by Fresh Start Tax | Aug 3, 2020 | Tax Help
The IRS Trust Fund Penalty +How to WIN + Best Trust Fund Penalty Defense – Former IRS 1-866-700-1040
Winning the trust fund penalty cases is an art.
You must understand the protocol that IRS works under.
We are comprised of tax attorneys, CPAs, and former IRS agents, managers and tax instructors.
We have over 100 years of directly working for the Internal Revenue Service in the local, district, and regional tax offices of the Internal Revenue Service.
We have worked hundreds and hundreds of trust fund recovery penalties when working for the Internal Revenue Service.
Not only have we asserted the penalties as former IRS agents we also have on staff former appeals agents who completely understood the government’s position.
As a result of our years of experience we know the loopholes and certain defense arguments and strategies.
How to save yourself from the Trust Fund Recovery Penalty
The Trust Fund Recovery Penalty (TFRP) is a penalty provided by IRC 6672 against any person required to collect, account for, and pay over taxes held in trust who willfully fails any of these activities. The penalty is equal to the total amount of tax evaded, not collected or not accounted for and paid over to the Government.
The penalty is applicable for many types of taxes, but the most common application of the TFRP is for unpaid employer’s taxes on Form 941.
The TFRP is not dischargeable in bankruptcy.
The trust portion of the employment taxes (Form 941) consist of the amount of withholding for the Federal Income Tax and for Social Security. The only way to fully protect yourself from the application of the TFRP is to always pay these taxes to the Government, even if you don’t have the funds for any other expenditure. Don’t forget, the amounts withheld are not yours, you are holding those funds in trust for the Government!
For the assertion of the Trust Fund Recovery Penalty (TFRP), the IRS must establish that a person is “responsible” and also “willfully” failed to collect or pay over the trust fund taxes to the government.
Potential “responsible” persons include:
1. Officer or employee of a corporation.
2. Partner or employee of a partnership.
3. Corporate director or shareholder.
4. Employee of a sole proprietorship.
5. Surety lender.
6. Other person or entity outside the delinquent business organization.
A “responsible” person has:
1. Duty to perform.
2. Power to direct the act of collecting trust fund taxes.
3. Accountability for and authority to pay trust fund taxes.
4. Authority to determine which creditors will or will not be paid.
To determine whether a person has the status, duty and authority to ensure that the trust fund taxes are paid, the IRS considers the duties of the officers as set forth in the corporate by-laws as well as the ability of the individual(s) to sign checks. In addition, the IRS determines the identity of the individuals who:
1. Hire and fire employees.
2. Exercise authority to determine which creditors to pay.
3. Sign and file the employment tax returns.
4. Control payroll/disbursements.
5. Control the corporation’s voting stock.
6. Make federal tax deposits.
Factors to consider as to “responsibility” include;
1. Whether the person had the ability to exercise independent judgement with the financial affairs of the business.
2. If a person is an officer or owns stock in the corporation, this cannot be the sole basis for “responsibility.”
3. If a person has the authority to signs checks, the exercise of that authority does not, in and of itself, establish “responsibility.”
Willfulness, this is the tough part!!!!!
“Willfulness” means intentional, deliberate, voluntary, reckless, knowing, as opposed to accidental. No evil intent or bad motive is required.
To show “willfulness,” the IRS must show that a “responsible” person was aware, or should have been aware, of the outstanding taxes and either intentionally chose not to pay the taxes or was plainly indifferent that the taxes needed to be paid.
A “responsible” person’s failure to investigate or correct mismanagement after being notified that withholding taxes have not been paid satisfies the TFRP’s “willfulness” element. The payment of of net wages (wages minus the trust fund taxes) to employees when funds are not available to pay withholding taxes is a “willful” failure to collect and pay over under the trust fund taxes.
The payment of wages to employees over the government constitute “willfulness.”
If the IRS can show that you paid other creditors or directed others to pay other creditors after you became aware of the unpaid trust fund taxes, you have met the “willfulness” element for the application of the TFRP.
Again, for the assertion of the TFRP, the IRS must establish that a person is “responsible” and also “willfully” failed to collect or pay over the trust fund taxes to the government. Thus, you would first argue that you are not a “responsible” person; and if that fails, you will argue that you did not “willfully” fail to pay the trust fund taxes. You must keep in mind that the courts have favored the IRS in the application of the TFRP.
If you were the sole shareholder, president and director of your corporation and had check signing authority; the TFRP will be applied against you for the trust fund taxes. You are liable, end of issue.
