Trust Fund Penalty Assessment Interview

What Is A Trust Fund Recovery Penalty Interview?

A Trust Fund Recovery Penalty Interview and investigation permits the IRS (Internal Revenue Service) to collect unpaid taxes from businesses and assets of the individuals involved in the finances of the business. If the IRS believes you are responsible for the trust fund taxes, they will request an interview with you. The purpose of trust fund penalty assessment interview is to figure out if you are responsible for the recorded unpaid taxes or not. The interview is called a 4180 interview because the IRS agent will ask questions from the Form 4180 (Report of Interview With Individual Relative to Trust Fund Recovery Penalty).

What Is The “Trust Fund” In Regards To Form 4180?

Payroll taxes are withheld by the employer on behalf of each of the employees in trust for the U.S. Treasury. The amount of money the employee owes to the IRS is called “trust fund” taxes. This “trust fund tax” makes up the bulk of the payroll taxes due to the United States Treasury. Employers are responsible for calculating the taxes due from their employees’ earnings and sending it to the IRS on behalf of all employees.

 

When the IRS does not receive any money on behalf of the employee from a business, the IRS will then try to collect this trust fund tax by utilizing IRS Form 4180.

How to Avoid the 4180 Interview if Liable?

The best way to get out of the interview is to pay the bill and cancel the interview. You could also admit being liable by signing the Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) and then try to set up a payment plan or apply for a settlement.

 

If the bill is under $25,000, the business should be able to pay it back over a 24-month period. Once a business sets up payments, you no longer have to worry about any personal assets being at risk.

Examples of Personal Assets:

Automobiles

Jewelry

Furniture

Checking Account

Savings Account

How to Avoid the 4180 Interview if Not Liable?

If you are not responsible for the payment of Trust Fund Taxes, you can argue your liability. However, this can be extremely difficult and it is highly recommended to get a tax professional to assist you. Perhaps you accidentally signed off on a tax but you were not really responsible for the collection and payment of those taxes. The tax professional will have to prove that you are not responsible for the unpaid tax even if you were involved with the company finances.

How Can One Survive A Trust Fund Interview For Back Payroll Taxes?

If you are the person responsible for the collection and payment of the Trust Fund Taxes, accept the fact you are being held accountable for those taxes and move to resolve the resulting debt owed. However, if you are not responsible, then it is well worth the fight. The amount owed can be staggering since the more employees involved, the larger the liabilities will be.

Some reasons why the trust fund penalty is assessed when it should not be:

Next Steps:

Being honest and upfront is the fastest way to get this matter resolved. Although you may be liable,  it is best to contact a tax professional to confirm liability and assist you with moving forward. If you believe yourself to be innocent and should not be held accountable, then contact us to assist you. We can help you so please contact us for any questions or assistance with your current situation. Check for more information on our tax problem resolution services page.

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