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The failure to remit a business’s trust fund taxes to the federal government every quarter could result in an IRS investigation if you do not address it. You may be on the path to experiencing the TFRP investigation process in Washington DC, but you should not handle it alone or solely within your business. Pontius Tax Law has a trust fund recovery penalty lawyer available to advise on how to respond to the investigation and get back in the good graces of the IRS.
The IRS may determine a business in Washington DC should be investigated if it detects a substantial reduction in trust fund taxes being paid from one quarter to another, or if a payment or tax return is missing. Typically, the IRS would assign a Revenue Officer to investigate a business’s withholdings.
When investigating, the IRS requests various documents concerning who controls the business bank accounts and where the money is going. For example, the IRS could use signature cards on bank accounts to determine who could write checks or submit payments on behalf of business.
The Revenue Officer will also interview suspected persons responsible for the tax withholding, accounting, and paying of trust fund taxes. They would conduct a required Form 4180 interview (Report of Interview with Individuals Relative to Trust Fund Recovery Penalty). The subject must provide accurate information, under penalty of perjury.
If the IRS determines that a business withheld taxes it was supposed to remit, the IRS will issue a Letter 1153, outlining the assessment of the trust fund recovery penalty to the responsible parties. The individuals in receipt of the letter have the right to contest the assessment to the IRS.
Just like any other type of investigation, the Fifth Amendment protects people against self-incrimination. If a taxpayer is concerned with this civil TFRP investigation going criminal, they may claim the Fifth; but this is a very aggressive tactic and should not be taken without the consultation of a tax attorney.
There are certain situations where a business representative could refuse to answer questions or hand over documents. However, the IRS could go to court and compel them to submit to the questioning or provide the documents.
A business is allowed to have a DC attorney present during the trust fund recovery investigation periods and they should contact one as soon as possible. An attorney could advise a business through a TFRP investigation by limiting the amount of information given to the IRS, and providing only the information that is needed.
The goal is to show the IRS that the individual being investigated was not responsible and willful in the failure to remit employment taxes. An attorney could also explain the potential liabilities to both the business and the person being individually investigated, as well as the amount of taxes due, the responsibility for paying them, and the collection alternatives like installment agreements, Currently Not Collectible status, or an offer in compromise.
A business could handle their own TFRP investigation if they planned on fully paying the balance due. The reason why most people want to challenge the TFRP is so they do not have to personally pay for the taxes that should have been remitted by the business. No matter how much money is at issue, it is strongly recommended that you contact an attorney for an initial paid consultation to discuss the situation.
Typically, during the investigation process, businesses or the individuals being interviewed will speak with the IRS without an attorney and they reveal too much information that ends up hurting them in the long-term.
If you received a Letter 1153, you still have time to act. It may be possible to contest the tax assessment or clarify whose role it was to hold and remit employee’s taxes. If you are a Washington DC business that needs assistance with a TFRP investigation, please call us now to learn what happens next.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Fairfax, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.