The escape application for the Trust Fund Penalty
You have a chance to escape the application of the TFRP penalty when the IRS determines that you are a “responsible” person due to one specific factor and nothing more.
If the IRS determined that you are a “responsible” person because you had check signing authority and nothing more, you can argue you that you were given check signing authority for the mere convenience of your employer.
You can explain that other individuals also had check signing authority. You will need to show that you had nothing to do with payroll.
You will need to obtain affidavits from other employees of the corporation stating that you had nothing to do with the finances of the corporation.
If the IRS determined that you are a “responsible” person because you were a shareholder of the corporation and nothing more, you can argue that you were a mere investor in the business and not involved in the day to day operation of the business.
You will need to show that you were not on the business premises. Again, you will need to obtain affidavits from the employees of the corporation to collaborate your position.
The Responsible person under 6672 of the Code
If the IRS determined that you are a “responsible” person because you were a director of the corporation and nothing more, you can argue that you had nothing to do with the operation of the business. You will need to obtain the corporate records to show when you were the director and what was discussed at the board of director’s meetings.
You will need to show that you were not on the business premises. Again, you will need to obtain affidavits from the employees of the corporation to collaborate your position.
If the IRS determined that you are a “responsible” person because you were related to a “responsible” person and nothing more. You will argue that you had nothing to do with the day to day operation of the business.
Again you will have to obtain affidavits from the employees of the corporation stating that you were not on the business premises and had nothing to do with the day to day operation of the business and not an owner or director of the business.
If the IRS determined that you are “responsible” person because you are a shareholder (but not the sole shareholder), were an employee and had check signing authority; you will need to argue that you had no decision making authority. You will need to describe your duties as an employee and obtain affidavits from other employees that you were not involved in the day to day operations of the business.
If the IRS determines that you are a “responsible” person solely due to one of these factors, stock ownership, check signing authority or employment status; you will need to show that you had no authority over the financial affairs of the corporation. You will need to obtain affidavits from the employees of the corporation to collaborate your position.
If the IRS determines that you are a “responsible” person due to a combination of factors, such as stock ownership, check signing authority or employment status; you will need to show that you had no authority over the financial affairs of the corporation.
You will need to obtain affidavits from the employees of the corporation to collaborate your position. With more factors against you, it will be more difficult for you to prove that you are not a “responsible” person.
Once the IRS has determined that you are a “responsible” person and you can not persuade the IRS that you are not a “responsible” person; you will need to show that you did not “willfully” fail to pay the employment taxes.
If you paid other creditors after you became aware of the unpaid trust fund taxes, you have “willfully” failed to pay the employment taxes.
On the other hand, if you made these payments because you were threatened with physical harm by the owner or director of the corporation, you can argue that you did not “willfully” fail to pay the employment taxes.
Again you will need to prove your position with affidavits from the employees of the corporation and a police report to show physical violence.
In conclusion, if you are a non-owner employee of a corporation and do not want to be held liable for the TFRP; as soon as you become aware of the unpaid employment taxes, you need to inform the officers and directors of the corporation in writing of the problem and don’t sign any more corporate checks.
If your are given the choice of either paying other creditors or being fired; the choice is yours with consequences. If you pay the other creditors, you have “willfully” failed to pay the employment taxes.
If the taxes are not paid soon, you resign your position from the corporation and make your resignation in writing.
Further, if you were an officer and/or director of the corporation, you make sure that the public corporate records reflect that you no longer have these positions with the corporation. This may seem harsh, but this is the safest way to save yourself from the TFRP.
by Fresh Start Tax | Aug 3, 2020 | Tax Help
Learn how to get a pay off of when others are involved in the assertion of the trust fund recovery penalty.
There is a huge gap in the IRS system in dealing with trust fund recovery penalties.
The IRS does not cross-reference other Social Security numbers in regarding to the trust fund taxes of 6672.
So if one person makes a payment on their trust fund recovery penalty and you have been asserted the same penalty, IRS has no way of cross matching that payment to your liability.
This is a real hardship because somebody in fact could’ve paid off the liability and you have absolutely no way of knowing.
I am a former IRS agent and teaching instructor with Internal Revenue Service and here’s what you need to do to deal with the aforementioned situation.
8.25.1.5.5 (12-07-2012)
Disclosure that must be made by the IRS
1. IRC 6103(e)(9) provides for disclosure of information where more than one person is held liable for the TFRP.
Once a person is determined to be liable then, upon their written request, the IRS may disclose, in writing, the name of any other person determined to be liable, whether the IRS has attempted to collect the penalty from the other liable person, the general nature of the collection activities and the amount collected.
