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The Trust Fund Recovery Penalty (TFRP) is a civil penalty imposed by the IRS on individuals responsible for withholding, accounting for, and depositing certain employment taxes. This penalty applies when these taxes are not paid, and it is equal to the unpaid balance of the trust fund tax. The TFRP is intended to encourage compliance with tax laws and ensure that funds withheld from employees’ wages are properly remitted to the government.
The TFRP can be assessed against individuals who are responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes. This can include officers or employees of a corporation, partners or members of a partnership, or any other person with authority and control over funds to direct their disbursement. The penalty is imposed when these responsible individuals willfully fail to collect or pay the required taxes.
A critical step in the assessment of the TFRP is the Trust Fund Recovery Penalty Interview, conducted by the IRS. During this interview, the IRS will determine who is responsible for the unpaid taxes and whether the failure to pay was willful. The individuals interviewed are typically those who had control over the company’s finances or decision-making authority related to the payment of taxes.
To resolve a TFRP, individuals can take the following steps:
The Trust Fund Recovery Penalty is a serious matter that requires prompt attention. Understanding your responsibilities and taking timely action can help prevent or resolve a TFRP assessment. Working with a tax professional can also provide the expertise needed to navigate the resolution process effectively.
For assistance with resolving a Trust Fund Recovery Penalty or other tax-related issues, consider reaching out to Timberline Tax Group. Our team is experienced in dealing with TFRP cases and can help you find a resolution that works for your situation.