IRS Drops Last FedEx Audit

FedEx says it expects no more audits from the Internal Revenue Service now that the agency for the second time dropped a look at potential penalties in the company’s classification of parcel division drivers as independent contractors.

The IRS, which last month told FedEx it will not impose penalties under an audit for 2002, this week said it also rejected assessments for the years 2004 through 2006.

FedEx said in a securities filing that the IRS still could look at 2007 and 2008, but no audit for those years is underway and so this week’s decision clears an important hurdle for the company in its ongoing battle over the classification of drivers.

“We are gratified 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,” the company said in a statement.

It’s a major victory for FedEx because the classification of the drivers as independent contractors is a central pillar of the business model at its ground delivery operation, which competes directly with UPS and its unionized parcel delivery work force.

“FedEx Ground’s independent contractor model has been tremendously successful for our customers, the hard-working independent contractors and FedEx Ground for more than 20 years,” the company said. “It is clear that the IRS decision today further validates this business model and we look forward to continue growing the model for many decades to come.”