A. A person is determined to be liable for purposes of IRC 6103(e)(9) when that person is assessed.
Therefore, no disclosure is permitted until after the person is assessed.
B. If Appeals receives a disclosure request with ONLY a request for the names of liable persons, the written request may be responded to once an assessment is made. Appeals should make no disclosures concerning the collection actions, since we are not in a position to know everything that may have occurred.
Refer those requests to the Disclosure or Collection function
For more information, refer to IRM 21.1.3.2, General Disclosure Guidelines, and for a full discussion, refer to IRM 11.3.40, Disclosure of Official Information, Disclosures Involving Trust Fund Recovery Penalty Assessments.
by Fresh Start Tax | Jul 28, 2020 | Tax Help
How to Defend the IRS Trust Fund Penalty Problems, Former IRS Agent, Revenue Officer
As a former IRS agent and teaching instructor with the Internal Revenue Service I have worked well over 750 trust fund cases.
Many people get caught with there pants down because they have no idea the IRS can transfer this penalty against you as an individual if you are found responsible for the IRS trust fund.
You must defend yourself against this penalty is much as possible.You must understand that this has severe personal ramifications against you and therefore you must pull out all resources you have a fight off trust fund problems.
I have been on both sides of the fences, for the Internal Revenue Service as a former IRS revenue officer, I set up the deficiencies for the trust fund and being on the other side of the fence I put together solid tight packages for IRS trust fund defense penalty help.
The IRS trust fund penalty defense is an art and it’s a very important that you understand the ramifications of the IRS trust fund penalty.
If the IRS sets up this tax deficiency against you, IRS has its full legal resource to enforce and collect back taxes as though you owe individual taxes and therefore it must be taken seriously.
You can expect letters from the Internal Revenue Service that will threaten IRS tax levies,wage garnishment, and federal tax liens.
So, it’s best to stop this proceeding by understanding how to defend yourself against the IRS trust fund penalty.
The bottom line here is to FIND SOMEONE TO BLAME and support with DOCUMENTATION WINS!
In putting your case together, you need to have documentation supporting your claim.
It’s critical to support your claim with Internal Revenue Service with written affidavits from third parties explaining why you are not responsible for this tax.
The revenue officer will gather as much possible information from as many sources as they can to make a determination.
The use of the IRS form 4180 by the RO is very critical to investigation. You must know the form and the questions the IRS will ask, so be prepared.
The RO determines many things including the business financial policy. As a Former IRS agent I took massive amounts of these 4180 interviews.
The RO will ask a series of questions on the form that will start to point to the responsible persons. Page 2 is critical.
Keep in mind, along with the answers and facts and the documentation is king.
IRS will look closely at those who filed and review tax returns, who signed the checks, sign contracts, who signed for loans, who made day-to-day decisions, who paid the bills, who decides what bills not to pay, and who ran the show.
The RO can contact former employees, bank officers, anybody they can find to interview, the secretary is a great source of information.
The principal factor that the IRS considers when examining which individuals may or may not be liable for the TFRP is, who signs company checks.
Now, may times others have signed checks but IRS is looking for ultimate control.Who had the power, who had control.
As we say in IRS, follow the money and you will find the responsible & WHO HAD CONTROL.
In defending responsible persons, it is critical to demonstrate that a person lacked the financial control exhibited by the foregoing factors through such things as company business records, involving the business, contracts, and affidavits from third parties, and providing statements to the IRS.What you are proving is that someone was controlling and directing you.
You must build your own case that you were being controlled of directed by others.
The IRS Revenue Officer.
The TFRP investigation is conducted by a revenue officer from the IRS’s collection unit. The revenue officer typically requests bank signature cards, cancelled checks, corporate resolutions and other business records to identify potential responsible persons.
If the company does not provide these documents voluntarily, administrative summons, a form 2039 will be used to demand the records from the business, banks or from third parties.
The RO usually will follow up with a call or simply send out forms to the company indicating who is responsible, the agent will try to set up as many persons and they can and throw an broad net around everyone.
Lastly, get as many people as you possibly can to support you. everybody will blame everybody else so get ready for a battle and get ready to fight.
If you have been assessed this penalty, by all means, appeal.
DO NOT GET CAUGHT WITH YOUR PANTS DOWN, FIGHT!
by Fresh Start Tax | Jul 28, 2020 | Tax Help
How to Defend the IRS Trust Fund Penalty, Former IRS
As a former IRS agent and teaching instructor with the Internal Revenue Service I have worked well over 750 trust fund cases.
