TFRP Offer in Compromise in Washington DC

When a business fails to remit the trust fund taxes they are required to send to the IRS, they have the right to set up a payment plan to pay back the full amount instead of addressing it with a lump sum. The person responsible for remitting the taxes is also responsible for the trust fund recovery penalty (TFRP), not the business. However, the same funds are accounted for twice. A payment plan can be set up to pay back those employment taxes, including the additional penalty.

You will want to work with a tax lawyer to learn if you are eligible for a TFRP offer in compromise in Washington DC. It comes down to the financial situation of both the business and the individual assessed with the TFRP.

Eligibility for TFRP Offer in Compromise

An offer in compromise is an agreement between the taxpayer and the IRS to settle a tax debt for less than the full amount, and the taxpayer must make an offer based upon their ability to pay the underlying tax.

Those eligible for an offer in compromise are individuals or businesses who cannot pay in full to the IRS because of their current assets or their monthly ability to pay the IRS over a 10-year collection statute of limitations. To be eligible, that taxpayer must be current on filing all required tax forms and they must have received a specific tax bill from the IRS. Business owners with employees must automate their federal tax policies for the current quarter and they cannot be in a chapter of bankruptcy that would prevent them from being eligible.

A taxpayer is not a good candidate for a TFRP offer in compromise if they are able to fully pay the underlying tax, based upon the equity and assets that they own, or if the IRS could get the full monthly amount from them or the business over the 10-year collection statute of limitations. The IRS will not settle for less than a full amount if it is likely that the taxpayer could fully pay the debt

Required Forms

There are a few key documents that need to be signed and sent to the IRS to request an offer in compromise for a trust fund recovery penalty. The first one is a Form 433A, a collection information statement for wage earners and self-employed individuals, or a Form 433B which is a collection statement for businesses. Either of those two need to be submitted in addition to Form 656.

When the Offer is Accepted or Rejected

If an offer in compromise is accepted, the taxpayer needs to continue to timely file and pay all required tax returns in the future. Failure to make those payments for the following five years may cause the offer in compromise to be revoked, and the full TFRP and payroll taxes would be reassessed to the taxpayer.

Offer in compromise agreements are typically rejected when the offer was too low, lacking the supporting documents, if it is determined the taxpayer could fully pay the tax debt during the 10-year statute of limitations, or if the taxpayer is not cooperating with document requests. The taxpayer can appeal a TFRP offer in compromise rejection and will have 30 days to file an appeal with the aid of an attorney.

Learn How a DC Attorney Helps You Address a TFRP with an Offer in Compromise

Pontius Tax Law could help ensure an offer in compromise contains the lowest possible repayment option by reviewing all the taxpayer’s financial information closely, running through the different scenarios, and making a high-level determination if the taxpayer is a good candidate.

Please call our Washington DC office today if you are considering an offer in compromise to address your trust fund recovery penalty.