Businesses that have employees run payroll and are responsible for employment taxes. When a business falls behind with employment taxes the IRS will investigate to determine who the “responsible individuals” are behind the business. These responsible individuals can be held personally liable for the Trust Fund Recovery Penalty. This is a method through which the IRS can collect back taxes from the business but also from the individuals who run the business. The IRS will multiply the sources from which they can collect.
The IRS can pierce the Corporation or LLC and personally assessed the owners, officers or other responsible individuals. The TFRP is comprised of the Social Security, Medicare and Income tax that is withheld from employee paychecks and held “in trust” by the employer to be paid to the IRS on the employees behalf.
The IRS, through a local Revenue Officer, will perform the Trust Fund Recovery Penalty investigation to determine who are the business’ responsible individuals. This can be one person or multiple people. It can be an owner or an officer as well as an employee with significant day to day responsibilities. The investigation will uncover who is responsible for company financial decision making, responsibility for daily operations and responsibility for IRS tax returns and payment of IRS taxes. The TFRP investigation should not be taken lightly as the IRS oftentimes declares more than one individual as responsible and it is up to each individual to fight the IRS to clear their name.
First, if possible it is best to avoid the TFRP altogether. Tabb & Associates can assist with defending individuals against the TFRP. If you have already been declared as a responsible individual there is an IRS Appeal process to follow to challenge the IRS on their decision. If you are responsible, a resolution will need to be worked out with the IRS. If the TFRP is left unresolved, it will lead to personal Federal Tax Liens and IRS collections. With the TFRP, you must be proactive with the IRS as they will be extremely aggressive with this type of tax as the business was supposed to be holding these funds in trust for their employees. Tabb & Associates will work directly with your Revenue Officer during the TFRP investigation and TFRP assessment to protect your interests and secure a permanent resolution that will minimize or eliminate the impacts of the TFRP.