Employment Taxes and the Trust Fund Recovery Penalty: What You Need to Know — Part II

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Totaling 100 percent of unpaid employment and federal taxes, the TFRP is not to be taken lightly. In this segment of our three-part series on this devastating penalty, we highlight the assessment process and its implications.

How is the TFRP assessed?

As soon as the IRS determines that employment taxes have remained willfully unpaid, a lengthy investigation begins. First, the agency makes its intentions known by sending a warning letter.

The window for appeal is narrow: in most cases, just sixty days after receiving a letter from the IRS. The failure to promptly respond to the initial letter could result in a Notice and Demand for Payment.

What happens during a 4180 trust fund interview?

Often, the IRS determines whether to assess the TFRP based on information gathered during a 4180 interview. This is named for the document that guides the interview — IRS Form 4180: Report of Interview with Individual Relative to Trust Fund Recovery Penalty or Personal Liability for Excise Taxes.

The 4180 interview helps the IRS determine who, exactly, is responsible for withholding employment taxes or making key financial decisions for the business in question. Typically, revenue officers conduct interviews with multiple people. These take place in person or over the phone.

Can TFRP collection involve personal assets?

Depending on who is deemed responsible during the investigation and 4180 interviews, collection action may be needed to obtain penalties. In some cases, this means that the IRS can go after personal assets while taking collection action. Examples could include filing federal tax liens or assessing levies.

You’ll find it far easier to navigate TFRP interviews and the appeals process with an enrolled agent on your side. The team at the Highland Tax Group can work with you every step of the way. Contact us today to learn more about your options for avoiding the TFRP.