Maybe a company is struggling. Maybe the company is closing. Maybe the company was otherwise negligent. Whatever the reason, when a company fails to pay payroll and employment taxes, persons within that company who are deemed responsible for the withholding and failure to turn those funds over to the IRS can be held personally liable. Many companies do not realize that defaulting on paying taxes is unlike defaulting on other types of business debts regardless of the business's structure as a limited liability company. When a company does not pay its taxes to the IRS, Trust Fund Recovery Penalty (TFRP) can be assessed against each individual, responsible party.
If you have been slapped with a TFRP or have a Revenue officer assigned to your case, contact an experienced Trust Fund Recovery Penalty lawyer today. At Gabaie & Associates, LLC, we are committed to your case, we have the resources to successfully pursue it, and we will seek an appeal or resolution that works in your favor. Tax attorney Juda Gabaie and his team assist clients with TFRP appeals and resolution through Maryland and have convenient office locations in Annapolis, Baltimore, Columbia, Frederick, and Rockville. Contact Gabaie & Associates, LLC today.
Timeline of Events before a TFRP Appeal
When your business has been identified as delinquent on employment and payroll tax deposits or filing requirements, the business is referred to a local IRS office to be assigned a Revenue Officer. At this time, several things occur before you invoke your IRS Appeal rights. Some of what occurs is described below.
The Start of the TFRP Process. A Federal Tax Deposit (FTD) alert and notice are sent to the business.
Assignment of Revenue Officer. If you do not respond to the alert and notice, a Revenue Officer (RO) is assigned to the case to conduct a full investigation. To get your company into compliance, the RO may send a Form 930, which instructs the employer to establish a special trust account for employment tax deposits.
Revenue Officer's Investigation. If the employer still does not respond, the RO will investigate to determine responsible parties. During this process, if you are suspected as a responsible party, you will receive a Letter 3586 that appoints a meeting for an interview.
The Interview & Form 4180. During interviews, Form 4180, Report of Interview with Individual Relative to Trust Fund Recovery Penalty, will be used to assess a TFRP. This form is important and serious caution should be taken with how you complete it. There is no requirement to sign the form during the interview, but if you do -- you will do so under penalties of perjury.
Post-Investigation & Proposed Assessment. After the investigation, the proposed assessment letter, or Letter 1153, will be sent outlining the assessments of penalty. In this letter, you are advised of your IRS Appeal rights.
IRS Appeals Rights
Among the rights granted to you, there are three specific ones.
- You have the right to appeal if requested within 60 days of Letter 1153.
- You have the right to have an authorized representative -- your attorney -- accompany you during the appeal process.
- You have the right to have a court review the assessment with or without a special bond in the event you disagree with the IRS Appeals decision.
The Appeals Process
When you receive Letter 1153, you have 60 days to file a protest to challenge the assessment. Your request for a hearing with the IRS to appeal the collection action should be provided as a formal written protest that clearly and concisely establishes factual and legal arguments against the TFRP. Letter 1153 will provide specific instructions, but to be sure, you will need to include all relevant documentation as evidence supporting your case. This evidence can also include any kind of records and affidavits you may have or you find necessary.
After you send your protest within 60 days, a number of events may transpire:
- You will receive a Letter 4141. This letter informs you your case has been assigned to an Appeals Officer and provides information on the appeals process.
- Within 30 days, you will receive a follow-up letter that sets the date and time of the hearing.
- You may also receive another appeals letter that states preliminary findings in response to the protest you sent to the IRS.
- If you have any additional materials you want the Appeals Officer to consider before the hearing, it should be provided at least five days before the conference.
- At the conference hearing -- which your attorney may or may not want you present -- or soon after the hearing, you may submit a qualified settlement offer under IRC § 7430.
After the conference, Appeals will send a letter that
- Sustains the original proposed TFRP;
- Accepts the proposed settlement; or
- Offers a hazards of litigation settlement.
Once you receive the Appeals settlement offer, you typically have one week to accept it or not. If you do not send a response in due time or you do not agree with the settlement offer, the case returns to the Collection Area Director. The Appeals Officer will send a final letter reminding you of the assessment decision and requesting payment in full.
If settlement discussions were unsuccessful, you may still have an opportunity for mediation per Rev. Proc. 2014-63. You must write a request for the mediation and sent it to the appropriate Appeals Team Management.
Three Things to Keep in Mind
- Keep in mind that once you receive your first bill for the unpaid penalty, if you do not pay it within 20 days, interest will start to accrue.
- Keep in mind that the IRS is limited by Statute of Limitations. There is a three-year limit for the IRS to assess the penalty, and the start time is April 15 after the year the trust fund taxes were due to be filed. There is a ten-year limit to collect the debt once an assessment has been determined.
- Keep in mind that the Appeals process is not the only means to deal with the IRS and the proposed TFRP assessment. You have options. It's a complex process, and an experienced tax attorney like Juda Gabaie can help you through it.
Trust Fund Recovery Penalty Appeals Attorney in Maryland
Little do many employers know that if they withhold payroll and employment taxes and fail to submit the funds to the IRS, individuals within that company can be held personally liable for payment of those taxes. An experienced tax attorney can help you. Contact us today at 443.345.8291 for a consultation.