What This Letter Means

Letter 950-C is the Employment Tax 30-Day Letter for section 7436 issues. It comes at the end of an employment tax audit where you did not agree with the result.

Section 7436 issues are worker classification issues. The IRS uses Letter 950-C when it proposes to reclassify at least one worker, usually from independent contractor to employee, or when it decides you are not entitled to section 530 relief. It also covers wage issues the IRS treats as section 7436 issues.

If your audit also has other employment tax issues, those come in a separate letter, Letter 950-D. You may get both.

What Comes With It

The letter includes the examination report and an agreement form. For these cases the agreement form is Form 2504-T. You also get Publication 5, which explains your appeal rights. If the amount for every tax period is $25,000 or less, the IRS encloses Form 13683, Statement of Disputed Issues, for a small case request.

What to Do

  • Review the report. Check which workers were reclassified, the periods, and how the tax and penalties were figured.
  • If you agree, sign and return the agreement form.
  • If you disagree, request Appeals within 30 days. If any period exceeds $25,000, you need a formal written protest. If you also got Letter 950-D, the amounts on both reports are added together for that test.
  • Keep copies and use certified mail.

If You Don't Respond

The IRS cannot simply assess tax on the classification issues. After the 30 days run, it issues Letter 3523, the Notice of Determination of Worker Classification. That notice gives you 90 days to petition the Tax Court. Missing the 30-day window means no Appeals conference before Letter 3523 issues. Missing the 90-day window costs you Tax Court.

Worker classification cases turn on facts and on whether you qualify for section 530 relief. Get help before the 30 days are up.

If you received Letter 950-C and want to challenge a worker classification decision, call us at (813) 229-7100.