What is Trust Fund Penalty?

A Trust Fund in terms of employment tax should not be mistaken with a trust fund in terms of wealth management. This is the payroll tax amount assessed to the officers of the business. Tax resolution can help reduce and or arrange the payment of these taxes.

What is a Trust Fund Recovery Penalty (TRFP)?

A Trust Fund Recovery Penalty can be assessed if the unpaid trust fund taxes cannot be immediately collected from the business. This often happens if the business falls on hard times and taps into that fund for any reason. According International Revenue Code 6672(a) an individual can be held liable for penalty for willful failure to collect, account for, or pay to the IRS the taxes for the business.

Who is Held Responsible for the TRFP?

According to the IRS, the TRFP can be assessed against any person who is: responsible for collecting or paying withheld employment taxes, willfully fails to collect or pay the taxes.

A Wage Garnishment Release Frees Your Wages from the IRS

As stated in earlier blogs, the Internal Revenue Service (IRS) can attach liens and levies against your personal and/or business assets to collect a tax debt. It can also attach a wage garnishment to your wages and earnings through your employer if you do not establish an installment agreement to pay the tax debt with them. However, obtaining a Wage Garnishment Release will stop the IRS from taking any part of your wages or earnings to satisfy your tax debt.

Just as the IRS can place a tax lien on your business, a wage garnishment is like a tax levy in that the IRS has a right to your property, i.e., your paycheck. Your employer is instructed to withhold a portion of your paycheck and send it to the IRS to make payments against your tax debt. If you are a business with a wage garnishment notice from the IRS for one of your employees, call us for advice on this payroll tax resolution. Wage garnishments are serious. They can affect not only your gross wages or salary, but commissions, bonuses, retirement benefits, disability payments, and VA and social security benefits.

Before garnishing your wages, the IRS will send you several notices reflecting the amount you owe in taxes before garnishing your wages. The IRS will garnish your wages if you do not attempt to pay off your debt in full or enter into an installment agreement with them. The IRS will NOT notify you that it is garnishing your wages but will directly issue a notification of garnishment to your employer. Your employer will then in turn notify you that your wages are being garnished.

As the name implies, a Wage Garnishment Release “releases” your wages from garnishment by the IRS. You must request a wage garnishment release from the IRS. Here are several main reasons that the IRS will consider before releasing your wages from garnishment:

Your tax debt has been paid off in full.
You have entered into a collection agreement: (However, failure in paying the agreed amount can led to the IRS garnishing your wages again.)
1. Offer in Compromise (OIC)
2. Installment Agreement (IA)
3. Currently Non-Collectible (CNC)
A Wage Garnishment would lead to financial hardship, making it more difficult to pay off your tax debt or pay for basic living expenses.
If you have not previously filed for an extension to pay (ETP) for this tax debt, but you have complied with previous payment agreements, the IRS may accept an extension to pay which will automatically release your wages from garnishment.

By amending or filing any missing or incorrect tax returns, you can also reduce the amount of collections owed. By having a tax professional review your tax returns for any missed deductions, you may also reduce your tax debt. The rules and fees that the IRS must follow do not make wage garnishment an ideal method for obtaining full payment of your tax debt. Since it is burdensome, the IRS is reluctant to release a wage garnishment once it is imposed since you were given warning via several notices.

Consulting a tax professional who can evaluate your specific tax situation and advise you on how to proceed is your best course of action, especially if you have received a notice of garnishment from your employer or your wages are already being garnished. Call us today at Bullseye Tax Relief so that we can help you avoid a wage garnishment or release one if one has already been imposed.