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Title 26 — Internal Revenue CodeRelease 119-73

§7436 Proceedings for determination of employment status

Title 26 › Subtitle Subtitle F— - Procedure and Administration › Chapter CHAPTER 76— - JUDICIAL PROCEEDINGS › Subchapter Subchapter B— - Proceedings by Taxpayers and Third Parties › § 7436

Last updated Apr 6, 2026|Official source

Summary

You can ask the Tax Court to decide, during an audit, whether people who work for you are your employees for employment taxes or whether you lose the special treatment under section 530(a) of the Revenue Act of 1978. Only the person who hires the workers may file. If the IRS mails a notice by certified or registered mail, you must file your request before the 91st day after the notice was mailed. If you change how you treat those workers as employees while the case is open, the court will ignore that change when it makes its decision. If the amount of employment taxes in dispute is $50,000 or less for each calendar quarter involved, you can ask the Tax Court to use the simpler small-case rules, but the court must agree before the hearing. Small-case decisions cannot be appealed to another court and do not count as precedent except for the same taxpayer and issues. Normal Tax Court timing, appeal, and procedure rules apply as if the IRS had issued a deficiency notice. The rule about recovering certain legal costs under section 7430 also applies. "Employment tax" means any tax under subtitle C.

Full Legal Text

Title 26, §7436

Internal Revenue Code — Source: USLM XML via OLRC

(a)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—
(1)one or more individuals performing services for such person are employees of such person for purposes of subtitle C, or
(2)such person is not entitled to the treatment under subsection (a) of section 530 of the Revenue Act of 1978 with respect to such an individual,
(b)(1)A pleading may be filed under this section only by the person for whom the services are performed.
(2)If the Secretary sends by certified or registered mail notice to the petitioner of a determination by the Secretary described in subsection (a), no proceeding may be initiated under this section with respect to such determination unless the pleading is filed before the 91st day after the date of such mailing.
(3)If, during the pendency of any proceeding brought under this section, the petitioner changes his treatment for employment tax purposes of any individual whose employment status as an employee is involved in such proceeding (or of any individual holding a substantially similar position) to treatment as an employee, such change shall not be taken into account in the Tax Court’s determination under this section.
(c)(1)At the option of the petitioner, concurred in by the Tax Court or a division thereof before the hearing of the case, proceedings under this section may (notwithstanding the provisions of section 7453) be conducted subject to the rules of evidence, practice, and procedure applicable under section 7463 if the amount of employment taxes placed in dispute is $50,000 or less for each calendar quarter involved.
(2)A decision entered in any proceeding conducted under this subsection shall not be reviewed in any other court and shall not be treated as a precedent for any other case not involving the same petitioner and the same determinations.
(3)Rules similar to the rules of the last sentence of subsection (a), and subsections (c), (d), and (e), of section 7463 shall apply to proceedings conducted under this subsection.
(d)(1)The principles of subsections (a), (b), (c), (d), and (f) of section 6213, section 6214(a), section 6215, section 6503(a), section 6512, and section 7481 shall apply to proceedings brought under this section in the same manner as if the Secretary’s determination described in subsection (a) were a notice of deficiency.
(2)section 7430 shall apply to proceedings brought under this section.
(e)The term “employment tax” means any tax imposed by subtitle C.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 530 of the Revenue Act of 1978, referred to in subsec. (a)(2), is section 530 of Pub. L. 95–600, which is set out as a note under section 3401 of this title.

Prior Provisions

A prior section 7436 was renumbered section 7437 of this title.

Amendments

2000—Subsec. (a). Pub. L. 106–554 inserted “and the proper amount of employment tax under such determination” before period at end of first sentence. 1998—Subsec. (c)(1). Pub. L. 105–206 substituted “$50,000” for “$10,000”.

Statutory Notes and Related Subsidiaries

Effective Date

of 2000 AmendmentAmendment by Pub. L. 106–554 effective as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 1(a)(7) [title III, § 314(g)] of Pub. L. 106–554, set out as a note under section 56 of this title.

Effective Date

of 1998 Amendment Pub. L. 105–206, title III, § 3103(c), July 22, 1998, 112 Stat. 731, provided that: “The

Amendments

made by this section [amending this section and section 7443A and 7463 of this title] shall apply to proceedings commenced after the date of the enactment of this Act [July 22, 1998].”

Reference

Citations & Metadata

Citation

26 U.S.C. § 7436

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73