If you are asking what is the Trust Fund Recovery Penalty, it is likely that you own a business and that your business owes 941 taxes to the Internal Revenue Service. If you find yourself in this situation, it is recommended that you contact a tax lawyer or tax professional. Owing 941 taxes to the Internal Revenue Service is very serious and can impact you individually as well as your business. The article below has been drafted by a Denver tax lawyer at The McGuire Law Firm to discuss the Trust Fund Recovery Penalty. Please feel free to contact our law firm to speak with a tax attorney if you have any tax questions or issues.
The Trust Fund Recovery Penalty is the term used when the Internal Revenue Service personally assesses an individual the trust fund portion of a 941 tax debt. The trust fund is the amount of taxes that an employer has withheld from an employee for the social security & Medicare taxes and federal withholding tax. Thus, if looking at a 941 employment tax return, if you took 50% of the social security & Medicare taxes and added this amount to the federal income tax withheld, such amount would be the trust fund portion for that 941 tax period.
When not paid, the trust fund can be personally assessed to the individual business owners who the IRS deems as willful and responsible parties. Thus, the trust fund can be personally assessed to one or multiple individuals and the debt is considered joint and several liability. As a joint and several liability, the IRS can collect the entire debt from one individual. Further, the IRS will collect the trust fund debt from individuals even while the business that accrued the debt is also making payments or under an agreement. The IRS always wants to collect the trust fund portion as quickly as possible and will aggressively collect 941 debts from a business and the trust fund portion from the responsible individual parties.
The IRS has three years from the following April 15th once a 941 liability is assessed to personally assess an individual. For example, if your business accrued a 941 tax debt in July of 2013, the IRS would have until April 15, 2017 to propose the personal assessment of the trust fund recovery penalty. The IRS will propose the assessment of the trust fund after conducting the 4180 Interview, and you have 60 days to protest the assessment from the date of the proposed assessment. Once assessed, the collection statue is 10 years and the trust fund recovery penalty cannot be discharged in bankruptcy. The IRS will begin the collection process against you personally by issuing notices to your personal residence. The IRS can also file a notice of federal tax lien against you personally, which is likely to impact your credit and ability to obtain lending. Further, if you do not establish an agreement to resolve the IRS debt, the IRS can enforce collection of the tax via a bank levy, wage garnishment or even by seizing personal assets.
You can speak with a Denver tax attorney at The McGuire Law Firm if you are having 941 tax debt problems or other issues. A tax attorney can represent you before the IRS, help prevent enforcement action and assist to resolve the tax debt through a formal agreement.
Contact The McGuire Law Firm to schedule a free consultation with a Denver tax attorney.