information
can be provided by telephone, fax, or mail as required.” -
To ensure that formal requests are submitted in a consistent manner,
a referral form must be used when submitting a formal request to SSA. The
form should be completed for each request and attached to the E-mail sent
to the SSA Coverage Specialist. The FSLG Specialist should send a copy of
the E-mail to the group manager. SSA will use this mailbox system to manage
its workload and control responses to FSLG. The Specialist can expect to receive
an acknowledgement within five workdays and a written response within 60 days.
If there has been no response within 60 days, initiate a follow-up contact.
If SSA does not respond to the follow-up contact, the Specialist should discuss
the situation with his/her manager. The written response may be received by
any means necessary (i.e. fax, E-mail, or regular mail). The response will
be used as the primary supporting documentation for the proposal of additional
FICA tax on the specific positions at issue. -
IRC 6103(l)(1)(A) authorizes the IRS to share information with SSA with
respect to taxes imposed by IRC chapters 2,21, and 24 as necessary for purposes
of SSAs administration of the Social Security Act. Any return information
in the possession of IRS with respect to these three chapters, including results
of an examination or compliance check, can be disclosed to SSA for its use
in administering the Social Security Act. The information that is authorized
to be disclosed is not limited to specific items of information; it is limited
only to information with respect to taxes imposed by specified chapters of
the Code. However, SSAs use of the information is limited to administration
of the Social Security Act. IRS should not disclose information it knows that
SSA does not need or cannot use in connection with this purpose. Additionally,
this contact with SSA is not considered a third-party contact under IRC 7602(c).
Form 12175 is not required.
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This section outlines procedures for responding to congressional correspondence.
As a matter of policy, the National Director for Legislative Affairs controls
all congressional inquiries, assigns them for response, and reviews responses
prepared for the Commissioners signature. Correspondence that falls under
these procedures includes responses to any member of Congress or his or her
staffs. The Director, Government Entities coordinates all congressional responses
from GE personnel. The Manager, Compliance and Program Management (CPM) of
Federal, State, and Local Governments (FSLG) assigns and controls all congressional
correspondence within FSLG. -
When congressional correspondence is received by an FSLG employee, it
should be immediately faxed to the CPM Manager. The original document should
be mailed to the CPM Manager. CPM will submit a copy to the Director, Government
Entities. -
The CPM Manager, upon receiving the control documentation, will assign
the case to a CPM analyst. The analyst should work expeditiously to meet the
deadline in the control documentation. The analyst has several resources for
guidance, including Document 11155 and IRM sections 1.10.1, 1.10.2, and 11.3.4. -
The CPM Manager will review the analysts draft response. The CPM Manager
will then fax a copy (along with all supporting documentation) for review
to Legislative Affairs, Congressional Correspondence and Quality Review Branch
(Legislative Affairs). This draft response should be sent to Legislative Affairs
in a timely manner so as to allow sufficient time to provide comments. Their
comments, if any, will be incorporated into the analysts response. -
An undated final response, printed on letterhead, will be prepared for
signature by the Director, FSLG. After the response has been signed by the
Director, FSLG, the file will be forwarded to the Director, Government Entities.
The file should include the final response, relevant background information,
a disk with the version of the undated response, and an addressed envelope.
FSLG will retain a copy of the file.
