Solutions for IRS Trust Fund Penalties

Expert Support At Clarity Tax Resolutions, we leverage over 15 years of combined IRS experience, including roles in local, district, and regional offices. Our team of and managers knows every nuance of the system and every potential tax defense against the IRS Trust Fund Penalty (TFRP).

If you’re facing the TFRP, contact us today. Our expertise in IRS procedures and settlement calculations can help you effectively resolve your tax issues.

Understanding the Trust Fund Recovery Penalty

The IRS can impose the TFRP on individuals within corporations who fail to pay their payroll taxes. These penalties incentivize timely payment of employment taxes, including excise, railroad retirement, social security, and withheld income taxes.

Trust fund taxes are those you withhold from employees until you deposit them with the IRS. If these taxes remain unpaid, the IRS can pursue the TFRP from responsible individuals within the business, regardless of whether the business is still operational.

Who is Liable?

Under Code Section 6672, the IRS typically holds the following individuals liable for trust fund taxes:

  • Officers or employees of a corporation
  • Members or employees of a partnership
  • Corporate directors, shareholders, or members
  • Board of trustees members of nonprofit organizations
  • Individuals with authority and control over financial disbursements
  • Persons who willfully chose not to pay payroll tax liabilities, often indicated by paying other creditors instead of employment taxes

Identifying Accountability

The IRS may conduct interviews and evaluate your duties and responsibilities to determine your liability. You are held accountable based on whether you exercised independent judgment over the company’s financial matters. Employees who simply followed orders to pay bills, without decision-making power, are generally not held liable.

Calculating the Penalty

The TFRP amount equals the unpaid trust fund taxes, including:

  • Unpaid withheld income taxes
  • Employee’s portion of withheld FICA taxes
  • Any timely payments made, which are subtracted from the owed amount
  • Any taxes designated to “trust fund only,” also subtracted from the total owed

Criteria for Responsibility

The IRS uses several criteria to determine responsibility, including whether you:

  • Determined financial policies for the business
  • Authorized payments to creditors
  • Opened or closed bank accounts
  • Guaranteed or co-signed loans
  • Signed or counter-signed checks
  • Authorized payroll
  • Made Federal Tax Deposits
  • Prepared, reviewed, signed, or transmitted payroll tax returns
  • Had the authority to hire or fire employees

This list is a starting point. The IRS will gather extensive statements and documents, such as corporate resolutions and bank signature cards, to identify responsible parties.

How We Can Assist

With our deep understanding of IRS protocols, we can guide you through the TFRP process. Our expertise ensures you receive the best possible defense and resolution strategy.

Contact Clarity Tax Resolutions today to learn how we can help you overcome the IRS Trust Fund Penalty challenges.