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IRS Employment Tax Examination Response
An employment tax examination ends with a 30-day letter and a Revenue Agent's Report, most often proposing to reclassify your 1099 contractors as W-2 employees. The proposed numbers stack: employer FICA, income tax withholding, FUTA, and accuracy penalties on top. You have 30 days to agree, protest in writing, or request an Appeals conference. After that comes the statutory notice of deficiency.
Section 530 of the Revenue Act of 1978 fully protects an employer who treated workers as contractors consistently and had a reasonable basis for it: an industry norm, a past audit, a court ruling. IRS policy requires agents to consider it. In practice, the report you received does not mention it, and if you do not claim it in your response, nobody will claim it for you.
Worker reclassification findings routinely propose six figures in back FICA, withholding, and penalties. Section 530 relief, the strongest available defense, appears nowhere on the Revenue Agent's report. The burden of raising it is on you.
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This tool is software. It reads your answers, no one reviews them, and it generates and emails the document itself the moment payment completes.
Why the agency will not tell you what to do
The Revenue Agent who proposed the adjustments cannot advise you on contesting them. Your payroll software files Form 941; it has nothing for the examination that follows. Payroll tax defense attorneys charge $3,000 to $20,000, which prices out most owners facing assessments under $200,000. The two-prong Section 530 test itself is published in IRS Publication 1976.
What the free summary tells you
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Your deadline, computed
The exact date your response window closes, counted from the date on your notice, and what happens if it has already passed.
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Your options under the published rules
Which paths the regulations actually give you, and which one your answers point to.
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The numbers the agency will use
Computed from the same published standards the agency applies, so you walk in knowing what they know.
Related notices in the library
Sources
This tool provides general information based on published IRS rules, including Section 530 of the Revenue Act of 1978 and IRC 3509. Its citations and figures were checked against official sources using AI-assisted research, most recently on 2026-09-01; no licensed tax professional has reviewed this content. It is not legal or tax advice. Worker classification is fact-intensive; the eligibility signal here is a starting point for your response, not a determination. For complex facts, or amounts your business cannot absorb, consult a payroll tax attorney before the deadline.