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The law is complicated and we all have questions.  We have compiled a listing of the most asked questions and hope this provides you with the additional information you are looking for.  Please remember, these answers are general and pertain to a general set of facts.  Answers vary by circumstance.  What is the correct answer for someone might not be the correct answer in your situation because of circumstances these general answers don’t take into account.

It is best to call a qualified attorney if you find yourself faced with a difficult situation.  

The information on this website for The Law Office of Dustin Whittenburg is for general informational purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship.

The answers provided below are for general informational purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship.

Trust Fund Recovery Penalty

  • What is the Trust Fund Recovery Penalty?
    This occurs when the person who collected and is withholding trust fund taxes, fails to send the money to the IRS. Congress authorizes Revenue Officers to collect the unpaid taxes. It’s also known as the Civil Penalty (or “CIV-PEN”) or “6672 Penalty,” and it’s equal to 100% of the unpaid taxes in the trust fund.
  • Who Does the IRS Typically Assess the Trust Fund Recovery Penalty Against?
    The IRS typically assesses the Trust Fund Recovery Penalty against the employer if they are holding back on forwarding the pending taxes on behalf of employees.
  • Is the Trust Fund Recovery Penalty Only Assessed Against the Owner of a Company and Just One Person?
    No. Legally, the Trust Fund Recovery Penalty can be assessed against anyone whose job it was to collect and pay the trust fund taxes, but knowingly refused to do so. The penalty can be assessed against more than one person who is responsible and they are jointly responsible. The penalty is non-dischargeable in bankruptcy.
  • What if I am Broke? Would the IRS Assess a Penalty Against Me if There is No Way I Can Pay It?
    Your financial situation will not stop the IRS from accessing a penalty but it may cause a pause in efforts to collect.
  • Can the IRS Collect More Than What is Owed By Going After Everyone Separately?
    No. The IRS collects the tax liability once.
  • Can I Appeal a Revenue Officer Assessment of the Trust Fund Recovery Penalty Against Me?
    Yes. You can appeal to the IRS Office of Appeals once the Trust Fund Recovery Penalty is assessed against you.
  • What if I Never Appealed the Decision? Can I Undo the Assessment of the Trust Fund Recovery Penalty?
    Yes. You must claim a refund. If the refund is administratively denied you then have the opportunity to go to Federal District Court.
  • Can I File an Offer in Compromise to Settle a Debt Created By the Assessment of the Trust Fund Recovery Penalty By the IRS?
    Yes. The personal tax liability that’s non-dischargeable in bankruptcy can be negotiated via an installment agreement, a partial payment installment agreement, currently non-collectible status, or an Offer in Compromise.
  • Is There a Time Limit the IRS Has to Collect On the Trust Fund Recovery Penalty?
    Yes, the IRS generally has ten years from the date of assessment to collect.
  • My Business is Already Paying Back All Unpaid Payroll Taxes. Why is the IRS Trying to Add the Trust Fund Recovery Penalty?
    This is common. The IRS will still attempt to impose the Trust Fund Recovery Penalty to maximize collection potential.

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The Trust Fund Recovery Penalty (TFRP) is a penalty that can be assessed by the Internal Revenue Service (IRS) against individuals who are responsible for collecting, accounting for, and paying over certain taxes, such as income and employment taxes, but fail to do so. The penalty can be significant, and the IRS has broad powers to enforce it, including the ability to seize assets and pursue legal action against the responsible individuals.

Hiring a tax attorney when the IRS is assessing the TFRP is important for several reasons. First, a tax attorney can help you understand your rights and obligations under the law and the specific facts of your case. They can review the evidence and determine whether the penalty has been correctly assessed, and if so, how much you may owe.

Second, a tax attorney can represent you in dealings with the IRS, including negotiating a payment plan or settlement of the TFRP, or challenging the penalty in court if necessary. They can also help you respond to any other tax issues that may arise, such as audits or other tax disputes.

Third, a tax attorney can provide valuable guidance on how to avoid future tax problems and ensure compliance with tax laws going forward. They can help you establish procedures for ensuring timely payment of taxes, identify areas of risk, and advise you on tax planning strategies that can help minimize your tax liability.

Overall, a tax attorney can provide valuable guidance and representation when the IRS is assessing the TFRP, and can help you avoid or mitigate the significant financial and legal consequences that can arise from noncompliance with tax laws.

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Commonly Asked Tax Questions

