If you own a business, you are likely required to pay payroll taxes (income tax, Social Security, and Medicare taxes) to the IRS. Now, the IRS has sent you a payroll tax assessment (Letter 1153), stating that they will hold individuals in your business personally liable for unpaid taxes.
Receiving a payroll tax assessment can be nerve-wracking, but the qualified tax professionals at Highland Tax Group can help your business get this sorted out.
Who is Liable for Unpaid Payroll Taxes?
If your business has unpaid payroll taxes, the IRS will hold individuals in the business personally liable for the unpaid taxes – this is called the Trust Fund Recovery Penalty (TFRP). Individuals likely to be pursued under TFRP include:
- The business owner
- Officers or directors
- Bookkeepers or payroll managers
- Any employee with authority and responsibility over tax payments
How Does TFRP Work?
To hold a person liable under the TFRP, the IRS must prove that the person was responsible for handling payroll taxes and willfully failed to do so. Two definitions are very important here: responsible and willful.
Responsible means the person had the authority to make financial decisions for the business and a duty to ensure the taxes were paid. For a person to willfully fail to pay taxes, they must have known the taxes were outstanding and chose not to pay them.
Challenging IRS Assertions of Willful Responsibility
If you believe you were improperly named as a willfully responsible party and are being pursued under TFRP, you can challenge this assertion with the IRS. You have 60 days from the date you received Letter 1153 to respond to the IRS, requesting a conference with the IRS’s Independent Office of Appeals.
The request should also include a written protest, a document that disputes responsibility and willfulness. The written protest should consist of evidence that you were not a financial officer of the business, you did not have the authority to approve payments, and you were unaware of the unpaid taxes or advocated for the payment of the taxes.
Preparing for and drafting your written protest, as well as presenting a strong case at your conference, is crucial to winning your case. Having an experienced tax professional from Highland Tax Group can make all the difference in your case.