The 4180 is a form used by the IRS to determine who is responsible for unpaid trust fund taxes belonging to a corporate entity. A Revenue Officer out of the local IRS office is usually in charge of this process. The 4180 is one of the determining factors along with bank records to determine who is responsible.

The assessment of this tax will have damaging effects on those set up with this penalty.

If the IRS is asking you to fill out a 4180 form to determine whether you are a responsible person for the trust fund taxes, do not do it. 90% of all individuals who fill out this form are held responsible for the trust fund tax.

I know this because I was a former IRS Agent and Instructor with the IRS.

There are many tricks that taxpayers are unaware of on this form. Being able to just answer the questions makes the IRS wonder just how much you were involved with the Corporate entity. The Revenue Officers job is to set up as many individuals as possible so the tax can be collected.

Fresh Start Tax client education:

Most individuals are very surprised that the IRS has the right to collect the trust fund recovery penalty (TFRP) against individuals of corporations who failed to pay their payroll taxes. The penalties are set up to encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes or collected excise taxes. Congress passed a law that provides for the so called trust fund taxes. These taxes are called trust fund taxes because you actually hold the employee’s money in trust until you make a federal tax deposit in that amount. The (TFRP) may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business. The business does not have to have stopped operating in order for the TFRP to be assessed.

Who Can Be Responsible for the Trust Fund Taxes, code section 6672

The trust fund recovery penalty may be assessed against any person who:

·         Is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes; and

·         Willfully fails to collect or pay them.

A responsible person is a person or group of people who have the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be or had some of the following powers:

·         An officer or an employee of a corporation;

·         A member or employee of a partnership;

·         A corporate director or shareholder or member;

·         A member of a board of trustees of a nonprofit organization, or anyone deemed to be responsible;

·         Another person with authority and control over funds to direct their disbursement.

For willfulness to exist, the responsible person:

·         Must have been, or should have been, aware of the outstanding taxes; and

·         Either intentionally disregarded the law or was plainly indifferent to its requirements (no fraudulent intent or bad motive is required).

Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.

You may be asked to complete an interview in order to determine the full scope of your duties and responsibilities. Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business. An employee is not a responsible person if the employee’s function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid.

How does the IRS figure out what the penalty will be?

The amount of the penalty is equal to the unpaid balance of the trust fund tax. The penalty is computed based on:

·         The unpaid income taxes withheld; plus

·         The employee’s portion of the withheld FICA taxes;

·         Any timely payments will be subtracted from the amounts owed;

·         Any taxes designated to “trust fund only” will be subtracted from the total owed.

Fresh Start Tax is one of the premier tax resolutions firms in the country. We deal with all types of civil cases including individuals, businesses, corporate and defunct corporations. We have staff that specializes in every facet of the Internal Revenue Service. We know all the IRS strategies. Some of our many specialties include the following:

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