by Jim Magary | Mar 31, 2016 | Tax Help
As a former IRS agent and teaching instructor I have conducted hundreds upon hundreds of 4180 Trust fund penalty interviews during my days as a former IRS revenue officer.
We Know the Best Penalty Trust Fund Defenses.
Your best source of tax defenses can be provided by former IRS agents and managers who know all the systems, methodologies, and that’s possible tax defenses. we have worked hundreds upon hundreds of cases. Were true experts and specialists in trust fund penalty defenses.
We have over 65 years of direct IRS work experience in the local, district, and regional tax offices of the Internal Revenue Service.
Some on are our staff were former IRS revenue officers, supervisors and teaching instructors who worked the trust fund recovery programs at the Internal Revenue Service.
You will have the aid of our expertise in the matters in knowing the inside secrets of the trust fund penalty investigation and the interview itself.
What is the The Trust Fund Tax Liability
A trust fund tax is money withheld from an employee’s wages (income tax, social security, and Medicare taxes) by an employer and held in trust until paid to the Treasury.
When you pay your employees, you do not pay them all the money they earned. As their employer, you have the added responsibility of withholding taxes from their paychecks. The income tax and employees’ share of FICA (social security and Medicare) that you withhold from your employees’ paychecks are part of their wages you pay to the Treasury instead of to your employees.
Your employees trust that you pay the withholding to the Treasury by making Federal Tax Deposits (PDF). That is why they are called trust fund taxes.
Through this withholding, your employees pay their contributions toward retirement benefits (social security and Medicare) and the income taxes reported on their tax returns. Your employees’ trust fund taxes, along with your matching share of FICA, are paid to the Treasury through the Federal Tax Deposit System.
The withheld part of these taxes is your employees’ money, and the matching portion is their retirement benefit. For additional information, refer to Employment Taxes and the Trust Fund Recovery Penalty (TFRP).
Employment tax deposits are a current expense.
Congress has established large penalties for delays in turning over your employment taxes to the Treasury. The longer it takes to pay that money, the more it will cost you.
The trust fund tax liability in fact is not a tax but it is a pass-through liability because employers did not pay the required withholding and Social Security to the Internal Revenue Service.
Under 6672 of the Internal Revenue Code the IRS has the right to pass through a taxable withholding and one half of the social security amount to the individual or persons that should have been held responsible for this penalty.
The goal of the Internal Revenue Service is to have as many persons responsible for this penalty because that will provide the best chance to collect the money. The IRS philosophy is, the more the merrier.
A seasoned IRS revenue officer will conduct the investigation and many times want a face-to-face meeting with the person or persons they believe are responsible for the tax.
In days past you used to be able to send the 4180 form out but now is an IRS requirement that they fill out the form themselves.
it does not take long for revenue officer to make a determination as to who is responsible. after spending a couple of hours on the case when the dust settles determinations are easy to make.
It’s all about control, who had the power and who control the money and who made decisions.
No matter what your duties were within a company or corporation there are always defenses.
As a general rule, the Internal Revenue Service will have certain documents available before the 4180 interview is held.
They will usually have bank signature cards, copies of checks and the corporate resolutions and many times will have the 4180 trust fund interviews of other persons that they think may be responsible. You want to make sure you are very truthful because IRS has done some due diligence before they call you when to the interview.
Bank signature cards and canceled checks are a great way that IRS has to determine who they think is responsible.
As a general rule, whoever has the power over the money has the right to make decisions. Many times are to direct decision-makers that are set up for the trust fund penalty.
There are many cases were secretaries and employees have been trusted by management to make these decisions and often time these are great tax defenses. Do not be bullied by the Internal Revenue Service by making them think you are responsible for trust fund liabilities.
The revenue officer interview of the 4180.
As a former IRS agent and teaching instructor I would train new IRS employees on how to conduct the 4180 interview. One of the major teaching points was to secure documents ahead of time so you had some knowledge of the company, corporation and its persons. It was one of the fastest and quickest ways to know if an employee was lying.
Many times when we interviewed employees they said they knew nothing about the company yet answered all the questions. I would urge those taking the interview to answer unknown or I don’t know and not to guess. Sometimes guessing shows that you may have had actual knowledge of what was going on.
Each case is different and every facts are different and are uniquely shaped by the events.
