On October 30, 2009, the Internal Revenue Service’s audit team (“Audit Team”) provided us with a revised notice of proposed adjustment with respect to their employment tax audit for the 2002 calendar year regarding the classification of independent contractors at FedEx Ground Package System, Inc. (“FedEx Ground”), a wholly owned subsidiary of FedEx Corporation. The Audit Team has now proposed that no assessment of federal employment tax be made with respect to any of FedEx Ground’s independent contractors, including those providing the FedEx Home Delivery service.
We are pleased with the IRS audit team’s decision not to assess any tax or penalty with respect to any of FedEx Ground’s independent contractors, including our FedEx Home Delivery independent contractors.
FedEx Ground’s independent contractor model has been tremendously successful for customers, contractors and the company for more than 20 years, and we believe the IRS decision provides further vindication of the model.
While similar issues are still under audit for calendar years 2004 through 2008, we believe the Audit Team should reach the same conclusion on these issues for each of those years, as well.