Trust Fund Recovery Penalty Lawyer | IRS Payroll Tax Defense
A letter from the IRS, a call from a Revenue Officer, or a notice that an interview has been scheduled to recover payroll taxes from you might come as a shock. However, when a business falls behind on payroll taxes, the IRS has the power to pursue you personally.
This can feel overwhelming, and you’re probably wondering how far the IRS can go to recover these taxes. The short answer? The agency can do everything in its power to collect unpaid trust fund taxes, including seizing nearly all of your business and personal assets.
“When you have payroll taxes, they are what are called trust fund monies. These are monies that you, as the employer, are taking out of the employees’ salaries. It is not your money; it is money held in trust for the employees’ taxes. When you take something that doesn’t belong to you and don’t do what you’re supposed to do with it, the IRS views that as stealing,” says Stephen Kass.
Stephen B. Kass is a dedicated trust fund recovery penalty lawyer who works with clients to handle TFRP cases. Contact us online or by calling (212) 843-0050 for guidance.
If You’re Facing a TFRP Investigation, You’re in the Right Place
Are you dealing with any of the following? Then, you’re in the right place for TFRP help.
- Unpaid payroll taxes with no plan for repayment
- Business subject to a TFRP interview
- Letters about trust fund penalty interviews
- IRS TFRP assessment against you personally
- Unable to pay a TFRP that’s already been assessed
Many people who end up in this situation aren’t trying to defraud the government. They may have been trying to keep the doors open while facing mounting financial pressure. We understand that things happen, but the IRS isn’t so understanding.
That’s why you need experienced representation to protect yourself.
What is the Trust Fund Recovery Penalty (TFRP)?
The Trust Fund Recovery Penalty (TFRP) is a serious and often misunderstood enforcement action from the IRS. Under IRC Section 6672, when a business falls behind on payroll taxes, the agency pursues the individuals personally responsible for that debt.
The reason the IRS treats this differently from other tax debt comes down to the nature of the money. Not remitting payroll taxes that you withheld from employees’ paychecks is a problem, as they are not technically your business funds. The IRS treats this money as held in trust for employees.
The moment you use it for something other than that, it is viewed as misappropriation of funds that were never yours to spend.
“Sometimes, business owners tend to think they can hide behind corporate law or an LLC to protect themselves. When they don’t remit money held in trust for employees, the IRS uses Revenue Code 6672 to look behind the corporation. They will go after the beneficial owners of the company who are responsible,” says Stephen B. Kass
The misappropriation of these funds is a serious matter. The IRS pursues these cases with a level of scrutiny that exceeds standard tax enforcement, and the personal liability exposure can be significant. If you are facing a TFRP investigation or have already been assessed, this is not a matter to navigate without representation.
An experienced tax attorney is critical if you’re trying to settle a Trust Fund Recovery Penalty without dealing with IRS collection activities.
Who Can Be Held Personally Liable for TFRP?
Most people make the mistake of thinking only the business owner can be held personally liable. However, that is not the case. Anyone who is in charge of the business finances could find themselves under scrutiny. Those responsible often include the following:
- Business owners
- Corporate officers
- Partners or members of LLCs
- Payroll managers or financial decision-makers
Anyone with authority over financial decisions or tax payments may be held personally liable. The IRS has pursued office managers and treasurers who believed they were simply following instructions. But if their role gave them functional control, that comes with personal liability.
“Responsible parties by law are those in charge of writing checks, doing payroll tax returns, or having control of the purse. It doesn’t even have to be an owner; it could be the CFO, the treasurer, or even an office manager… even employees just following a boss’s orders to delay payments can get roped into this without having any clue they are personally liable.” – Stephen B. Kass.
Identifying all responsible parties is an important part of creating a defense strategy. Getting professional IRS payroll tax penalty help can help you navigate this process correctly.
How TFRP Cases Begin and Escalate
TFRP cases tend to follow a recognizable pattern. When a business falls behind on payroll tax deposits, the IRS identifies unpaid trust fund taxes and assigns a Revenue Officer to the case. The officer will then launch an investigation into who is personally liable for the tax.
The investigation leads to Form 4180 interviews with any identified parties. Should the agency determine responsibility and willfulness, it will then propose a penalty assessment. If the matter goes unresolved, that person is likely to face collection actions directly from the IRS.
There is a crucial window before the assessment that allows you to take action. When the IRS has formally assessed the penalty, you will have fewer options. While appeals do remain available, the process will swiftly become more complex and expensive to handle.
What Happens During the IRS Form 4180 Interview Process?
When the IRS conducts Form 4180 interviews, the agency is looking to determine two factors. The first is who was responsible for the payroll taxes. There may be multiple people who have a liability. The second is whether that person showed willfulness. That is, whether they explicitly knew that the taxes were being withheld and continued to allow it to happen.
Any statements you make during this interview are signed under penalty of perjury and will significantly impact the outcome. Attending this type of interview without representation from a TFRP defense attorney creates a real risk. They can help you understand what the IRS is looking for, identify what information is relevant, and limit exposure where possible.
The Risks of Ignoring a Trust Fund Recovery Penalty Case
Ignoring a TFRP case won’t make it go away. Instead, it will likely lead to serious enforcement action from the IRS. The agency will assess the penalty in the absence of a response, and collection actions against your personal assets start from there.
