If your New York business has not properly paid withheld income and employment taxes, you will likely be facing the Trust Fund Recovery Penalty (TFRP) imposed by the IRS. Because this is such a serious matter, contacting the True Resolve Tax Professionals should be your first step if you’ve received a notice. We’ll stand between you and the IRS and work diligently on your behalf towards a positive outcome.
We understand that owning a business is not easy. There are fluctuations in the economy, unexpected expenses, and other financial hardships along the way. Meanwhile, you may have a substantial amount of money set aside for payroll taxes, also known as trust fund taxes. While it may be tempting for you to “borrow” this money to pay a creditor, vendor, or other expense, we highly recommend that you resist the urge. At True Resolve, we’ve helped clients who were unable to replenish their payroll tax fund and found themselves facing the Trust Fund Recovery Penalty.
So, what is the TFRP exactly, and does it apply to your situation? Let’s take a closer look.
The IRS TFRP, Establishing Responsibility and Willful Failure
If employment taxes are not correctly or promptly paid to the IRS, and it turns into an investigation, the IRS will attempt to determine who is responsible for collecting and paying trust fund taxes and if they willfully failed to submit the required payment.
According to the IRS, a responsible person or group will be in the position to perform collections, handle accounting, and pay the trust fund taxes. As a small business owner, this may fall on your shoulders. If you own a larger company, the tax penalty may be assessed against a partner, one of your employees, your payroll service provider, or another individual with authority and control over the disbursement of funds.
Willfulness sets aside what the IRS calls “evil intent” or bad motives. Their criteria focus’ on whether or not the responsible party was or should have been cognizant of the taxes due and either intentionally disregarded the law or showed indifference to what the law required.
In the scenario above, the New York business owner (you) would be deemed responsible, and using payroll tax money to pay a vendor would be an indication of willfulness. Now, if an employee was tasked with only making bill payments determined by a superior, they would likely not be considered responsible.
Investigated and Now Facing the Trust Fund Recovery Penalty
If the IRS determines that you or someone within your company fits their criteria, a Trust Fund Recovery Penalty assessment will be made. Moving forward, things will unfold quickly.
First, you will be notified of their findings via mail, and you will have just 60 days (from the date of the notice) to appeal their decision. If you miss this key deadline, the IRS will then send you a demand for payment which opens a whole new can of worms. As we all know, once it’s time to collect, the IRS can be very aggressive, even ruthless. Unless you can pay in full, you may be subject to a federal tax lien, or IRS tax levy which can include freezing your business and personal bank account and seizing your assets.
Before Things Get Out of Control, Reach Out to the Experts
Trust us when we say that the True Resolve Tax Professionals have just about seen and heard it all from our clients in New York and beyond. If you’re facing the Trust Fund Recovery Penalty (TFRP), we can assist with nearly any situation, work directly with the IRS on your behalf, as well as walk you through all the available options to get your tax issue resolved. Contact us today to learn more about how we can take on the IRS while you focus on the business that truly matters, your own.