UPDATE 1-FedEx says IRS drops Ground assessment for 2004-6

* Ground contractors cleared from tax audit 2004-2006

* Already cleared 2002 tax audit last month

* Stock up 0.1 percent

SEATTLE, Nov 10 (Reuters) - Package delivery company FedEx Corp (FDX.N) said on Tuesday in a regulatory filing that the U.S. Internal Revenue Service dropped a tax assessment tied to its FedEx Ground independent contractors for 2004 through 2006.

Late last month, FedEx said the IRS had already dropped the tax assessment against those contractors for 2002, and that it expected the same conclusion would be reached for the remainder of the years under audit.

While the latest announcement leaves the audit pending for calendar years 2007 and 2008, "the audit team should reach the same conclusion on these issues for each of those years as well," FedEx said in a U.S. Securities and Exchange Commission filing.

A year ago, FedEx said the IRS was continuing an employment tax audit of FedEx Ground for the 2002 calendar year, after the IRS withdrew a tentative assessment tied to the classification of independent contractors.

FedEx had said before that the IRS "tentatively concluded" that the 15,000 independent contractors FedEx Ground uses as drivers should be reclassified as employees.

The use of independent contractors at FedEx Ground lets it save money and helps it compete against United Parcel Service Inc (UPS.N), whose drivers are unionized and represented by the Teamsters.

But that cost-saving model has come under fire, including attempts by the Teamsters union to organize FedEx Ground workers. Opponents of the model allege that the level of control FedEx exercises over the contractors' work should qualify them as employees and entitle them to company benefits that they do not receive as independent contractors.

But FedEx has always denied such claims, saying that its contractors are independent entrepreneurs and not employees.

FedEx shares were up 0.3 percent at $81.48 on the New York Stock Exchange. (Reporting by Aarthi Sivaraman, editing by Gerald E. McCormick)