At LA-Twins, we understand the complexities of tax regulations and are here to help our clients enhance their leads for tax reliefs. The IRS requires businesses to withhold a certain amount from employee paychecks every pay period. These funds, which include Social Security and Medicare contributions, are held in “trust” by the employer until paid to the IRS. When a business fails to remit these payroll withholding taxes, the IRS identifies responsible individuals, who may face accountability through the Trust Fund Recovery Penalty (TFRP). Read on to learn how the TFRP is determined and how we can help manage this penalty.
Two Key Determining Factors for the Trust Fund Recovery Penalty
When determining the TFRP, the IRS considers two key factors:
- Responsibility for Payment: The IRS investigates who is responsible for failing to pay the payroll deposits. While the responsible party could be the CEO, owner, or director of the business, titles alone do not determine liability. Individuals ranging from bookkeepers to board members and even outside accountants may be held liable if found to have willfully failed to collect and pay employee taxes. The IRS may request various documents, such as bank statements, canceled checks, and articles of incorporation, to identify those responsible.
- Willfulness of Non-Payment: The IRS must demonstrate that the failure to pay was willful. This means that the responsible party knew taxes were due and intentionally chose not to pay. Additionally, others who are aware of the non-compliance and take no action to rectify the situation may also be deemed willfully responsible.
Managing the TFRP
Those identified as responsible must repay the entire TFRP assessed, along with any accrued interest. If the taxpayer cannot fully pay the assessed amount, options such as Installment Agreements or Offers in Compromise may be available.
An Overview of the Trust Fund Recovery Penalty
When a business willfully fails to remit payroll deposits (funds withheld from employees’ paychecks), the IRS assesses a Trust Fund Recovery Penalty. This penalty is assigned to individuals deemed willfully responsible for the non-payment of payroll tax deposits or those who were aware that taxes were not being paid. Responsible parties must personally repay the TFRP owed to the IRS, plus interest.
At LA-Twins, we are dedicated to assisting our clients in navigating their tax relief options. With over 40 years of experience, we offer straightforward, honest guidance without any empty promises. If you’re facing delinquent tax liabilities, reach out to us for a consultation. Our team is here to help you understand your options and take the necessary steps toward resolution.
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Visit LA-Twins to request a consultation or contact us via contact@la-twins.com. Let us help you enhance your leads for tax relief.
