TFRP Penalty Amount in Washington DC

Failure to remit the trust fund taxes to the IRS may expose a business to an IRS inquiry. If you do not pay the amount owed, you will be on the hook for the TFRP and any interest that accrues. We highly recommend that you speak with our TFRP attorney to discuss collection alternatives and any other tax-related issue that puts you at risk of an audit.

What Decides the Penalty Amount in a TFRP?

The TFRP is actually a bit of a misnomer, as it is not technically a penalty. The trust fund taxes owed is one-half of the employment taxes withheld from the employees. The IRS is requesting the full amount and they call it a penalty because they are now going after an individual who willfully failed to remit the taxes.

Generally speaking, the IRS makes the determination after conducting a Form 4180 interview and the tax amount is recorded on a Form 941. The business cannot challenge the amount of the TFRP based upon on a Form 941. However, the business could request collection alternatives, like Currently Not Collectible status or an offer in compromise.

A business should call our Washington DC attorney as soon as it receives contact from the IRS regarding unpaid trust fund taxes, or even before then, if possible.

How Long Does the Business Have to Pay?

Once the TFRP has been established, business or the individual it was assessed to have 20 days to send the penalty amount to the IRS. If the business fails to pay the penalty in the time allotted, interest will begin to accrue. The penalty itself does not increase each month it is not paid; however, interest will continue to accrue until payments of the TFRP is fully paid off.

There are other options to pay in full but there is no simple extension. However, a 30-day collection hold can be requested. There is an ability to request to pay in full in 120 days, but any type of delay in payment will only lead to increased interest.

Should a Business Remit the Amount Immediately?

Given the complexity of this area of law and the amount of tax at issue, it may make sense to speak with a lawyer first, even if the business believes the amount is correct. If the IRS is investigating this taxpayer, there may be more areas that could use an attorney’s counsel.

Unfortunately, there are cases where the penalty is so large that a business must either shut down or liquidate its assets to pay it. This happens fairly frequently but the IRS offers the chance for an offer in compromise settlement for less than the full amount if they are a good candidate, based on the financial state of the business.

When a Business is Unable to Pay

If a business fails to pay the trust fund recovery penalty or is unable to pay, for whatever reason, there would be additional accrued interest, and the IRS could file a lien or levy against the business or the individual. The IRS will also pursue the individual for the joint and several liabilities of this tax bill or it will go after both individual and the business for the trust fund portion that contained the employer’s contribution. The IRS can only go after the employer for that half.

Call Our DC Office to Discuss the Penalty Amount in the TFRP

Washington DC businesses must pay the TFRP amount that they owe. If you need help contesting this amount, finding a collection alternative, or some other concern, call our tax lawyer and learn what you need to do next.