Trust Fund Recovery Penalty

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Businesses that run into cashflow problems will generally pay it's employment taxes last, as the IRS is the last creditor knocking at the door. If a business fails to pay it's employment taxes to the IRS, the IRS will assess the trust fund recovery penalty, which imposes personal liability on owners, offices, directors, and employees. Any person who is a responsible party and who willfully failed to collect, account for, and pay over the employment taxes, may be personally liable for those taxes regardless of the corporate shell.

To determine whether an employee is a responsible person, is a matter of status, duty, and authority. This tax law firm will show that workers performing ministerial acts without exercising independent judgment, will not be deemed a responsible party. A corporate title without the authority to act does not make a person responsible. The IRS claims that shareholders, officers, directors, employees of a corporation, partners in a partnership, members of an LLC, and employees can be a responsible party. However, responsibility depends on the facts of circumstances.

We will investigate the duties set forth in your employment agreement in the bylaws, determine who has authority to sign checks, determine who is in control of the financial affairs, who has authority to determine which creditors will be paid, who controls the payroll disbursements, who had control of the voting stock, and who signs the employment tax returns to show you are not a responsible party and you did not willfully fail to pay the payroll taxes.

The critical test is whether the person has the affective power to pay the payroll taxes oath. Willfulness indicates intentional, voluntary, or knowing conduct that is not accidental. Even though no evil intent or bad motive is required, willfulness is the attitude of a responsible party not to pay the payroll taxes. Willfulness exists when the person was aware of the outstanding taxes, and either deliberately chose not to pay, or recklessly disregarded a risk that the taxes would not be paid. This tax law firm will martial all the facts and evidence to show a lack of willfulness, and avoid assessment of the trust fund recovery penalty.

The trust fund portion is the federal withholding in employees share of social security, medicare, and unemployment taxes. The trust fund portion does not include the employers matching portion, or the penalties or interest. The trust fund recovery program can only be collected once. However, the IRS will try to allocate all payments to the non trust fund portion. This tax law firm will show you how to designate any payments to the trust fund portion only.

Our defenses to the trust fund recovery penalty generally include showing that the person is not responsible, did not act willfully, acted with reasonable cause, the IRS misapplied the designated payments, or that the statute of limitations on either assessment or collection has expired. This tax law firm has been extremely successful in eliminating the trust fund recovery penalty in it's entirety, or reducing the trust fund recovery penalty based on the facts and circumstances. Please call me at 858-481-4844 for a confidential call that's protected by the Attorney Client Privilege.