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.

Tax Resolution Services: Types of Installment Agreements, Continued

Struggling with tax debt can be a difficult situation for any person or business owner and sometimes it’s easy to lose hope or feel overwhelmed. But you’ve made it to our blog post! You’re ready to learn about some of the tax resolution services available and you’re in the right place!

Well – if you’re coming from our previous blog post, Tax Resolution Services: Types of Installment Agreements, then you’re definitely in the right place. If not, you’re very close! In our recent blog series, Tax Resolution Services, we’ve discussed many of the more common tax resolution services that are available to businesses and individuals that are struggling with tax debt to the IRS. Depending on your current financial situation, as well as several other factors, there are a variety of tax resolution options available. To learn more, start at the beginning with our introductory blog posts, What is Tax Resolution? and Tax Resolution Options.

In this blog post, we’ll be building on what we covered in our previous post, Tax Resolution Services: Types of Installment Agreements, and discussing the three remaining types of Installment Agreements, excluding the Partial Payment Installment Agreement, which we’ve covered in other recent posts.

The Differences Between the Installment Agreements

As we covered in the last post, there are three main types of installment agreements, excluding the Partial Payment Installment Agreement. We’ll briefly summarize them and discuss their requirements next!

Types of Installment Agreements

Guaranteed IRS Installment Agreement
Streamlined Installment Agreement
In-Business Trust Fund Installment Agreement

Guaranteed IRS Installment Agreement

According to our Installment Agreement Service Page, if you meet certain IRS criteria – listed below – you or your business may be eligible for a Guaranteed IRS Installment Agreement, which does not require you to complete a financial statement or verification. You may be eligible for a Guaranteed IRS Installment Agreement if:

You owe $10,000 or less in tax debt
You have filed all required returns
You agree to allow the IRS to take all future returns to pay down the debt
You agree to file and pay on time for all future returns
You agree to pay off your installment agreement in 72 months or less

Streamlined Installment Agreement

The Streamlined Installment Agreement is for those that owe more tax debt than the $10,000 stipulated in the Guaranteed IRS Installment Agreement, but similar to the guaranteed agreement, also typically does not require you to complete financial statements and verification. According to our Installment Agreement Service Page, you may be eligible for a Streamlined Installment Agreement if:

You owe $25,000 – $50,000 in tax debt
You have filed all required returns
You agree to file and pay on time for all future returns
You agree to pay off your installment agreement in 72 months or less

In-Business Trust Fund Installment Agreement

This last Installment Agreement, the In-Business Trust Fund Installment Agreement, is specifically for small businesses and also different than the previous two installment agreements because it has a much shorter timeframe to pay back the tax debt. But, like the first two, this installment agreement also does not usually require that you submit financial verification and statements. According to our Installment Agreement Service Page, you may be eligible for an In-Business Trust Fund Installment Agreement if:

You are a small business with employees
You owe $25,000 in tax debt or less
You have filed all required returns
You agree to allow the IRS to take all future returns to pay down the debt
You agree to file and pay on time for all future returns
You agree to pay off your installment agreement in 24 months or less

As you can see, all three of these installment agreements usually do not require that you submit financial verification and statements and they all require that you have filed all required returns. After that, they vary in different ways, from the amount owed, to the timeframe, to whether the taxpayer is an individual or a business. In our next blog post, Tax Resolution Services: Installment Agreements vs the IRS PPIA, we’ll discuss the differences between all four installment agreements in greater detail.

If you’re struggling with tax debt and looking for help, give one of our tax resolution specialists a call today at (844) 582-3323. We are proud to offer a free consultation and transcript analysis for new clients!