IRS Trust Fund Recovery Penalty

As an IRS income tax lawyer, I know that one of the most frustrating things small business owners can deal with the IRS Trust Fund Recovery Penalty.

When a business owes back payroll taxes (941 federal income tax and FICA withholdings), the IRS can assess a responsible party (typically the business owner) for the trust fund portion of the payroll taxes (the portion from the employee that the employer holds in trust).

Check out the four steps of the IRS Trust Fund Recovery Penalty representation that we do to defend our clients.

Get Help from an IRS Income Tax Lawyer

See if you qualify for the IRS Back Tax Relief
Texas IRS Attorney
This field is for validation purposes and should be left unchanged.

What exactly is the IRS Trust Fund Recovery Penalty?

As an IRS income tax lawyer, we work with a lot of small business owners who deal with the dreaded IRS trust fund recovery penalty. Let's take a look at exactly what this is.

As an IRS income tax lawyer, I know that payroll taxes fund most of the day-to-day operations of the U.S. government. These are those deductions from paychecks. Business owners have a responsibility to remit those to the IRS (generally, monthly). And when they don’t, the IRS can assess responsible individuals (typically, the owners) with a Trust Fund Recovery Penalty.

This is the “trust fund” portion of the business liability that did not get paid. Now, don’t worry, the IRS only gets one bite at the apple. If the business pays the “trust fund” portion, then the personal liability goes away.

(1) What kind of taxes are “trust fund” taxes (IRS income tax lawyers get asked this a lot)

Business federal payroll taxes include (1) business portion of FICA (social security and Medicare), (2) employee federal income tax withholdings, and (3) employee portion of FICA (social security and Medicare).

The trust fund portion of the above include #2 (employee federal income tax withholdings) and #3 (the employee portion of FICA).

Basically, anything that you, as the business-owner, hold “in trust” from the employee to send to the IRS.

(2) Why does the IRS get to make me personally liable?

As an IRS income tax lawyer, I hear this a lot. Many people think that the business entity offers them liability protection. While that is true, the U.S. tax code allows the government to “pierce the corporate veil” and come after responsible individuals for not remitting trust fund taxes.

However, the IRS must still follow the process. If they follow the process, they are allowed to make an individual personally responsible for the “trust fund” portion of the payroll taxes. The business portion can never be assessed against an individual personally, though.

(3) How does the IRS assess the Trust Fund Recovery Penalty against me?

The process starts with the 4180 interview. The IRS must find that you are responsible and that you failed to remit the trust taxes willfully.

Once they establish those two prongs, they will then send you the proposed liability. You must file an appeal/protest within 30 days if you disagree.

If the appeals officer agrees with the IRS, you may go to tax court to continue disputing the liability. Hopefully, you are able to break one of the links and establish that you are either not responsible, or, your failure to remit was not willful.

Get a Fresh Start with an IRS Income Tax Lawyer Today

If you are ready to have an IRS income tax lawyer look at your case to see if you qualify for IRS back tax relief, click here to get the process started today. Or call us directly for a free consultation at 330-331-7611.


Income Tax Lawyers

Low Flat Rate

We have extensive experience and can tell you precisely what your flat rate legal fees will be. We have interest-free payment plans too.

Licensed IRS Attorney

Josh is a real licensed IRS tax relief attorney. Don’t fall for “tax group” scams from unlicensed “tax relief firms.”

High IRS Success Rate

As a licensed IRS tax relief attorney, you know you will get results. We shoot straight and will tell you exactly what to expect.

Money Back Guarantee

If we don’t get the resolution that we tell you we can get, we will refund your entire legal fee – how’s that for a guarantee?