Trust Fund Recovery Penalty: They Want Your Personal Assets
Your business fell behind on payroll taxes. Now the IRS wants to hold you personally responsible. The Trust Fund Recovery Penalty is 100% of the trust fund portion of unpaid employment taxes, assessed against you as an individual. Your house, your savings, your personal accounts — all fair game.
What Makes You a 'Responsible Person'
Anyone with authority over the business's finances. Officers, directors, shareholders with check-signing authority, even bookkeepers. The IRS interprets 'responsible person' broadly. I've defended business owners, CFOs, and people who thought they were just helping with the books.
The Willfulness Standard
Willfulness doesn't mean you intended to cheat the government. It means you knew the taxes were due and paid other creditors first. If you paid rent, utilities, or suppliers instead of the IRS, that's willfulness in their eyes.
Fighting the Assessment
You have 60 days after receiving Letter 1153 to appeal before the penalty is assessed. After assessment, you can pay a minimal amount and sue for refund in federal court. I use both tracks depending on the circumstances.
Protecting Other Responsible Persons
If you're not the only responsible person, there may be others who should share the liability. I analyze the business structure to determine whether the IRS has properly identified all responsible persons.