8-KOther Events

FEDEX CORP 8-K Report, Corporate Update (Nov 10, 2009)

Filed November 10, 2009For Securities:FDX

Summary

FedEx Corporation (FDX) announced a significant positive development regarding a federal employment tax audit for its subsidiary, FedEx Ground Package System, Inc. The Internal Revenue Service (IRS) Audit Team has confirmed that no federal employment tax assessment will be made for independent contractors for calendar years 2002 and 2004 through 2006. This ruling resolves a potentially material financial risk that had been under scrutiny.

Key Highlights

  • 1IRS confirms no federal employment tax assessment for FedEx Ground independent contractors for 2002 and 2004-2006.
  • 2This ruling removes a significant potential financial liability for the company.
  • 3The audit covered the classification of independent contractors, a common area of scrutiny for large employers.
  • 4FedEx expects a similar favorable outcome for the 2007 and 2008 audit years.
  • 5This news is a positive de-risking event for FedEx investors, removing uncertainty from the balance sheet.
  • 6The filing is an 8-K report, indicating material information being disclosed.

Frequently Asked Questions

The Internal Revenue Service was auditing the classification of independent contractors at FedEx Ground Package System, Inc. to determine if federal employment taxes should have been assessed on payments made to them.

The IRS has confirmed no assessment of federal employment taxes will be made for the audited periods (2002 and 2004-2006). This eliminates a potential financial liability for FedEx, which could have been substantial had the IRS ruled otherwise.

FedEx believes the Audit Team should reach the same favorable conclusion for the calendar years 2007 and 2008, as similar issues are under audit for these years. While not yet confirmed, the company is optimistic about a similar resolution.

This announcement is crucial for investors as it resolves a significant potential financial risk related to employment taxes. By confirming no assessment, it provides greater certainty regarding FedEx's future financial performance and reduces the possibility of unexpected financial burdens.