These include:
- Federal tax liens against personal property
- Bank account levies
- Wage garnishment
- Seizure of assets
Each person’s liability is assessed independently, and it’s increasingly difficult to challenge a penalty once the assessment has taken place. Waiting to see what happens is not an effective strategy and can lead to serious long-term financial consequences.
How Stephen B. Kass Defends TFRP Cases
The Law Offices of Stephen B. Kass can help you defend yourself in TFRP cases. When you contact the team, you can expect the following support:
Analyzing IRS claims
If the IRS is claiming that you are responsible and acted with willfulness, the team will analyze the case and determine whether they have a case.
Interview preparation
Attending the Form 4180 interview without representation is a risky move. Stephen B. Kass helps to prepare clients for these interviews so you understand what information to share.
Revenue Officer Representation
We can also represent you in communications with Revenue Officers, so you don’t have to contact them or deal with them on your own.
Challenging assessments
Should an assessment be improper or unsupported, Stephen B. Kass can challenge this through the formal route. This may involve disputing the “responsible person” designation or the claim that you acted willfully.
Developing defense strategies
Stephen B. Kass works to develop legal and factual strategies, such as demonstrating a lack of authority or control, identifying other responsible parties, and reviewing procedural errors by the IRS. Where a full defense is not possible, he can negotiate an alternative resolution.
Stephen B. Kass has worked on a selection of TFRP defense cases in the New York area and beyond. He works to limit or eliminate personal liability for his clients where possible. His in-depth approach is the most effective way to identify the best defense strategy for your case.
Resolution Options After Assessment
A TFRP assessment does not necessarily mean the debt is fixed and final. For clients who have already been assessed, Stephen B. Kass regularly handles the resolution of these cases. Resolution options include an Offers in Compromise, but since you’re dealing with payroll taxes, it requires a different approach than a standard income tax OIC.
“I have done payroll tax Offers in Compromise, and while you do qualify, the IRS will be looking at everything with much more scrutiny than an income tax case. I tell my clients I am going to do a full interview with them because they better be very honest in their presentation. I get these done plenty of times, but you have to be prepared for the IRS to look at everything.” – Stephen B. Kass.
There is also a threshold question that affects whether an OIC is viable. The IRS is unlikely to accept an offer from someone whose business remains a going concern because granting relief while the same situation may recur makes little sense from the agency’s position. However, in the right circumstances, even operational businesses can qualify.
Resolution options for assessed TFRP debt include appeals, installment agreements, and Offers in Compromise, including payroll tax OICs where the facts support it.
Why Choose Stephen B. Kass
Stephen B. Kass practices New York tax law as both an attorney and a CPA. That combination is particularly relevant in TFRP cases, where the IRS’s analysis turns on financial records, payroll documentation, and who actually controlled business accounts.
- More than 31 years of experience
- 100% success in all Tax Court cases over the last three years – most with $0 due
- Attorney, admitted in New York and New Jersey
- Certified Public Accountant (CPA)
- LL.M. in Taxation, New York University School of Law
- J.D., Maurice A. Deane School of Law at Hofstra University
TFRP cases are high-stakes, complex matters that demand a high level of expertise to handle. Stephen B. Kass has years of experience navigating payroll tax and trust fund issues. He offers a strategic, defense-oriented approach with discreet handling of sensitive matters. He also handles New York State responsible-party assessments for sales tax, a separate but often compounding liability that many TFRP clients face.
Frequently Asked Questions (FAQs)
Here are common questions about the Trust Fund Recovery Penalty (TFRP):
Can I negotiate a settlement after assessment?
Yes, once your TFRP has been assessed, you can resolve your tax debt through tax relief options such as OIC, instalment agreement plans, or apply to have your account on CNC status.
What happens during a Form 4180 interview?
During the Form 4180 interview, the IRS representative asks questions about your role in the business. The goal is to determine whether you were responsible for collecting payroll taxes and whether you willfully failed to do so.
Should I attend an IRS interview without representation?
You are not required by law to attend a Form 4180 with representation. However, your answers during this meeting heavily influence whether the IRS assesses the TFRP against you. We therefore recommend that you have a CPA or tax attorney represent you during the interview to protect your interests.
What if I didn’t control the finances?
Being a business owner, employee, or officer doesn’t automatically make you responsible for the TFRP. If you do not meet the IRS definition of a responsible person who are in charge of collecting and remitting taxes, the IRS won’t hold you accountable.
Can a bookkeeper or office manager be held liable for payroll taxes?
It depends on the authority and responsibility of a bookkeeper in a business. If they were simply processing payroll and other similar administrative duties, then the IRS wouldn’t hold them accountable for payroll taxes. However, if they had authority to decide which creditors to pay, sign checks, and make payroll tax payments, then the IRS could hold them accountable for unpaid payroll taxes.
Get Help With a Trust Fund Recovery Penalty Case
If the IRS has contacted you about payroll taxes, scheduled a Form 4180 interview, or you have already received a TFRP assessment, the time to act is now. Proper representation and early strategy, ideally before the interview or assessment, produce better outcomes.
Stephen B Kass provides experienced, strategic representation in Trust Fund Recovery Penalty cases and other business tax problems. To discuss your situation and understand your options, call 212-843-0050 or contact us online now.