I have been on both sides of the fences, for the Internal Revenue Service as a former IRS revenue officer, I set up the deficiencies for the trust fund and being on the other side of the fence I put together solid tight packages for IRS trust fund defense penalty help.
The IRS trust fund penalty defense is an art and it’s a very important that you understand the ramifications of the IRS trust fund penalty.
If the IRS sets up this tax deficiency against you, IRS has its full legal resource to enforce and collect back taxes as though you owe individual taxes and therefore it must be taken seriously.
You can expect letters from the Internal Revenue Service that will threaten IRS tax levies,wage garnishment, and federal tax liens.
So, it’s best to stop this proceeding by understanding how to defend yourself against the IRS trust fund penalty.
The bottom line here is to FIND SOMEONE TO BLAME!
In putting your case together you need to have documentation supporting your claim.
It’s critical to support your claim with Internal Revenue Service with written affidavits from third parties explaining why you are not responsible for this tax.
The revenue officer will gather as much possible information from as many sources as they can to make a determination.
The use of the IRS form 4180 by the RO is very critical to investigation. You must know the form and the questions the IRS will ask, so be prepared.
The RO determines many things including the business financial policy. As a Former IRS agent I took massive amounts of these 4180 interviews.
The RO will ask a series of questions on the form that will start to point to the responsible persons. Page 2 is critical.Keep in mind, along with the answers and facts and the documentation is king.
IRS will look closely at those who filed and review tax returns, who signed the checks, sign contracts, who signed for loans, who made day-to-day decisions, who paid the bills, who decides what bills not to pay, and who ran the show.
The RO can contact former employees, bank officers, anybody they can find to interview, the secretary is a great source of information.
The principal factor that the IRS considers when examining which individuals may or may not be liable for the TFRP is, who signs company checks.
Now, may times others have signed checks but IRS is looking for ultimate control.Who had the power, who had control.
As we say in IRS, follow the money and you will find the responsible.
In defending responsible persons, it is critical to demonstrate that a person lacked the financial control exhibited by the foregoing factors through such things as company business records, involving the business, contracts, and affidavits from third parties, and providing statements to the IRS.What you are proving is that someone was controlling and directing you.
You must build your own case that you were being controlled of directed by others.
The IRS Revenue Officer.
The TFRP investigation is conducted by a revenue officer from the IRS’s collection unit. The revenue officer typically requests bank signature cards, cancelled checks, corporate resolutions and other business records to identify potential responsible persons.
If the company does not provide these documents voluntarily, administrative summons, a form 2039 will be used to demand the records from the business, banks or from third parties.
The RO usually will follow up with a call or simply send out forms to the company indicating who is responsible, the agent will try to set up as many persons and they can and throw an broad net around everyone.
Lastly, get as many people as you possibly can to support you. everybody will blame everybody else so get ready for a battle and get ready to fight.
If you have been assessed this penalty, by all means, appeal.
by Fresh Start Tax | Jul 27, 2020 | Tax Help
The trust fund penalty is an absolute killer. It is important you absolutely know how to defend it so you do not become the target of IRS collection enforcement. A Revenue Officer like I once was, will administer the Trust Fund Penalty.
As a former IRS agent and teaching instructor I worked, accessed and collected trust fund taxes from officers and employees of corporations that were liable under IRC 6672.
As corporations, companies struggle for funds to keep there businesses afloat, many times they decide that they can’t pay payroll taxes and they use those funds to cover their bills.
As they stop making tax deposits the liabilities it just snowballs.It gets out of control fast.
When this happens, the IRS has the right to assert the trust fund penalty after those responsible while the company is in business or out of business. As the IRS goes after these so called responsible persons they do so a what IRS sometimes calls, protective assessments.
What is the trust fund penalty under 6672.
Basically, if you do not pay your 941 taxes i.e. withholding and Social Security, the federal government has the right to impose those taxes you held in trust against you personally or any responsible persons of your corporate or entity responsible for the tax and thus collect the money from you on an individual basis.
Most Trust fund cases involve officers of corporations.
However, a responsible person may be one or more of the following:
A. an officer or employee of a corporation
,
B. a member or employee of a partnership
,
C. a corporate director or shareholder,
D. a related controlling corporation,
E. employee of a sole proprietorship
,
F. limited liability company (LLC) member, manager or employee
,
G. a Payroll Service Provider (PSP)H. a responsible party within a PSP
,
I. a Professional Employer Organization (PEO)
,
J. a responsible party within a PEO,
K. a responsible party within the common law employer (client of PSP/PEO)
L. a lender, a surety, or any other person with sufficient control over funds to direct disbursement of the funds, or
,
M. in some cases, a person assuming control after accrual of the liability.
How does one become responsible?