It is best to have a seasoned and trained representative who knows the system go through the 4180 interview go over the questions and make sure your answers are both truthful and honest and provide your best defense.
Here are the questions the IRS revenue officer may focus on:
Did you determine the financial policy for the business?
Did you direct or authorize payment of bills?
Did you open or close bank accounts for the business?
Did you guarantee or co-sign loans?
Did you sign or countersign checks?
Did you authorize or sign payroll checks?
Did you authorize or make federal tax deposits?
Did you prepare, review, sign, or transmit payroll tax returns?
Who would you hold as being directly responsible for these taxes?
Did you have ownership of this business?
The Statute of Limitations on Trust Fund Assessment
Pursuant to IRC 6501(b)(2), employment tax returns filed for any period ending within a calendar year are considered filed on April 15 of the succeeding year.
Employment tax returns for all four quarters of 2007 are considered filed on April 15, 2008.
The IRS has three years (beginning April 15, 2008 and ending on April 15, 2011) to complete its trust fund investigation for the 2007 returns.
WATCH OUT Single Member L L C’s
The owner of a single member limited liability company who is taxed as a disregarded entity and files a Schedule C (Profit or Loss from Business) will be held responsible for both trust and non-trust fund payroll taxes.
For any payroll tax liability resulting from wages paid before January 1, 2009, the owner of the LLC (rather than the LLC itself) is considered the taxpayer for payroll tax purposes.
The IRS collection of all unpaid employment taxes from the owner of a single member LLC was recently litigated and upheld by the U.S. Tax Court in Medical Practice Solutions, LLC v. Commissioner, 132 T.C. 7 (2009).
There is no trust fund recovery penalty process for a single-member LLC.
If you have any questions regarding the trust fund penalty call seasoned and experienced IRS revenue officer’s who can help provide your best trust fund tax defense.
IRS Trust Fund Taxes + Best Trust Fund Penalty Tax Defenses
by Jim Magary | Mar 31, 2016 | Tax Help
As a former IRS agent and teaching instructor I have conducted hundreds upon hundreds of 4180 Trust fund penalty interviews during my days as a former IRS revenue officer.
I will tell you as a taxpayer do not do this by yourself, you can be best prepared for this interview by using former IRS agents and managers who know the system.
We have over 65 years of direct IRS work experience in the local, district, and regional tax offices of the Internal Revenue Service.
Some on are our staff were former IRS revenue officers, supervisors and teaching instructors who worked the trust fund recovery programs at the Internal Revenue Service. you will have the aid of our expertise in the matters in knowing the inside secrets of the trust fund penalty investigation and the interview itself.
The Trust Fund Tax liability
A trust fund tax is money withheld from an employee’s wages (income tax, social security, and Medicare taxes) by an employer and held in trust until paid to the Treasury.
When you pay your employees, you do not pay them all the money they earned. As their employer, you have the added responsibility of withholding taxes from their paychecks. The income tax and employees’ share of FICA (social security and Medicare) that you withhold from your employees’ paychecks are part of their wages you pay to the Treasury instead of to your employees.
Your employees trust that you pay the withholding to the Treasury by making Federal Tax Deposits (PDF). That is why they are called trust fund taxes.
Through this withholding, your employees pay their contributions toward retirement benefits (social security and Medicare) and the income taxes reported on their tax returns. Your employees’ trust fund taxes, along with your matching share of FICA, are paid to the Treasury through the Federal Tax Deposit System.
The withheld part of these taxes is your employees’ money, and the matching portion is their retirement benefit. For additional information, refer to Employment Taxes and the Trust Fund Recovery Penalty (TFRP).
Employment tax deposits are a current expense. Postponing paying them is not the same as making a late payment on your phone bill or to a supplier.
Congress has established large penalties for delays in turning over your employment taxes to the Treasury. The longer it takes to pay that money, the more it will cost you.
The trust fund tax liability in fact is not a tax but it is a pass-through liability because employers did not pay the required withholding and Social Security to the Internal Revenue Service.
Under 6672 of the Internal Revenue Code the IRS has the right to pass through a taxable withholding and one half of the social security amount to the individual or persons that should have been held responsible for this penalty.
The goal of the Internal Revenue Service is to have as many persons responsible for this penalty because that will provide the best chance to collect the money.
