IRS Payroll Tax & Trust Fund Recovery Penalty (TFRP) Attorney

Payroll tax problems can become serious very quickly. When a business falls behind on employment taxes, the IRS can pursue aggressive collection against the company—and in some cases, personally assess owners, officers, employees, or other individuals for the unpaid trust fund taxes.

I represent businesses and individuals in Bakersfield, Kern County, and throughout California facing IRS payroll tax liabilities and Trust Fund Recovery Penalty (TFRP) investigations and assessments.

Whether the IRS has contacted you about unpaid Forms 941 or 940, scheduled a Trust Fund Recovery Penalty interview, proposed an assessment against you personally, or begun collection activity, getting experienced representation early can make a significant difference.

IRS Payroll Tax Problems

Employers are required to withhold federal income tax and the employee portion of Social Security and Medicare taxes from employee wages and pay those amounts to the IRS. Because these funds are withheld from employees and held in trust for the government, the IRS treats unpaid payroll taxes particularly seriously.

Payroll tax cases may involve:

Unpaid or late payroll tax deposits
Delinquent Forms 941 or other employment tax returns
IRS substitute or estimated assessments
Federal tax liens and levies
Revenue Officer investigations
Installment agreements and collection alternatives
Business closures involving unpaid employment taxes
Trust Fund Recovery Penalty investigations
Personal assessments against owners, officers, employees, or other individuals

In many payroll tax cases, the IRS assigns a Revenue Officer who will investigate both the business's ability to pay and whether individuals should be held personally responsible for the unpaid trust fund taxes.

What Is the Trust Fund Recovery Penalty?

The Trust Fund Recovery Penalty, commonly called the TFRP, allows the IRS to pursue certain individuals personally for the trust fund portion of a business's unpaid employment taxes.

Under Internal Revenue Code § 6672, the IRS generally must establish that the individual:

Was a responsible person with sufficient authority over the company's financial affairs; and
Willfully failed to collect, account for, or pay over the trust fund taxes.

A person's job title alone does not determine liability.

The IRS may look at who had authority to sign checks, control bank accounts, decide which creditors were paid, hire or fire employees, sign tax returns, direct financial affairs, or otherwise exercise meaningful financial control over the business.

Likewise, simply being an owner, officer, employee, or bookkeeper does not automatically mean you are personally liable for the TFRP.

The IRS Form 4180 Interview

One of the most important stages of a TFRP investigation is the Form 4180 interview.

During this interview, an IRS Revenue Officer may ask detailed questions about:

Your role in the business
Access to bank accounts
Check-signing authority
Payroll responsibilities
Who decided which bills were paid
Knowledge of unpaid payroll taxes
Communications with accountants or bookkeepers
Payments to other creditors while taxes remained unpaid

These interviews should not be treated casually. Statements made during a Form 4180 interview can become important evidence in determining whether the IRS assesses the TFRP against you personally.

You have the right to be represented by an attorney during the IRS investigation.

Proposed TFRP Assessments and IRS Appeals

If the IRS determines that you are responsible for the unpaid trust fund taxes, it will generally issue Letter 1153 proposing the Trust Fund Recovery Penalty, often together with Form 2751.

You do not necessarily have to accept the IRS's determination.

Depending on the circumstances, you may have the right to challenge the proposed assessment through the IRS Independent Office of Appeals. The time to appeal is limited, so it is important to act promptly after receiving a proposed TFRP assessment.

I examine the government's evidence, the taxpayer's actual authority within the business, financial records, bank signature cards, payroll records, corporate documents, communications, and the conduct of other individuals involved with the company to determine whether the IRS can establish both responsibility and willfulness.

How I Handle Payroll Tax and TFRP Cases

When I take on a payroll tax or Trust Fund Recovery Penalty matter, my first priority is figuring out exactly what the IRS is trying to do—and whether it has the facts and law to do it.

I do not assume that because the IRS says someone is responsible, they actually are.

I want to know who really controlled the money. Who had access to the bank accounts? Who made the decisions? Who knew the taxes were unpaid? Who communicated with payroll? Who decided which creditors got paid? Was my client actually running the business, or did someone else control its finances?

Those details matter.

I also prefer to deal directly with the Revenue Officer so my client does not have to navigate an IRS investigation alone. If an interview is necessary, I prepare my client beforehand and attend the interview with them. If I believe an assessment is unsupported, I challenge it.

For the business itself, I look beyond simply stopping collection. The goal is to understand the entire payroll tax problem, determine what returns or deposits are missing, evaluate the IRS's assessments, and develop a practical strategy for resolving the liability.

These cases can involve a business someone spent years building and, at the same time, the threat of a substantial tax debt being transferred personally to an owner, officer, employee, or family member. I understand how much is at stake, and I treat these matters accordingly.

Can the IRS Pursue More Than One Person?

Yes.

The IRS may assess the Trust Fund Recovery Penalty against more than one responsible person. For example, it may investigate multiple owners, corporate officers, managers, employees, or others who had control over the company's finances.

That does not mean every person investigated is actually liable.

Determining responsibility requires a factual analysis of each individual's actual authority and conduct.

What If the Business Has Closed?

Closing a business does not automatically eliminate unpaid payroll tax liabilities or prevent a TFRP investigation.

The IRS may continue collecting from the business and may investigate individuals who were involved during the periods when the payroll taxes went unpaid.

If your business has closed and substantial payroll taxes remain outstanding, it is especially important to determine whether the IRS is considering personal assessments against you or anyone else associated with the company.

Resolving Payroll Tax Debt

The appropriate resolution depends on the business, the amount owed, whether the company is still operating, and the taxpayer's financial circumstances.

Possible strategies may include:

Installment agreements
Offers in compromise
Currently Not Collectible status in appropriate individual cases
Challenges to incorrect assessments
Penalty relief
Collection Due Process hearings
Appeals of proposed TFRP assessments
Negotiations with IRS Revenue Officers
Strategies involving closed or financially distressed businesses

Every case is different. Before recommending a collection alternative, I want to know whether the IRS's underlying assessment is correct and whether the individual the government is pursuing should be personally liable at all.

Bakersfield IRS Payroll Tax Attorney

I represent taxpayers in Bakersfield and throughout Kern County in serious IRS payroll tax and Trust Fund Recovery Penalty matters.

My practice focuses on tax controversies—problems between taxpayers and taxing agencies after something has gone wrong. That includes IRS audits, appeals, collection matters, payroll tax investigations, liens, levies, and personal assessments such as the TFRP.

If you are dealing with an IRS Revenue Officer, unpaid payroll taxes, a Form 4180 interview, Letter 1153, or a proposed Trust Fund Recovery Penalty, you do not have to deal with the IRS on your own.

Speak With a Bakersfield Trust Fund Recovery Penalty Attorney

Payroll tax liabilities can place both a business and the people behind it at risk. The earlier I become involved, the more opportunity I have to understand the IRS's position, protect your rights, and develop a strategy before the situation progresses further.

If you have received an IRS payroll tax notice or are being investigated for the Trust Fund Recovery Penalty, contact my office to discuss your situation.

Serving clients in Bakersfield, Kern County, and throughout California.