Trust Fund Recovery Penalty Attorney

A trust fund recovery penalty is one of the most significant penalties assessed by the Internal Revenue Service (IRS), and it can mean you are personally liable for certain unpaid payroll taxes. This can be a very stressful and overwhelming penalty to be assessed, and it is crucial that you work with a trust fund recovery penalty attorney. A Miami State tax attorney helps you determine your options for resolving this debt with the IRS.

Hire a Trust Fund Recovery Penalty Attorney With TaxSmith, LLC

The team at TaxSmith, LLC, has over a decade of tax law experience. It can be very overwhelming if you are held liable for business taxes from a trust fund, especially if you didn’t know you were a responsible person. There are ways to address a trust fund recovery penalty (TFRP), potentially avoiding being held liable or negotiating other ways to pay the debt. Our team helps you navigate these options.

What Are Trust Fund Taxes?

Trust fund taxes refer to the taxes that employers withhold from their employees as part of their payroll taxes. This largely includes the employee’s half of the Federal Insurance Contributions Act (FICA) taxes and the employee’s federal income taxes. FICA taxes include contributions to Medicare and Social Security.

When an employer or other party withholds these taxes, they act as the trustee for those funds, and those funds are owed to the IRS and the federal government.

The Trust Fund Recovery Penalty

The TFRP is assessed if the business fails to pay this portion of its employment taxes. Any person responsible for paying those taxes who willfully did not withhold or file them might be held personally liable for the full amount of taxes owed.

The IRS assesses many civil penalties against businesses, including over 952,000 penalties against corporations totaling nearly $4.7 billion. A TFRP is different from these types of penalties.

A TFRP is not restricted to holding a business liable. The IRS can bypass typical corporate protections to assess this penalty. Your personal assets and income could be at risk. You could face collection actions like liens or levies. The IRS requested nearly 313,800 levies in 2024. This extreme method of recovering payment is done to achieve accurate and full payment of FICA taxes and federal employment taxes.

Who Is Liable for a Trust Fund Recovery Penalty?

You can be held liable for a TFRP if the IRS can prove that you:

1. Were responsible for collecting and paying the trust fund employment tax
2. Willfully failed to collect or pay the tax

You are considered a responsible party if you are entrusted with both the duty and the power to have a say over accounting, withholding, and paying of the tax. This can include:

• Business owners
• Corporate officers or employees
• Partnership members or employees
• Directors or shareholders in a corporation
• Board members
• Bookkeepers
• A third-party corporation or payer
• Any other person or party with control and authority over funds and how they are used

Willfulness is determined based on the following:

1. The responsible person was aware of the taxes owed, or should have been aware of them.
2. They were either indifferent to their legal responsibilities or intentionally ignored the law.

Under both of these willfulness requirements, the responsible person does not need a malicious motive to be considered liable for the tax. When the IRS conducts an investigation into the unpaid trust fund taxes, it will likely conduct interviews to determine the responsibilities of different individuals in the company and their willfulness. It is important to hire a Miami IRS tax attorney in these situations to protect your rights.

Are There Options for Trust Fund Recovery Penalty Relief?

The most effective way to avoid a TFRP is to make certain that all employment taxes are properly collected and paid. If you are already facing a TFRP, there may still be options such as:

• Proving you are not a responsible party, and did not have the control and ability to collect and file the trust fund taxes
• Proving you did not willfully fail to collect or pay the taxes
• The assessment or collection action is outside the IRS statute of limitations for those actions.

You have 60 days to file an appeal after the IRS informs you of the TFRP. When you work with a skilled attorney, they can review your unique circumstances to determine if there are options for relief from the TFRP.

FAQs About Florida Trust Fund Recovery Penalty Law

How Much Is the Trust Fund Recovery Penalty?

The trust fund recovery penalty is the same as the unpaid balance of the trust fund tax, meaning you could be held liable for all of the taxes owed to the IRS. It is not a percentage of the unpaid debt like some other penalties. The penalty is determined based on the income taxes that were withheld but not paid, and the employee’s portion of FICA taxes.

How Long Does the IRS Have to Collect a Trust Fund Recovery Penalty?

A penalty like a trust fund recovery penalty needs to be assessed by the IRS within three years of the return being filed. If the return is not filed, then this limit does not apply. Once the penalty is assessed, the IRS generally has 10 years to recover the amount assessed. However, there are several circumstances that can pause the 10-year time limit. This includes filing for bankruptcy, negotiating tax debt settlement, or living outside the United States

What Is an Example of a Trust Fund Recovery Penalty?

A trust fund recovery penalty occurs when someone who had the power and ability to collect and pay the IRS employment taxes failed to do so, and they are held personally responsible. This may include a corporate officer, a lead accountant, a corporate treasurer, or another party that made decisions on payments, had access to accounts, or acted as a bookkeeper. If you pay creditors with the trust fund taxes, this results in a TFRP.

What Is the Trust Fund Recovery Penalty Assessment Statute?

The trust fund recovery penalty assessment statute is found in Internal Revenue Code (IRC) 6672. It is also found in the Internal Revenue Manuals (IRM) in part five, chapter 19, section 14. The IRC is the US code, while the IRM provides IRS employees with instructions and guidelines used internally.

Trust Fund Recovery Penalty Lawyer

Reach out to TaxSmith, LLC, today for help addressing a TFRP before it causes you serious personal financial hardship.

Florida Trust Fund Recovery Penalty Attorney Additional Resources:

Tax Liens in Florida

• How to Remove a Tax Lien in Florida
• Federal Tax Lien Statute of Limitations in Florida
• How Long Does a Tax Lien Last in Florida?

Tax Debt & IRS Issues in Florida

• How to Get Out of Tax Debt in Florida
• Can a Tax Attorney Negotiate with the IRS to Resolve Tax Debt Issues in Florida?
• IRS Offer in Compromise in Florida
• How to Negotiate a Tax Debt Settlement with the IRS in Florida
• Tax Settlement Options for Florida Residents