Source: https://polittelaw.com/trust-fund-recovery-penalty/
Timestamp: 2019-09-22 15:09:26
Document Index: 178434654

Matched Legal Cases: ['§ 6672', '§ 39', '§ 43', '§ 5', '§ 105', '§ 12', '§ 111', '§ 59', '§ 58']

Trust Fund Recovery Penalty - Politte Law Offices, LLC
The Trust Fund Recovery Penalty (TFRP) is also sometimes referred to as the Responsible Person Penalty, Responsible Officer Penalty, or 100% Penalty.
To encourage prompt payment of certain taxes, such as withheld employment taxes, Congress passed a law, I.R.C. § 6672, that provides for the TFRP or Responsible Person Penalty. Many state governments, have passed similar laws—for instance: C.R.S. § 39-21-116.5 (Colorado); Ariz. Rev. Stat. Ann. § 43-435 (Arizona); Mass. Gen. Laws ch. 62B, § 5 (Massachusetts); N.C. Gen. Stat. § 105-242.2(b) (North Carolina); S.C. Code Ann. § 12-8-2010(A) & (D) (South Carolina); Tex. Tax Code Ann. § 111.016 (Texas); Utah Code Ann. § 59-1-302(2) (Utah); Va. Code Ann. § 58.1-1813 (Virginia).
The TFRP, or Responsible Person Penalty, is a mechanism that the IRS uses to hold individuals, personally liable for the unpaid taxes of a company, including a corporation, limited liability company, partnership, or payroll service provider. Although the TFRP can be used to hold individuals responsible for several different types of tax, it most commonly used to hold them personally liable for a company’s non-payment of the “trust fund” portion of employment taxes.
Employment taxes can be broken down into two parts: the “trust fund” portion of the taxes and the non-trust fund portion of the taxes.
Trust Fund Taxes vs. Non-Trust Fund Tax
The trust fund portion of employment taxes consists of the taxes that an employer withholds from an employee’s wages. When an employer pays its employees, the employer does not pay the employees all of the money that the employees earned. This is because employers are required to withhold taxes (income tax and the employee’s share of Social Security and Medicare taxes (FICA)) from their employees’ paychecks and pay the withheld taxes to the government. The income tax and employees’ share of FICA (social security and Medicare) that an employer withholds from its employees’ paychecks are part of the employees’ wages, although they are paid to the government instead of to the employees. These taxes are called “trust fund” taxes because an employer actually holds its employee’s money, in trust, until the employer pays the withheld amount to the government.
The non-trust fund portion of employment taxes consists of the taxes that an employer pays from the employer’s own funds: the employer’s share of Social Security and Medicare (FICA) tax, and federal unemployment tax (FUTA).
The IRS is especially aggressive in employment tax and Trust Fund Recovery Penalty collection. The government likens a company’s failure to pay trust fund employment taxes to stealing because the withheld trust fund taxes are not the company’s money, but are employees’ money, held in trust by the company.
Unfortunately, a Trust Fund Recovery Penalty assessment can be devastating to the individual against whom it is assessed. The TFRP is often a very large amount, and it cannot be discharged in bankruptcy.
If you are a shareholders, officer, director, member, manager, partner, or employee of a business that is facing employment tax problems, or if you are the potential target of an IRS assessment of the TFRP, call the employment tax attorneys at the Politte Law Offices immediately. Do not speak to the IRS, no matter how friendly or helpful the IRS agent may seem, as this may damage your case. IRS agents are specially trained in employment tax matters to extract as much information as they can in order to use that information against both the business and individuals who the IRS may hold responsible for the Trust Fund Recovery Penalty.
Experienced legal counsel can often make the difference. The attorneys at the Politte Law Offices are experienced in handling Trust Fund Recovery or Responsible Person Penalty cases, and have successfully defended many individuals against assessment of the TFRP. We represent clients at all stages involving the Trust Fund Recovery Penalty, which include the IRS’s initial TFRP investigations, when the IRS proposes TFRP assessments, appealing proposed TFRP assessments, when the IRS actually assesses the TFPR, appealing TFRP assessments, filing claims for refund challenging TFRP assessments, litigating TFRP assessments in court and on appeal, and the IRS’s collection of the TFRP.
Contact the employment tax attorneys at the Politte Law Offices today by calling 303-261-8044 or using our online form.