Employers must withhold payroll taxes from employee wages and make the required payments to the Internal Revenue Service. The responsible person in the business holds these funds in a trust until the business makes the payment in the form of a federal tax deposit. Congress has set a statutory penalty for the failure to make a prompt deposit called the Trust Fund Recovery Penalty (TFRP). If you are the responsible person and you willfully fail to make a timely payment, you may be on the hook for the penalty. It is imperative that you contact an adequate tax attorney if faced with such an issue.
The IRS may assess the penalty against the “responsible person.” A responsible person can be an individual or group. The person or persons can be a corporate officer, shareholder or a payroll service provider as long as they have the authority and control over the funds at issue. That authority and control cannot be mere bookkeeping. The person or persons must be authorized to make decisions on where the funds go.
To willfully violate the law, the responsible person knows or should know, that the deposits weren’t made. The responsible person may be personally liable for the penalty if they showed an indifference to abiding by the law or intentionally ignored the rules.
IRS employees will decide who is the responsible person in your company and whether that person willfully violated the rule.
The IRS will notify the responsible person via a letter if they uncover an unpaid balance. The letter will notify you of the TFRP and your due process rights and your right to appeal. You will have 60-days from the mailing date of the letter in which to appeal if you wish to do so. You should contact a tax attorney with some experience dealing with the IRS.
The appeal will be an administrative law appeal. The process is less formal than that which you might expect from being sued in court. Because the process is less formal, the responsible person may receive advice that they do not need an attorney to represent them. However, one can and should hire a tax attorney for the appeal. The accused will have the right to present evidence and refute the IRS’ position, and an attorney will be able to present the best defense.
You may skip the appeals process and take your case to a federal tax court, claims court or district court. If the administrative appeal is not resolved to your satisfaction, you may appeal the administrative decision to a federal court. In either circumstance, legal representation will be imperative.
If you fail to respond to the notice of the impending TFRP, after the 60-day period has elapsed, the IRS will send you a demand to pay. The IRS publishes several notices and web pages that discuss the TFRP in depth. You should review them with your tax lawyer. There exists other methods outside litigation in resolving any taxes or funds the IRS claims that you owe. A skilled tax attorney may be able to help resolve matters with little interruption in the operation of your business or your life.
It is better to ensure you avoid the trust fund penalty by filing timely payroll tax returns and paying over payroll taxes. We will focus on your business success and take control of your tax burden for you. Payroll taxes are really the most difficult types of IRS tax debts to negotiate successfully. Uncertainty about your future may be mounting as you try desperately to find a way to pay a debt that you have little or no funds to cover. There are many options that we can provide to give you a good night’s sleep again. Call Travis W. Watkins Tax Resolution and Accounting Firm today for your Free consultation at 800-721-7054.