The
employer that you worked for or are currently working for
has been delinquent in paying its employment taxes to the
IRS. To the extent that these taxes represent that portion
withheld from the employees' wages (i.e., trust fund taxes),
the IRS can assess and seek collection from "responsible
persons" in their individual capacity the amount of the
unpaid trust fund taxes. Such liability is referred to by
the IRS as Trust Fund Recovery Penalty (“TFRP”).
Potential
responsible persons could be officers, partners, corporate
directors, shareholders or employees of a business organization.
If the IRS has classified you as a responsible person, you
will be held jointly and severally liable for the outstanding
trust fund taxes. The business does not have to have stopped
operating in order for this liability to be assessed on you.
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 with the
duty to perform and the power to direct the collecting, accounting,
and paying of trust fund taxes. This person may be:
- an
officer
- 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, or
- another
corporation.
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.
Figuring
the TFRP 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.
Assessing
the TFRP
If the IRS determines that you are a responsible person,
the IRS will provide you a letter stating that it plans
to assess the TFRP against you. You have 60 days after the
date of the letter to appeal the determination by filing
a Tax Protest. Your case would then be assigned to an Appeals
Officer for review. If you do nothing or fail to timely
file a Tax Protest, the IRS will assess the penalty against
you and send you a Notice and Demand for Payment. Thereafter,
the IRS can take collection action against your personal
assets including filing a federal tax lien or taking levy
or seizure action.
By
allowing us to analyze your situation and determine the best
course of action, we should be able to formulate a strategy
to settle this liability. For many taxpayers, this typically
leads to an
Offer
in Compromise.
For
prompt evaluation of your case, we encourage you to click
here to register for our Tax Advisory Service. You
may also contact us using our toll-free number at 866.494.6829.