What is the Definition of Willfulness?
1. The trust fund recovery penalty is a civil penalty so the degree of willfulness in failing to collect or pay over any tax leading to liability for this penalty is not as great as that necessary for criminal proceedings.
This is a civil proceeding and not criminal.
Willfulness in the context of the TFRP is defined as intentional, deliberate, voluntary, and knowing, as distinguished from accidental. “Willfulness” is the attitude of a responsible person who with free will or choice either intentionally disregards the law or is plainly indifferent to its requirements.
Some factors to consider when determining willfulness are:
a. Whether the responsible person had knowledge of a pattern of non-compliance at the time the delinquencies were accruing,
b. Whether the responsible person had received prior IRS notices indicating that employment tax returns have not been filed, or are inaccurate, or that employment taxes have not been paid,
c. The actions the responsible party has taken to ensure its Federal employment tax obligations have been met after becoming aware of the tax delinquencies.
How does IRS make there decision and who make them???
A Revenue Officer like me back in the day will do that.
If the company does not provide IRS with bank signature cards and corporate resolutions, IRS simply issues at 2039 form SUMMONS for information from the banks or financial institution.
Each trust fund recovery penalty before goes to the system must have sufficient documentation and there’s a checklist that must be attached is the case moves forward.
There is a internal form 4183, that the IRS uses to make sure the revenue officer did their due diligence to support their decision on who are responsible officer was under 6672 of the IRC code.
It is not very difficult to find out who is responsible, like I said before just follow the money and that’s it!
The use of the IRS form 4180 is very critical investigation who determine business financial policy.It is on our company website.
The principal factor that the IRS considers when examining which individuals may or may not be liable for the TFRP is who signs company checks.
As we say in IRS, follow the money and you will find the responsible.
I am former IRS agent instructor & administered hundreds upon hundreds of trust fund recovery penalties and I am an IRS expert trust fund tax situations.
How do you find out if you are responsible for the trust fund penalty
The revenue officer working the case also and you IRS notice 2751 which breaks out the trust fund liability and a forum 1153 with your appellate rights.
It is always best to appeal your tax assessment.
You must take this serious because this becomes an individual assessment and IRS has their full enforcement powers to go ahead and collect these back taxes. This is just like owing individual taxes, bad news.
How to Defend the IRS Trust Fund Penalty
FIND SOMEONE TO BLAME AND RIDE IT TO THE BANK
The use of the IRS form 4180 by the RO is very critical to investigation. You must know the form and the questions the IRS will ask, so be prepared.
The RO determines many things including the business financial policy. As a Former IRS agent I took massive amounts of these 4180 interviews.
The RO will ask a series of questions on the form that will start to point to the responsible persons. Page 2 is critical.Keep in mind, along with the answers and facts and the documentation is king.
IRS will look closely at those who filed and review tax returns, who signed the checks, sign contracts, who signed for loans, who made day-to-day decisions, who paid the bills, who decides what bills not to pay, and who ran the show.
The RO can contact former employees, bank officers, anybody they can find to interview, the secretary is a great source of information.
The principal factor that the IRS considers when examining which individuals may or may not be liable for the TFRP is, who signs company checks.
Now, may times others have signed checks but IRS is looking for ultimate control.Who had the power, who had control.
As we say in IRS, follow the money and you will find the responsible.
In defending responsible persons, it is critical to demonstrate that a person lacked the financial control exhibited by the foregoing factors through such things as company business records, involving the business, contracts, and affidavits from third parties, and providing statements to the IRS.What you are proving is that someone was controlling and directing you.
You must build your own case that you were being controlled of directed by others.
The IRS Revenue Officer.
The TFRP investigation is conducted by a revenue officer from the IRS’s collection unit. The revenue officer typically requests bank signature cards, cancelled checks, corporate resolutions and other business records to identify potential responsible persons.
If the company does not provide these documents voluntarily, administrative summons, a form 2039 will be used to demand the records from the business, banks or from third parties.
The RO usually will follow up with a call or simply send out forms to the company indicating who is responsible, the agent will try to set up as many persons and they can and throw an board net around everyone.
The RO can do as they please because they know you have appeals rights.
If you have been assessed this penalty, by all means, appeal.