A seasoned IRS revenue officer will conduct the investigation and many times want a face-to-face meeting with the person or persons they believe are responsible for the tax.
In days past you used to be able to send the 4180 form out but now is an IRS requirement that they fill out the form themselves.
it does not take long for revenue officer to make a determination as to who is responsible. after spending a couple of hours on the case when the dust settles determinations are easy to make.
It’s all about control, who had the power and who control the money and who made decisions.
No matter what your duties were within a company or corporation there are always defenses.
As a general rule, the Internal Revenue Service will have certain documents available before the 4180 interview is held.
They will usually have bank signature cards, copies of checks and the corporate resolutions and many times will have the 4180 trust fund interviews of other persons that they think may be responsible. You want to make sure you are very truthful because IRS has done some due diligence before they call you when to the interview.
Bank signature cards and canceled checks are a great way that IRS has to determine who they think is responsible.
As a general rule, whoever has the power over the money has the right to make decisions. Many times are to direct decision-makers that are set up for the trust fund penalty.
There are many cases were secretaries and employees have been trusted by management to make these decisions and often time these are great tax defenses. Do not be bullied by the Internal Revenue Service by making them think you are responsible for trust fund liabilities.
The revenue officer revenue of the 4180.
As a former IRS agent and teaching instructor I would train new IRS employees on how to conduct the 4180 interview. One of the major teaching points was to secure documents ahead of time so you had some knowledge of the company, corporation and its persons. It was one of the fastest and quickest ways to know if an employee was lying.
Many times when we interviewed employees they said they knew nothing about the company yet answered all the questions. I would urge those taking the interview to answer unknown or I don’t know and not to guess. Sometimes guessing shows that you may have had actual knowledge of what was going on.
Each case is different and every facts are different and are uniquely shaped by the events.
It is best to have a seasoned and trained representative who knows the system go through the 4180 interview go over the questions and make sure your answers are both truthful and honest and provide your best defense.
Here are the questions the IRS revenue officer may focus on:
Did you determine the financial policy for the business?
Did you direct or authorize payment of bills?
Did you open or close bank accounts for the business?
Did you guarantee or co-sign loans?
Did you sign or countersign checks?
Did you authorize or sign payroll checks?
Did you authorize or make federal tax deposits?
Did you prepare, review, sign, or transmit payroll tax returns?
Who would you hold as being directly responsible for these taxes?
Did you have ownership of this business?
The Statute of Limitations on Trust Fund Assessment
Pursuant to IRC 6501(b)(2), employment tax returns filed for any period ending within a calendar year are considered filed on April 15 of the succeeding year.
Employment tax returns for all four quarters of 2007 are considered filed on April 15, 2008.
The IRS has three years (beginning April 15, 2008 and ending on April 15, 2011) to complete its trust fund investigation for the 2007 returns.
WATCH OUT Single Member L L C’s
The owner of a single member limited liability company who is taxed as a disregarded entity and files a Schedule C (Profit or Loss from Business) will be held responsible for both trust and non-trust fund payroll taxes.
For any payroll tax liability resulting from wages paid before January 1, 2009, the owner of the LLC (rather than the LLC itself) is considered the taxpayer for payroll tax purposes.
The IRS collection of all unpaid employment taxes from the owner of a single member LLC was recently litigated and upheld by the U.S. Tax Court in Medical Practice Solutions, LLC v. Commissioner, 132 T.C. 7 (2009).
There is no trust fund recovery penalty process for a single-member LLC.
If you have any questions regarding the trust fund penalty call seasoned and experienced IRS revenue officer’s who can help provide your best trust fund tax defense.
Help w/ Trust Fund Penalty Interview + Do Not Do This By Yourself
by Jim Magary | Mar 31, 2016 | Tax Help
As a former IRS agent and teaching instructor I have conducted hundreds upon hundreds of trust fund penalty interviews during my days as a former IRS revenue officer.
I will tell you as a taxpayer do not do this by yourself, you need to have formidable tax representation.
We have over 65 years of direct IRS work experience in the local, district, and regional tax offices of the Internal Revenue Service.
Some on are our staff were former IRS revenue officers, supervisors and teaching instructors who worked the trust fund recovery programs at the Internal Revenue Service. you will have the aid of our expertise in the matters in knowing the inside secrets of the trust fund penalty investigation and the interview itself.
