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Resolving a Trust Fund Recovery Penalty (TFRP)

Understanding the Trust Fund Recovery Penalty 

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. 

How the Trust Fund Recovery Penalty Occurs 

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. 

Trust Fund Recovery Penalty Interview 

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. 

Resolving a Trust Fund Recovery Penalty 

To resolve a TFRP, individuals can take the following steps: 

  • Review the Assessment: Ensure that the assessment is accurate and that you are indeed a responsible party for the unpaid taxes. 
  • Pay the Penalty: If the assessment is correct, paying the penalty in full is the quickest way to resolve the issue. 
  • Set Up a Payment Plan: If you’re unable to pay the full amount, you may be able to arrange a payment plan with the IRS. 
  • Challenge the Assessment: If you believe the assessment is incorrect, you can appeal the decision and provide evidence to support your case. 
  • Seek Professional Help: Consulting with a tax professional or attorney experienced in TFRP cases can provide valuable guidance and representation in resolving the penalty. 

Timberline Tax Group: Your Partner in Resolving Trust Fund Recovery Penalties for Businesses 

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.

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