Affordable Expert Tax Defense for any IRS problem.
If the Internal Revenue Service is trying to set up the IRC 6672, trust fund penalty against you, there are a variety of tax defenses depending on your situation that you currently have.
Being a former IRS agent and tax instructor I have set up hundreds upon hundreds of trust fund penalties upon responsible persons when I worked at the Internal Revenue Service as a former revenue officer.
As a result, I know all the best possible tax defenses possible.
Call me today for a free initial tax consultation and I will review your case and let you know what your best possible tax defense against the trust fund penalty.
Each situation is different and I will need to have the fact pattern on your case to give you an honest and free evaluation.
What is the Employment Taxes and the Trust Fund Recovery Penalty (TFRP)
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 Taxes – These 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.It can happen at any time trust fund monies are owed to the IRS.
Who Can Be Responsible for the TFRP
The TFRP may be assessed against any person(s) 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 willfulness 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 may 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 TFRP Amount – there is only one formula.
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 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, 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.
Caution:
Once the IRS asserts the trust fund penalty, IRS can take collection action against your personal assets. For instance, we can file a federal tax lien or take levy or seizure action.
Call us today for free initial tax consultation and we can provide your best possible tax defense the trust fund recovery penalty.