The Trust Fund Tax liability
A trust fund tax is money withheld from an employee’s wages (income tax, social security, and Medicare taxes) by an employer and held in trust until paid to the Treasury.
When you pay your employees, you do not pay them all the money they earned. As their employer, you have the added responsibility of withholding taxes from their paychecks. The income tax and employees’ share of FICA (social security and Medicare) that you withhold from your employees’ paychecks are part of their wages you pay to the Treasury instead of to your employees.
Your employees trust that you pay the withholding to the Treasury by making Federal Tax Deposits (PDF). That is why they are called trust fund taxes.
Through this withholding, your employees pay their contributions toward retirement benefits (social security and Medicare) and the income taxes reported on their tax returns. Your employees’ trust fund taxes, along with your matching share of FICA, are paid to the Treasury through the Federal Tax Deposit System.
The withheld part of these taxes is your employees’ money, and the matching portion is their retirement benefit. For additional information, refer to Employment Taxes and the Trust Fund Recovery Penalty (TFRP).
Employment tax deposits are a current expense. Postponing paying them is not the same as making a late payment on your phone bill or to a supplier.
Congress has established large penalties for delays in turning over your employment taxes to the Treasury. The longer it takes to pay that money, the more it will cost you.
The trust fund tax liability in fact is not a tax but it is a pass-through liability because employers did not pay the required withholding and Social Security to the Internal Revenue Service.
Under 6672 of the Internal Revenue Code the IRS has the right to pass through a taxable withholding and one half of the social security amount to the individual or persons that should have been held responsible for this penalty.
The goal of the Internal Revenue Service is to have as many persons responsible for this penalty because that will provide the best chance to collect the money.
A seasoned IRS revenue officer will conduct the investigation and many times want a face-to-face meeting with the person or persons they believe are responsible for the tax.
In days past you used to be able to send the 4180 form out but now is an IRS requirement that they fill out the form themselves.
it does not take long for revenue officer to make a determination as to who is responsible. after spending a couple of hours on the case when the dust settles determinations are easy to make.
It’s all about control, who had the power and who control the money and who made decisions.
No matter what your duties were within a company or corporation there are always defenses.
As a general rule, the Internal Revenue Service will have certain documents available before the 4180 interview is held.
They will usually have bank signature cards, copies of checks and the corporate resolutions and many times will have the 4180 trust fund interviews of other persons that they think may be responsible. You want to make sure you are very truthful because IRS has done some due diligence before they call you when to the interview.
Bank signature cards and canceled checks are a great way that IRS has to determine who they think is responsible.
As a general rule, whoever has the power over the money has the right to make decisions. Many times are to direct decision-makers that are set up for the trust fund penalty.
There are many cases were secretaries and employees have been trusted by management to make these decisions and often time these are great tax defenses. Do not be bullied by the Internal Revenue Service by making them think you are responsible for trust fund liabilities.
Here are the questions the IRS revenue officer may focus on:
- Did you determine the financial policy for the business?
- Did you direct or authorize payment of bills?
- Did you open or close bank accounts for the business?
- Did you guarantee or co-sign loans?
- Did you sign or countersign checks?
- Did you authorize or sign payroll checks?
- Did you authorize or make federal tax deposits?
- Did you prepare, review, sign, or transmit payroll tax returns?
- Who would you hold as being directly responsible for these taxes?
- Did you have ownership of this business?
The Statute of Limitations on Trust Fund Assessment
Pursuant to IRC 6501(b)(2), employment tax returns filed for any period ending within a calendar year are considered filed on April 15 of the succeeding year.
Employment tax returns for all four quarters of 2007 are considered filed on April 15, 2008.
The IRS has three years (beginning April 15, 2008 and ending on April 15, 2011) to complete its trust fund investigation for the 2007 returns.
WATCH OUT Single Member L L C’s
The owner of a single member limited liability company who is taxed as a disregarded entity and files a Schedule C (Profit or Loss from Business) will be held responsible for both trust and non-trust fund payroll taxes.
For any payroll tax liability resulting from wages paid before January 1, 2009, the owner of the LLC (rather than the LLC itself) is considered the taxpayer for payroll tax purposes.
The IRS collection of all unpaid employment taxes from the owner of a single member LLC was recently litigated and upheld by the U.S. Tax Court in Medical Practice Solutions, LLC v. Commissioner, 132 T.C. 7 (2009).
