Tax Relief Blog

What is a Trust Fund Recovery Penalty?

Does the IRS claim you are a person responsible for unpaid payroll taxes? Is the IRS seeking to secure payment from you personally?  We can help!

Call today at (800) 505-4134.

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 Trust Fund Recovery Penalty (TFRP).  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.

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, or another corporation.

Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.

The IRS will request that any potential responsible parties complete an interview in order to determine the full scope of their duties and responsibilities. A Revenue Officer prepares form 4180, Report of Interview with Individual Relative to Trust Fund Recovery Penalty.  Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business.

Assessing the Trust Fund Recovery Penalty If the IRS determines that you are a responsible person, they will provide you with a letter stating that they 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 their proposal. If protest against the assessment is not made and appealed to the IRS, they will assess the TFRP.

Once the assessment is made, aggressive collection actions will follow.  The IRS will take enforced collection action against your personal assets. They will file a federal tax lien or take levy or seizure action.  This includes garnishing your wages or levying your bank account.

Call today at (800) 505-4134 for a FREE Tax Resolution Analysis.

What is a Collection Statute Expiration?

Is your IRS debt over 10 years old?  Call us Today! (800) 505-4134

The IRS has 10 years to collect outstanding tax liabilities, from the date assessed. The 10 year mark is calculated from the day a tax liability has been finalized. A tax liability can be finalized in a number of ways. It could be a balance due on a tax return, an assessment from an audit, or a proposed assessment that has become final. From that day, the IRS has 10 years to collect the full amount, plus any penalties and interest. If the IRS doesn’t collect the full amount in the 10 year period, then they must cease collecting on the remaining balance, since the statute of limitations has expired.

Most taxpayers and even some tax professionals are unaware of the fact that the IRS must collect a tax debt within 10 years. The 10 year period isn’t based upon the year for which the taxes are due but rather the date the liability was actually assessed.

Why is the IRS still collecting on a tax debt from 12 years ago? As with all IRS rules, the Collection Statute has many exceptions.  Some actions that will extend the collection statute date are:

  • If the taxpayer agrees in writing to allow the IRS more time to collect the tax by signing a waiver
  • If the taxpayer files for Bankruptcy during the 10 year period
  • If the taxpayer files an Offer in Compromise during the 10 year period
  • If the taxpayer files an application for Taxpayer Assistance Order from the Taxpayer Advocate Service during the 10 year period
  • If the taxpayer files a request for a Collection Due Process hearing

There are some instances where a tax debt from over 20 years ago is still being collected by the IRS!  This is why a skilled and experienced Tax Attorney is required to successfully represent you with the IRS.  Our tax experts at Direct Tax Relief will request your transcripts from the IRS to analyze and interpret them in order to choose which tax solution is most advantageous to you.  DTR will advise you of the best course of action and together we will put an end to your IRS tax problems!

Will the IRS Notify Me Once the 10-Year Statute Expires? The IRS will NEVER inform you when the 10 years are up. They will continue to send you invoices and collect on the debt. It is up to the taxpayer and their representative to prove to the IRS that the 10 year collection statute has in fact expired. It is very important to note that  although tax liens can no longer be enforced, your tax lien may be still on file with credit bureaus or with your local recording office unless it is requested to be released.

Call today at (800) 505-4134 for a FREE Tax Resolution Analysis.

Who is Direct Tax Relief?

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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