  • I am filing my income tax return and cannot pay the balance due. What should I do?
    It is always best to file your return by its deadline, even if you cannot pay your balance. This will reduce the penalties to which you are subject. Also, failure to file versus failure to pay your taxes can be the difference between a civil tax matter and a criminal tax case.
  • I requested a 6 month filing extension on my income tax return. Does that mean I also have a 6 month extension for paying my taxes?
    No it does not. The extension only applies to the filing of your return, not the payment of your balance due. Therefore, interest on your balance due will begin to accrue on the filing deadline, regardless of whether you received an extension.
  • I just received a letter that says “Notice of intent to levy”. Are my assets or bank accounts in danger?
    The IRS has a series of notices that must be issued before it can begin to seize your assets. Once the last notice, called a “Final Notice of Intent to Levy,” is issued, you have 30 days to resolve your liability before the IRS can seize your assets. If you have received any IRS notices, please promptly consult an attorney before the 30-day period lapses so he or she may help you avoid having your assets levied.
  • I owe the IRS some money but cannot afford to pay it in full. What are my options?
    Generally, there are three options available to a taxpayer: attempting to settle the liability for less than the full balance due by filing an offer in compromise, entering into an installment agreement to pay your liability in full over a series of monthly payments, or, if you cannot afford to make any payments to the IRS, requesting that your account is placed in temporarily non-collectible status. Which solution is right for you and acceptable to the government depends on your specific circumstances.
  • What is an offer in compromise? If I file an offer in compromise can I settle my balance due to the IRS for “pennies on the dollar?”
    An Offer in Compromise is an offer to settle your tax liability for less than the full balance due. Most of these offers are filed on the basis that the taxpayer will never be able to satisfy his or her tax liability. In this case, the amount that must be paid to the IRS is generally equal to the taxpayer’s realizable collection potential. While some taxpayers’ circumstances will enable them to settle their liabilities for relatively minimal payments, most taxpayers will not be eligible to do so and unfortunately, many tax relief businesses mislead taxpayers into believing virtually everyone qualifies.
  • Will incorporating or forming a limited liability company (llc) reduce or increase my total taxes?
    The tax implications of incorporating or forming an LLC vary for every business based on each business’s particular circumstances. Please consult an attorney or certified public accountant.
  • My ex-spouse lied on the joint tax returns we filed while we were married and now I am stuck with a tax liability when I did not do anything wrong. What can I do?
    You may be eligible for “innocent spouse relief.” If so, your share of the liability could be reduced or even eliminated. Contact an experienced tax attorney for more information.
  • My business is short on funds and will not be able to pay the 941 employment taxes due with our next payroll. What are our options?
    It is important that employers remit full tax deposits to the IRS with each payroll that is issued, or as otherwise required by their deposit schedule. It is never a good idea to forego making a deposit to meet other obligations. Doing so will subject the employer to penalties and interest and may result in the business owners and officers being personally liable for a significant portion of the unpaid taxes. If you simply cannot make the payment, contact our office for assistance with a payment plan.
  • I just received a notice of a proposed trust fund recovery penalty (a/k/a civil penalty) assessment. Why am I receiving this?
    The IRS is proposing to hold you personally liable for the unpaid trust fund portion of the employment taxes of a business with which the IRS believes you are involved. This portion of the taxes is equal to the funds that the business was required to withhold from its employees’ wages and pay to the IRS, but which were not paid to the IRS. Contact an attorney immediately to preserve your rights and discuss your options.
  • I heard that, legally, the IRS cannot force you to file returns or pay your taxes. Also, I believe federal income taxes are unconstitutional and, therefore, I have a valid defense to not pay income taxes. Is this true?
    This is simply not true. There is established federal case law available, including rulings from the United States Supreme Court, reinforcing the fact that individuals and businesses are required to report their income taxes to the IRS and pay federal taxes on their income. We do not proffer these agreements to the government nor do we represent sovereign citizens.
  • Do I have to file a personal tax return even if I have no income to report?
    While you are not required to file a return for a year in which you did not receive income, it is important to do so for several reasons. First, if you filed returns for previous years, the IRS may assume that you were required to file a return in this year and prepare a substitute return estimating your income and overstating your tax liability. Second, you should file a return to report all the deductions and credits to which you are entitled, especially refundable credits for which you can receive a tax refund. Finally, by filing a return you start the clock running on the window in which the IRS can audit your return and determine that you owe additional tax.
  • Do I have to file a corporate or partnership tax return even if my entity has no income to report?
    Yes, a corporation or LLC must file a federal income tax return for each year it was in operation, even if it did not earn any income. Situations vary for disregarded entities.  Please talk to your CPA to see how you should handle the issue as it relates to your unique situation.

Tax Advice and Assistance

The Trust Fund Recovery Penalty (TFRP) is a penalty that can be assessed by the Internal Revenue Service (IRS) against individuals who are responsible for collecting, accounting for, and paying over certain taxes, such as income and employment taxes, but fail to do so. The penalty can be significant, and the IRS has broad powers to enforce it, including the ability to seize assets and pursue legal action against the responsible individuals.

Hiring a tax attorney when the IRS is assessing the TFRP is important for several reasons. First, a tax attorney can help you understand your rights and obligations under the law and the specific facts of your case. They can review the evidence and determine whether the penalty has been correctly assessed, and if so, how much you may owe.

Second, a tax attorney can represent you in dealings with the IRS, including negotiating a payment plan or settlement of the TFRP, or challenging the penalty in court if necessary. They can also help you respond to any other tax issues that may arise, such as audits or other tax disputes.

Third, a tax attorney can provide valuable guidance on how to avoid future tax problems and ensure compliance with tax laws going forward. They can help you establish procedures for ensuring timely payment of taxes, identify areas of risk, and advise you on tax planning strategies that can help minimize your tax liability.

Overall, a tax attorney can provide valuable guidance and representation when the IRS is assessing the TFRP, and can help you avoid or mitigate the significant financial and legal consequences that can arise from noncompliance with tax laws.

Contact Us

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