Trust Fund Recovery Penalty (TRFP)

If withholding taxes, commonly called “trust fund taxes” or “941 Liabilities,” remain unpaid by a business entity, the IRS will aggressively pursue collection from responsible individuals involved in leading the business. The IRS is authorized to “pierce the corporate veil” by assessing the unpaid withholding tax liabilities of a business directly against the individuals who are responsible for the company’s failure to properly withhold and pay the trust fund taxes. This individual assessment is called the Trust Fund Recovery Penalty (TFRP).

In general, the IRS is authorized to assess the TFRP against individuals involved in the business who have control over the use and disposition of a company’s assets, or otherwise have decision making authority in connection with the payment of the company’s liabilities and have “willfully” failed to pay the company’s trust fund taxes.

If you are being, or believe you may be, subjected to a TFRP, you need  legal expertise immediately to help guide you through a potentially costly situation. At Daniel Rosefelt & Associates, LLC, Attorney & CPA, we regularly obtain employment tax solutions for business owners and other responsible parties engaged in managing businesses. Our experienced tax lawyers understand the law, IRS investigation procedures and how to obtain tax debt relief for our clients.

To learn how we can help you, contact us at (301) 656-4424 or reach out by completing our ten-second consultation form. We serve clients throughout the U.S. and around the world from our offices in Bethesda, Maryland.

Will You Be Held Personally Liable For Unpaid Withholding Taxes?

Although the TFRP is generally applicable to the owners and principal officers of small or closely held business enterprises, many IRS revenue officers paint the penalty with an extremely broad brush. They often assert TFRP even when legitimate defenses exist. In addition to owners and principal officers, revenue officers will also often assert the TFRP against all individuals involved in the accounting aspects of the business or who otherwise have check-signing authority. Many times, even when unsupported by the facts and applicable law, they will will assess the TFRP against company bookkeepers and accountants; other individuals who have been named as officers for “convenience,” but who have no actual authority or control over the business; the spouses or other relatives of principal owners and even and key company employees who have no control over the financial aspects of the business.

Successful Defenses Against The Trust Fund Recovery Penalty

Assessment of a TFRP can create difficult problems for any individual. In addition to often being a large amount, it cannot be discharged in a bankruptcy. Once the penalty has been assessed against you, it can jeopardize your home or other property, ruin your credit rating and interfere in your family life. If you are the potential target of a TFRP assessment, or have been notified by the IRS that you will be interviewed in connection with a TFRP, the time to act is now. Experienced legal counsel can often make the difference. Daniel Rosefelt, Attorney & CPA has successfully defended many individuals against imposition of the TFRP and IRS levy actions.

Our firm is often retained to solve TFRP problems months, or even years, after it has been assessed. This generally happens after the IRS has commenced enforced collection activity for an “old” TFRP liability, or a taxpayer is prevented from selling or refinancing his or her house due to a federal tax lien filed in connection with the original TFRP assessment. The potential solutions are varied and complex, and require skilled representation.

At times, an Offer in Compromise, or a request for lien discharge or subordination, will be the answer. Sometimes the solution requires payment of the withholding tax for one employee, followed by a claim for refund. Issues may even require IRS administrative appeal procedures or federal court litigation. In all cases, an attorney experienced in representing taxpayers in TFRP cases should be consulted.

Call Us For Solutions To Serious Tax Problems

If you are experiencing IRS collection activity for an old penalty, or are threatened by the prospect of a new TFRP, contact Daniel Rosefelt & Associates at (301) 656-4424 or reach out by completing our ten-second consultation form. Once engaged to represent you in these matters, the tax professionals at our firm will use their experience and training to help you solve your problem.