As a former IRS agent I was a teaching instructor. I’m a tax expert for the IRS trust fund taxes, appeals, and settlements.
I literally have worked hundreds upon hundreds of IRS trust fund cases. I have been doing this work since 1973 and are familiar with every single angle every single trick every single secret of the IRS trust fund recovery,
IRS goes to some length to determine who was responsible for trust fund taxes.
IRS uses a main form called a 4180 set up fact patterns to find out who is responsible for the trust fund tax. The 4180 can be found on our website on the homepage under forms. This is a critical form that IRS uses to determine the credibility of each person and to ascertain information as to who is responsible for trust fund taxes.
There are many trick questions on the 4180 so I would caution anyone giving those to IRS to be skilled and not only to be truthful but the stay away from the tricky questions.
Besides securing the 4180 which the revenue officer will insist to have a sit down in person interview, IRS will also ask for bank signature cards, copies of resolutions, copies of canceled checks. IRS needs to have proof documents before they can ascertain who is responsible for the trust fund taxes they cannot do it based on the 4180 alone IRS needs proof in case the case goes to Tax Court.
The bottom line for revenue officer seeking who is responsible for trust funds tax is:who has ultimate authority, decision-making, and who had the right to control.
Please keep in mind the revenue officer will be looking at past tax returns for assets, they will be looking at company checks to determine who is receiving extra income and for possible shifting of income or assets to those who would’ve been held responsible. IRS wants to make sure no cash, no income or no assets were placed beyond their reach during the course of business.
IRS has the right to also set up a nominee or an alter ego to responsible persons beside the trust fund tax.
A seasoned revenue officer is very crafty and within a matter of an hour or so easily make a determination as to who is responsible for the trust fund tax. The trust fund tax will always be passed on to those who ultimately were in control.
IRS has the right to assert the trust fund penalty to sometime parties such as secretaries or other persons in the Corporation who had specific rights and duties who really were not in control. These cases are sad but many instances the court rules anyone who was aware that the taxes were not being paid and had the ability to do something about it can and will be held against that person. On those cases you always appeal to the Appellate Division and fight them because ultimately IRS will have a difficult time sustaining those in case the case goes to Tax Court.
If your case goes to the Appellate Division IRS will use what’s called a hazard of litigation to determine if they want to bring the case forward to Tax Court.
The hazard of litigation is IRS making a determination on how much they believe they will win the tax court case. Many times if IRS does not feel they have a clear-cut winner they will settle based on the degree of certainty within the fact pattern of the case they have in front of them.
That is the job of the appellate agent to make that determination.
HINT: I have found in my practice it’s best always to go to appeals because the Appellate Division is a lot more generous than at the local office.
The one thing IRS does not want to lose do is lose in Tax Court because it sets a dangerous precedent for cases going forward.
If you’d like to know more call me for a free initial tax consultation and I will walk you through the exact process based on your situation.
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Our office has over 200 years of total IRS work experience and we are true experts and how to settle your federal payroll tax debt with Internal Revenue Service.
Why have Fresh Start Tax contact the IRS:
You never have to talk with the Internal Revenue Service on these tax matters;
Fresh Start Tax knows what the IRS is looking for;
Fresh Start Tax knows the exact packaging required;
Fresh Start Tax knows the next steps the IRS will take;
You know your case will be handled and resolved as fast as possible.
Other Factors To Consider:
IRS has the right to sell your complete inventory at public auction;
IRS can seize all your accounts receivables;
IRS can hold you personally responsible for this tax;
IRS has the right to lock the doors of your business.
Steps to take to work out an affordable payment plan with the Internal Revenue Service:
Immediately stay current on all payroll tax deposits to show the IRS good faith;
Be prepared to give the IRS a current financial statement;
Make sure your personal tax liabilities are filed and paid;
Have all documentation on the financial statement prepared for the IRS.
If you do not pay your Payroll Taxes IRS can collect them from you individually
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 TFRP.( trust fund recovery penalty )
These payroll 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
BE CAREFUL Who can be Responsible for the TFRP
The TFRP 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 has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:
An officer or an employee of a corporation,
A member or employee of a partnership,
A corporate director or shareholder,
A member of a board of trustees of a nonprofit organization,
Another person with authority and control over funds to direct their disbursement,
Another corporation or third-party payer,
Payroll Service Providers (PSP) ore responsible parties within a PSP
Professional Employer Organizations (PEO) or responsible parties within a PEO, or
Responsible parties within the common law employer (client of PSP/PEO).
For wilfulness 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 evil 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 will 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.
Figuring the Trust Fund Amount
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. For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.
Assessing the TFRP. If the IRS determines 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, Your Appeal Rights and How to Prepare a Protest if You Don’t Agree (PDF), 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.
Once we assert the penalty, the IRS can take collection action against your personal assets. For instance, we can file a federal tax lien or take levy or seizure action.
IRS Trust Fund Tax Expert, Tax Help + Former IRS Agent + What You Need To Know