There is no trust fund recovery penalty process for a single-member LLC.
If you have any questions regarding the trust fund penalty call seasoned and experienced IRS revenue officer’s who can help provide your best trust fund tax defense.
Help w/ Trust Fund Penalty Interview + Do Not Do This By Yourself
by Jim Magary | Mar 31, 2016 | Tax Help
You may choose any recordkeeping system suited to your business that clearly shows your income and expenses.
The business you are in affects the type of records you need to keep for federal tax purposes.
Your recordkeeping system should include a summary of your business transactions. This summary is ordinarily made in your business books (for example, accounting journals and ledgers).
Your books must show your gross income, as well as your deductions and credits. For most small businesses, the business checking account is the main source for entries in the business books.
Some businesses choose to use electronic accounting software programs or some other type of electronic system to capture and organize their records. The electronic accounting software program or electronic system you choose should meet the same basic recordkeeping principles mentioned above.
All requirements that apply to hard copy books and records also apply to electronic records. For more detailed information refer to Publication 583, Starting a Business and
Keeping Records.
Supporting Business Documents
Purchases, sales, payroll, and other transactions you have in your business will generate supporting documents. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks.
These documents contain the information you need to record in your books. It is important to keep these documents because they support the entries in your books and on your tax return.
You should keep them in an orderly fashion and in a safe place. For instance, organize them by year and type of income or expense.
The following are some of the types of records you should keep:
• Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts. Documents for gross receipts include the following:
◦ Cash register tapes
◦ Deposit information (cash and credit sales)
◦ Receipt books
◦ Invoices
◦ Forms 1099-MISC
• Purchases are the items you buy and resell to customers.
If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products.
Your supporting documents should show the amount paid and that the amount was for purchases.
Documents for purchases include the following:
◦ Canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transferred
◦ Cash register tape receipts
◦ Credit card receipts and statements
◦ Invoices
• Expenses are the costs you incur (other than purchases) to carry on your business.
Your supporting documents should show the amount paid and a description that shows the amount was for a business expense.
Documents for expenses include the following:
◦ Canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transferred
◦ Cash register tapes
◦ Account statements
◦ Credit card receipts and statements
◦ Invoices
◦ Petty cash slips for small cash payments
• Travel, Transportation, Entertainment, and Gift Expenses
If you deduct travel, entertainment, gift or transportation expenses, you must be able to prove (substantiate) certain elements of expenses.
For additional information, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.
• Assets are the property, such as machinery and furniture, that you own and use in your business. You must keep records to verify certain information about your business assets.
You need records to compute the annual depreciation and the gain or loss when you sell the assets.
Documents for assets should show the following information:
◦ When and how you acquired the assets
◦ Purchase price
◦ Cost of any improvements
◦ Section 179 deduction taken
◦ Deductions taken for depreciation
◦ Deductions taken for casualty losses, such as losses resulting from fires or storms
◦ How you used the asset
◦ When and how you disposed of the asset
◦ Selling price
◦ Expenses of sale
• The following documents may show this information.
◦ Purchase and sales invoices
◦ Real estate closing statements
◦ Canceled checks or other documents that identify payee, amount, and proof of payment/electronic funds transferred
• Employment taxes
.
There are specific employment tax records you must keep. Keep all records of employment for at least four years.
For additional information, refer to Recordkeeping for Employers and Publication 15, Circular E Employers Tax Guide.
by Jim Magary | Mar 31, 2016 | Tax Help
Employment Tax Recordkeeping
You should Keep all records of employment taxes for at least four years after filing the 4th quarter for the year.
These should be available for IRS review. Records should include:
• Your employer identification number.
• Amounts and dates of all wage, annuity, and pension payments.
• Amounts of tips reported.
• The fair market value of in-kind wages paid.
• Names, addresses, social security numbers, and occupations of employees and recipients.
• Any employee copies of Form W-2 that were returned to you as undeliverable.
• Dates of employment.
• Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them.
• Copies of employees’ and recipients’ income tax withholding allowance certificates (Forms W-4, W-4P, W-4S, and W-4V).
• Dates and amounts of tax deposits you made.
• Copies of returns filed.
• Records of allocated tips.
• Records of fringe benefits provided, including substantiation.
