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.

Collection Due Process

What is a Collection Due Process?

A Collection Due Process (CDP) hearing could be your last chance to resolve whatever tax controversy you have with the IRS. The IRS will issue a IRS Letter 1058, Notice of Intent to Levy and Right to Request a Hearing. Or the IRS will send IRS Letter 3172, Notice of Federal Tax Lien File and Your Rights To a Hearing before it sends a levy. After that notice you must have a CDP hearing within 30 days of the notice. To request a hearing, you must fill out IRS Form 12153.

Collection Due Process: Liens and Levys

What Is A Notice Of Federal Tax Lien?

A federal tax lien can have some big consequences. For example, liens can be attached to your home, making it difficult to refinance that home. Potential buyers can be hesitant to buy the home since it is associated with the IRS in such a negative way.

How Can I Avoid A Federal Tax Lien?

Pay the taxes you owe as well as those for your business, if applicable.
Enter into a Guaranteed Installment Agreement.
Enter into a Streamlined Installment Agreement.
Pay down your balance.
File an Offer In Compromise.

What Is A Notice Of Intent To Levy?

A Notice of Levy is much more serious than levying 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. A levy under U.S. Federal law 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 begin to seize assets until the tax liability is paid in full. If you happen to disagree with anything the IRS says you owe, you can file the CDP (Form 12153) request only within 30 days of these notices. Otherwise, you forfeit your right to object.

Examples of properties that can be seized

Land

Businesses

Properties

Automobiles

How Can I Stop A Levy?

How Can I File A Collection Due Process Request?

It is best to speak with a tax professional when requesting a CDP. The tax professional will file IRS Form 12153, Request for a Collection Due Process Equivalent Hearing. The form will require some background information and the reason why you believe the IRS should not pursue the lien or levy against you. You send this form back to the return address displayed on the envelope containing the notice.

How Much Time Is There To File A Collection Due Process Hearing Request?

You will have 30 days from the date of the letter. They are extremely strict with this requirement and failing to file within the 30 day period will result in you losing the right to a CDP hearing. If the CDP request is filed on time, the IRS must put a hold on collecting the debt amount pending the outcome of the hearing. If you happen to miss the 30 day deadline, you can still file for an Equivalency Hearing; however, the IRS is already authorized to pursue the debt against you.

Next Steps:

Once you get either IRS notification (Letter 3172, Notice of Federal Tax Lien and Your Rights to a Hearing or IRS Letter 1058, Notice of Intent To Levy and Notice of Your Rights to a Hearing), you should request the CDP hearing. Do NOT miss the 30-day deadline since you will miss your only opportunity to object. We are here to assist with any part of this process from the beginning to the end. Feel free to contact us for help regarding your situation.

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