§7436 Proceedings for Determination of Employment Status

Summary

If an IRS audit raises a real dispute about whether workers are employees or whether you can get the special section 530 treatment, the person for whom the services are performed may file a case in Tax Court to challenge that audit finding. If the IRS mailed the determination by certified or registered mail, you must file your pleading before the 91st day after the date of that mailing. If you change how you treat the worker during the court case and start treating them as an employee, the court will ignore that change when deciding the case. You may choose a simplified small-case procedure if the employment taxes in dispute are $50,000 or less for each calendar quarter involved and the Tax Court agrees before the hearing. A decision in that small case cannot be reviewed by other courts and cannot be used as a precedent for other taxpayers. Many of the same rules that apply to an IRS notice of deficiency also apply here, and “employment tax” means any tax under subtitle C.