The Trust Fund Recovery Penalty (TFRP) can be avoided by ensuring that all employment taxes are collected, accounted for and then sent to the IRS for payment when required. Make sure these tax payments are on time and accurate. If you do this correctly, you will avoid any Trust Fund Recovery Penalty (TFRP) assessment by the IRS.
Withholding trust fund taxes from the IRS can lead to heavy fines for any party involved. Not only are you hurting the IRS, but you could also be significantly harming your employee(s) by not documenting their payments of their share of these withheld taxes. These payroll taxes include the payment of the Federal income tax, Social Security tax, Medicare tax and self-employment taxes, if applicable.
A Trust Fund Recovery Penalty is often stressful for all responsible parties and businesses involved. There are a number of options for successful employment tax resolution. If you feel that you may be liable for TFRP, have received notice from the IRS that they are assessing a TFRP against you, or you just want to avoid the hassle of this responsibility altogether, then contact us for help with payroll tax.
The IRS will issue IRS Letter 1058, Notice of Intent to Levy and Right to Request a Hearing or IRS Letter 3172, Notice of Federal Tax Lien File and Your Rights To a Hearing before it imposes a levy. You must have a Collection Due Process (CDP) hearing within 30 days of the notice. To request a hearing, you must fill out IRS Form 12153, Request for a Collection Due Process Equivalent Hearing.
The IRS can impose a Federal Tax Lien or a levy against you for the tax amounts due. They will first issue letters. It is extremely important to respond to these letters immediately. Liens can be attached to your home, making it difficult to sell or refinance the home. The IRS can impose a tax lien on your business. If a lien has been imposed by the IRS, you will need help with this payroll tax problem. Payment of the taxes owed in full, using installment agreements, or entering into an Offer in Compromise are options.
A Notice of Levy is much more serious action than a lien. If you receive a Notice to Levy your business bank account, the IRS will immediately attempt to seize funds directly out of that bank account. Under U.S. Federal law, a levy is an administrative action by the IRS to seize property to satisfy a tax liability. The levy “includes the power to seizure by any means”. Once the IRS levy is in place, they will seize assets until the tax liability is paid in full. If you disagree with the IRS in what they say you owe, you can file the CDP (Form 12153) request only within 30 days of this notice. Otherwise, you forfeit your right to object. Levies can be stopped by requesting a Collection Due Process (CDP) hearing or a Collections Appeal program or by entering into an Installment Agreement or asking for an Offer in Compromise.