The Trust Fund Penalty act was enacted in 1998 to assist in collecting back payroll taxes due to the government. These taxes can include payroll or federal excise taxes. A trust fund penalty recovery could spell disaster for the entrepreneur, corporate manager, director, officer or employee who fails to pay their taxes. The general rule for this that any person required to collect, truthfully account for and pay over any tax imposed by this title who will fully fails to collect such tax, or truthfully account for and pay over such tax or will fully attempts in any manner to evade or defeat any such tax payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.

Anyone who has a degree of responsibility can be liable regardless of title which is included as a director who is not an officer or employee as long as he was responsible for the payment of the withholding taxes. The IRS can asses those who are in the corporation who they find to be both willful and responsible for the nonpayment of their tax funds to the government. If business owners have financial trouble and they fail to pay these taxes because they do not have enough money then the IRS will aggressively pursue and seek to collect those payments. Since the amount of money owed from a trust Fund Recovery Penalty is often huge it is often times difficult for corporations or businesses to pay back the money that is owed. The TFRP is a non dis chargeable penalty in bankruptcy. The most promise for most business owners is an offer in compromise that an experienced tax professional can help you with.

In many cases dealing with the trust fund penalty tax the IRS will come after all those associated with the business for funds and asses a penalty against them. In other cases a TFRP can be removed months or years after it is assessed.

If you knew that your taxes were due as the IRS defines as willful by intentional, deliberate, voluntary, reckless, knowing, as opposed to accidental but stresses that no premeditated intent not to pay was required. By being willful it means that you knew that you indeed needed to pay your taxes. The two conditions of being willful and responsible must exist for the Trust fund penalty to disprove just two of these criteria.

There is a time limit which is around three years after April the 15th of the tax year that the assessment has been made. If you file a 941 payroll tax return in September 2010 then the three year clock would not start until April 15, 2011 and the IRS would then have until April 15,2014 to assess the Trust Fund Recovery Penalty.

To find out if you are determined willful or responsible in the eyes of the IRS there is a form 4180 that is an interview in the form of a report for that purpose called “ Report of Interview Held With Person Relative to Trust Fund Recovery Penalty or Personal Liability for Excise Tax”.

There are ways to Prevent or Reduce trust fund penalty’s but it is generally difficult because willfulness and responsibility is deemed automatic if you were the owner of the company. However, there are cases where the person responsible for the payment can successfully defend themselves against the assessment. The IRS will send you a letter form 1153 that will assess your trust fund Recovery penalty and allow a person the opportunity to present evidence if you were willful or responsible enough. The IRS can take up to one year to hear your protest and that may afford you the time necessary for find other ways to either pay the debt or avoid a lien on your personal credit.

In order to reduce the amount of debt you will owe it is important to pay down as much of your debt as you possibly can in order to reduce the amount of debt interest you will pay before you enter into a payment plan with the IRS.

If you have recently been contacted by the IRS for a Trust Fund Penalty Interview or are currently being assessed for payroll tax problems, contact Tax Attorney Mary E. King to resolve your Payroll Tax Problems.

King Law P.L. Serves all of Florida for tax resolution and IRS defense including, Sarasota, Bradenton, Venice, Ft. Myers, Cape Coral, Naples, Tampa and St. Petersburg