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How to figure out the Trust Fund Recovery Penalty Amount
The amount of the penalty is equal to the unpaid balance of the trust fund tax. The penalty is computed based on:
1. The unpaid income taxes withheld, plus
2. The employee’s portion of the withheld FICA taxes.
For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.
Assessing the TFRP
If we determine that you are a responsible person, we will provide you a letter stating that we plan to assess the TFRP against you. You have 60 days (75 days if this letter is addressed to you outside the United States) from the date of this letter to appeal our proposal. The letter will explain your appeal rights. Refer to Publication 5 (PDF), Your Appeal Rights and How to Prepare a Protest if You Don’t Agree, for a clear outline of the appeals process. If you do not respond to our letter, we will assess the penalty against you and send you a Notice and Demand for Payment.
Caution:
Once we assert the penalty, we can take collection action against your personal assets. For instance, we can file a federal tax lien or take levy or seizure action.
Avoiding the TFRP
