Summary
FedEx Corporation (FDX) filed an 8-K on October 22, 2008, reporting a significant development regarding a tax assessment from the Internal Revenue Service (IRS). The IRS has withdrawn its tentative assessment of $319 million in taxes and penalties, plus interest, against its subsidiary FedEx Ground Package System, Inc. This assessment was related to the classification of FedEx Ground's owner-operators as employees for federal employment tax purposes for the 2002 calendar year. While this withdrawal is positive news, investors should note that the IRS audit for the 2002 calendar year is still ongoing, and FedEx remains in discussions with the IRS audit team.
Key Highlights
- 1IRS withdraws tentative tax assessment of $319 million (plus interest) against FedEx Ground for 2002.
- 2The assessment related to the classification of owner-operators for federal employment tax purposes.
- 3FedEx Ground continues to assert that its owner-operators are independent contractors.
- 4The IRS audit for FedEx Ground's 2002 tax year remains active.
- 5FedEx is actively engaged in discussions with the IRS audit team.
- 6The company maintains its belief that no loss is probable from this matter.
Frequently Asked Questions
The withdrawn tentative assessment was for $319 million in taxes and penalties, plus interest, for the 2002 calendar year.
The assessment was related to the IRS's preliminary view on the classification of FedEx Ground's owner-operators for federal employment tax purposes, suggesting they should be treated as employees rather than independent contractors.
No, the IRS has withdrawn its *tentative* assessment. The IRS audit for FedEx Ground's 2002 tax year is still ongoing, and FedEx is in discussions with the IRS.
FedEx maintains its strong belief that its owner-operators are independent contractors and that no loss is probable from this matter.