1. Internal Revenue Service TE/GE Federal, State, and Local Governments

2. MISSION Providing government entities top quality service by helping them understand and comply with their tax responsibilities and applying the law with integrity and fairness to all.

3. Federal, State, and Local Governments What do we do? What do we do? Provide customized products and services to Federal agencies, quasi-governmental entities, state agencies and local governments, including U.S. Territories (American Samoa, Guam, Puerto Rico, and the U.S. Virgin Islands.) Provide customized products and services to Federal agencies, quasi-governmental entities, state agencies and local governments, including U.S. Territories (American Samoa, Guam, Puerto Rico, and the U.S. Virgin Islands.)

4. 2008 Strategic Initiatives 2008 Strategic Initiatives Federal Agency Examinations Federal Agency Examinations Perform 20-25 each year Perform 20-25 each year Large Case Examinations Large Case Examinations Annual payroll > $40Million Annual payroll > $40Million Perform 30-40 each year Perform 30-40 each year National Research Project National Research Project

5. Special Projects Community Colleges Community Colleges Plan to complete examinations of 88 community colleges Plan to complete examinations of 88 community colleges Housing Authorities Housing Authorities Plan to complete examinations of 94 housing authorities Plan to complete examinations of 94 housing authorities Section 403(b) Examinations Section 403(b) Examinations Plan to complete examination of 8 school districts Plan to complete examination of 8 school districts

6. Customer Education and Outreach FY2007 FY 2008 (Actual) (Plan) Events 136 142 Customers Reached 14,476 14,200* * YTD = Approximately 5,500 as of 3/31/08

7. Compliance Checks Special Projects Special Projects Firefighter Project Firefighter Project 192 cases projected 192 cases projected Follow-Up Study Follow-Up Study 125 cases – randomly selected 125 cases – randomly selected

8. Compliance Activities FSLG FY 2007FY 2008 (Actual) (Plan) (Actual) (Plan) Examinations Closed 17251730 Compliance Checks 845833 Examination Timelines 298298 Exam Change RateCurrently 91% Comp Check Change RateCurrently 89.6%

9. Customer Assistance Voluntary Closing Agreements Voluntary Closing Agreements FY 2006 - 20 FY 2007 - 22 FY 2008 - 17 Total 59

10. Major Issues Work Re-class- no 218 agreement present Work Re-class- no 218 agreement present FICA Coverage- 218 agreements FICA Coverage- 218 agreements Taxable Fringe Benefits- accountable plans Taxable Fringe Benefits- accountable plans Settlement/ Relocation Pay Settlement/ Relocation Pay Back-up Withholding for lack of EIN Back-up Withholding for lack of EIN Failure to File and/or Failure to Provide Information Returns Failure to File and/or Failure to Provide Information Returns Payment Reclassification-1099 for substantially the same work as W-2 wage earner Payment Reclassification-1099 for substantially the same work as W-2 wage earner Section 530 Determinations Section 530 Determinations

11. External Partners (Examples) Social Security Administration Social Security Administration NASACT NASACT NCSSSA NCSSSA ACT ACT Three members for FSLG Annual Projects