We are an affordable professional tax firm with an expertise in IRS tax problems including trust fund help and expert representation.
As a former IRS agent in teaching instructor, I have worked hundreds and hundreds of cases involving trust fund taxes both the assessments, the appeals and the collections.
The trust fund tax arises when corporations failed to pay back payroll taxes.
Under 6672 of the Internal Revenue Code, the Internal Revenue Service is authorized to set up the trust fund penalty against those who were responsible to pay the payroll tax debt. many times when the IRS contacts the corporate entity they are already out of business and there are no assets remaining.
If the company is still in business, the Internal Revenue Service will need to take the case off the collection computer and it does so by taking a business financial statement and making a determination on how to close the case.
Cases are usually closed by putting them in hardship, monthly payments or acceptance of an offer in compromise. IRS has the luxury of asserting the trust fund penalty against responsible persons and still collecting money from an operating Corporation.
If the corporation is defunct, the revenue officer will be on a hunt to set up the trust fund tax against those responsible.
IRS does not make rash decisions on who is responsible.
They put several man-hours of due diligence and to make sure they have the correct responsible persons.
As you read this blog you will learn more about the trust fund tax penalty.
The key to the trust fund tax penalty is the form 4180 which is one of IRS determining factors to find out who is responsible for the tax.
Each revenue officer is required to secure a 4180 from all those who may be responsible to pay the payroll taxes.
Get Representation
I cannot possibly tell you how many form 4180’s I have filled out.
There are many trick questions on form 4180. Any taxpayer going to this process should seek professional representation unless this is a very simple case and you can be rest assured IRS will not even think about holding you as a responsible person.
Call us today for a free initial tax consultation and I will walk you through the process of getting the best possible result giving the facts and circumstances of your case.
I would caution any taxpayer never give IRS a form 4180 unless they have had a true professional review the answers.
That form is one of the main forms that IRS uses to make a determination the trust fund recovery penalty.
You do not want to do this by yourself because of damaging result the trust fund penalty will have on your life.
This assessment will be individually made against you and IRS has the fertile arsenal to collect the taxes. If possible you want to file an appeal if you have a suitable case.
Filing an appeal will delay the assessment of this case and make sure more importantly that IRS finds responsibility against other parties and the cases all come out at the same time for collection. It also stops the interest from running on this tax debt until an assessment is actually made.
Some cases are very simple and taxpayers can represent themselves.
As a general rule you should know that the IRS wants to make everybody responsible that they can so they can fully collect the tax. IRS will do their best to force the issue on trust fund recovery penalties.
Their philosophy, set up everybody for this tax, the more responsible, the merrier.
Call us today and we will review your case and let you know exactly where you stand and let you know how to get the best possible results.
How IRS will Work the Case
1. Regardless of the amount of the trust fund, revenue officers will make a reasonable attempt to collect the entire liability in full. IRS will conduct a full asset search of the company including bank statements reviewing individual and personal and corporate income tax returns and do a full asset search.
2. Potential for additional liabilities from unfiled returns, IRS will conduct a full compliance check on both business and individuals.
3. IRS will conduct the Taxpayer’s history of non-compliance that extends beyond the open balance due accounts.
4. Responsible person’s history of employment tax non-compliance. IRS will want to know if you are repeat offender. Sometimes repeat offenders are refer to the criminal investigation unit for criminal enforcement.
Some of the determining factors used to find individuals liable for this penalty are as follows:
1. Which individuals determine financial policy?
2. Which individuals authorize payment of bills?
3. Which individuals opens or closes bank accounts?
4. Which individuals signs checks?
5. Which individuals authorizes payroll?
6. Which individuals makes tax deposits?
7. Which individuals sign tax returns?
8. Which individuals oversee the hiring & termination of employees?
9. Which individuals run business on a day-to-day basis?
The IRS will review these answers based on sufficient documentation.
Additional Actions IRS will Consider for the trust fund
The goal of IRS is to collect the money in full many times taxpayers trying to wiggle away at around this tax and start moving assets around. the IRS knows the tricks and secrets that are used by taxpayers and will do a full investigation to find out if this is the case.
1. Certain facts may surface indicating that transfers of corporate stock and/or capital assets have occurred. If this is the case, in addition to pursuing the TFRP, consider recovery of the unpaid corporate liability by recommending:
• Transferee assessment
• Suit to establish a transferee liability
• Suit to set aside a fraudulent transfer
• Examination referral
How the Trust Fund Recovery Interviews and Investigations take place.
1. During the initial contact with the taxpayer the revenue officer will attempt to conduct interviews with potentially responsible persons. The revenue officer will take the following actions during the interview:
A. IRS must Provide Publication 1, Your Rights as a Taxpayer, and document in the history the publication was delivered.
B. Explain the TFRP to the taxpayer.
C. IRS will present a copy of the TFRP calculation (Page 4 of Form 4183) Pre-Contact) to all potentially responsible persons and advise them the IRS can personally assess the TFRP against those it determines liable for the penalty for the unpaid trust fund amount and collect the liability from their personal income and assets.
D. Provide Notice 784, Could You Be Personally Liable for Certain Unpaid Federal Taxes?, to the person interviewed and provide sufficient copies of Notice 784 to allow distribution to all other persons associated with the business who, based on the interview and other preliminary investigation, may be liable.
E. Advise the person(s) being interviewed of the proper actions to take to avoid such liability.
F. Begin asking questions and securing core documentation items Evidence That May Support Recommendations) from the taxpayer in support of assertion of the penalty.
If the documents are not secured, establish deadlines for the information and documents.
G. Attempt to secure at least one Form 4180, Report of Interview with Individual Relative to Trust Fund Recovery Penalty or Personal Liability for Excise Taxes, from a potentially responsible person Evidence That May Support Recommendations). Note: Secure additional Forms 4180 from all potentially responsible persons to the extent possible.
What about the IRS Form 4180, IRS use:
Is the form to be used for conducting TFRP interviews.
It is intended to be used as a record of a personal interview with a potentially responsible person. During the initial contact, attempt to personally secure the form from potentially responsible persons.
2. The purpose of the personal interview and completion of Form 4180 is to secure direct, detailed information regarding the individual’s or other person’s involvement in the business in order to determine if he or she meets the criteria for responsibility.
3. IRS will not give or mail Form 4180 to the potentially responsible person(s) or representative for completion by that person or for review prior to the interview. The form must be completed in person or over the phone.
4. A summons may be necessary to require the potentially responsible person’s presence at the interview. IRS will deliver form 2039 in person to the taxpayer.
5. After the IRS revenue officer takes the 4180 interview and during the process they will be securing information from third parties, reviewing bank signature cards, review corporate resolutions, review financial statements and after speaking to a number of people they will make a determination as to those persons who are responsible.
As I said earlier in my blog , it is in your best interest to hire a true tax professional to walk you through this process.
If you think in any way shape or form you have questions as to your responsibility call us today for a free initial tax consultation and we will let you know if you should pursue the assessment or the appeal process.
How the Trust Fund Tax Works + Former IRS + Trust Fund Help
