Trust Fund Recovery Penalty Abatement

Trust Fund Recovery Penalty Abatement | Trust Fund Recovery

The IRS uses Letter 1153 (IRS Letter 1153, LTR 1153, Notice 1153) to propose an assessment of the Trust Fund Recovery Penalty against a Responsible Party. When a business doesn’t pay the employee withholding taxes, the IRS is empowered to collect from those persons who could have paid the tax, especially those who had any signatory control over the business bank account. These “persons” are called Responsible Party and are subject to the Trust Fund Recovery Penalty.

Because the employees were given credit for the taxes (& FICA) never paid to the Government, the IRS feels the Responsible Party has used the money for personal benefit.

Two Sides to Payroll Liabilities

Employer Side

If the business is a Corporation (S or C) THE COMPANY is liable for the employer’s portion of the taxes (1/2 Social Security and Medicare, FUTA). For a Schedule C, self-employed (or single-member LLC) business the responsible persons are liable for the full tax.

Trust Fund Portion

The “Responsible Party” is liable for the other half for the Social Security/Medicare and Federal withholdings. This is the portion that can be assessed against ALL “Responsible Parties”.

You have 60 days to Appeal the assessment. After an assessment is been made it becomes a personal liability, subject to collection.

The better option to dispute the assessment is to pay all (or a portion) of the tax and file a claim for refund, Form 843. The IRS will ignore your claim. After 6 months you can sue in US District Court. The US District Court is a better forum because the Court has Equitable Powers over the IRS. They will fairly and independently review your case. In any event, tax attorney guidance is critical. If the case is decided against you in Court, no further IRS Appeals are possible.

If you admit you are a responsible person it is futile to contest it. You should seek guidance before you reach this decision.

If you are a “Responsible Party”, you can sign and agree to the liability with Form 2751.

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What is my first step?

If you received a letter or notice, a decision has to be made. Do you feel confident to handle this situation on your own? If it is a simple issue and you already know the answer, call or write them. If the issue is more complicated, you need to hire a Certified Tax Resolution Specialist. The IRS or State will take full advantage of your lack of knowledge and experience.

What is Your Next Step?

The next step is to determine if the notice was sent in error. Do you have an outstanding tax liability? Do you have unfiled or incomplete returns?

Is There a Time Limit?

Yes, each letter or notice from the IRS or State will indicate a date that you MUST to contact them by. If you need more time, call the number on the notice or letter and request an extension. DO NOT ALLOW the time to expire without contacting them or hiring a representative to contact them for you.

What You Don’t Want to Do!

What you don’t want to do is nothing. Your tax problems will only get worse if you ignore them. If you cannot pay, there are a number of potential solutions available to those who are otherwise in compliance. In compliance means having all tax returns filed and any balances paid or on a payment plan. If you have outstanding debts or unfiled returns, you need to get hire a Certified Tax Resolution Specialist.

Get Some Help

If you don’t know how to address the issue(s), have unfiled return/unpaid balances or just done feel confident, let the experts at Legacy Tax & Resolution Services represent you. Work with our team of Certified Tax Resolution Specialists to resolve your issue(s) quickly. Best of all, you don’t have to talk to the IRS or State; we can speak on your behalf.