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January 08, 2008
IRS Says FedEx Could Owe $319M for Misclassifying Drivers

FedEx Corp. has disclosed that the Internal Revenue Service has tentatively concluded that the company misclassified FedEx Ground delivery drivers as independent contractors in 2002 and that the company could owe $319 million in taxes and penalties.

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The company disclosed the tentative assessment in a filing with the Securities and Exchange Commission.

The company continues to argue that the drivers are independent contractors. The company says it is preparing to meet with the IRS audit team to review their tentative assessment and to provide an initial response.

"We believe that we have strong defenses to the IRSs tentative assessment and will vigorously defend our position, as we continue to believe that FedEx Grounds owner-operators are independent contractors and that no loss is probable," the company said in a statement.

The IRS has indicated that it anticipates assessing tax and penalties of $319 million plus interest for 2002. The IRS is also looking at similar issues for calendar years 2004 through 2006.

The Massachusetts attorney general recently fined FedEx Ground Package System $190,000, alleging that the company intentionally misclassified 13 drivers as independent contractors rather than as employees.

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