Many businesses in Fairfax have an obligation to withhold portions of an employee’s wages for contributions to Medicare, Social Security, or income taxes. The money is placed in a trust and then remitted to the federal government at the appropriate time. If you do not transfer the trust fund money to the government by a specified point, you could face a penalty, and in rare cases even face asset liquidation. A Fairfax trust fund recovery penalty lawyer could analyze your situation and guide you to a resolution.
The Internal Revenue Service (IRS) will review any failure to pay on time before assessing penalties. The sooner you make these payments, the easier it will be to resolve this issue with the help of a dedicated tax attorney.
Understanding the Trust Fund Recovery Penalty (TFRP)
Running a business in Virginia is complicated, especially when it has multiple employees. In addition to paying any tax obligations owed by the business, it also has a duty to withhold and submit contributions from individual employees.
There are strict requirements on what is to be done with these funds until they are remitted to the government. The money must be held in a trust account before it is submitted every quarter along with a document known as Form 941. There is also a Form 940, which must be submitted once a year. Any party responsible for failing to make this payment is potentially liable for the trust fund recovery penalty.
This penalty is equal to the amount of money that was intended for the IRS but was not received. An attorney in Fairfax could help you explore your options for dealing with a trust fund recovery penalty – including whether you were the person responsible for remitting the taxes at all.
Possible Remedies to the TFRP
There are a few ways that an attorney in Fairfax could resolve a trust fund recovery penalty, starting with filing a protest. If the IRS believes you failed to remit employee tax receipts, it will send you a proposed assessment. You have 60 days from receiving that assessment to protest the decision.
Outside of the protest process, there are additional remedies to consider. For example, you may be able to pay back what it owes through an installment agreement. This process involves paying the full amount of the liability, but breaking it up into monthly payments over a period of time.
Another option is to request Currently Not Collectible status. This is a temporary reprieve from collections, but it prevents any collection efforts and pauses the obligation to pay the balance. The IRS will only agree to these terms when paying the penalty would result in being unable to cover necessary expenses like rent and other allowable daily living expenses. This status only remains in place until payments once again become a realistic possibility.
Important Questions and Answers About TFRP
What is the Trust Fund Recovery Penalty?
The trust fund recovery penalty (TFRP) is a penalty assessed on the person or people who were responsible for withholding and paying the trust fund taxes, and failed to do so. The person responsible is held personally liable for this penalty. The half of the employment taxes that are withheld from the employee and not remitted to the government is commonly referred to as the trust fund recovery penalty.
How Could the TFRP Impact a Business in Fairfax?
If payroll tax is not paid, both the IRS and the Virginia government have a variety of enforcement actions that they could take against the business and it’s management to collect the unpaid taxes, including a tax lien, tax levy, or the seizure of actual property at the establishment. They could also use a collection agency to collect the funds, and the government may even offset certain refunds that the business was entitled to. The business could even lose its certificate of sales tax.
Who is Responsible for Paying These Penalties?
An individual will be responsible for withholding and accounting for paying the trust fund taxes. This could include the business owner, a corporate officer, an employee, a bookkeeper, CPA, or anyone with authority and control over the withheld funds.
How Long Does the IRS Have to Assess the Penalty?
If a tax return is filed timely, the IRS must assess the trust fund recovery penalty within three years of the date of filing the tax return, which is calculated beginning April 15 of the following year. However, if no employment tax return is filed, the statute of limitations remains open.
Are There Any Exemptions to the Penalties?
The trust fund recovery penalty may be assessed against the person or people responsible for collecting and paying the employment taxes and who willfully fails to collect and remit them. The IRS must prove both of those requirements to assess the penalty. Anyone who was not found to meet those two elements will not be subject to the penalty.
How Could a Lawyer Help Someone Who Was Hit With TFRP?
An attorney could help someone by either filing a timely protest or challenging the TFRP assessment. If that assessment is no longer appealable, an attorney could help resolve the underlying tax debt in this case, whether that is with an installment agreement, Currently Not Collectible status, or in rare circumstance, an offer in compromise to settle the tax debt for less than the full amount.
Individuals looking to hire an attorney should look for someone with experience, professionalism, and good communication.
Talk to an Attorney in Fairfax About the Trust Fund Recovery Penalty
When tax obligations to the IRS are missed, the consequences can add up quickly. Thankfully, a Fairfax trust fund recovery penalty lawyer could resolve these issues on your behalf by working out repayment plans or other options. Our former Revenue Officers dealt with TFRP extensively when working for the IRS, so they know the ins and outs of what the IRS is looking for and may be able to help you reduce the TFRP assessment or stop it entirely. Do not risk a tax lien or tax levy because you ignored collection notices. Reach out right away to discuss your case during a private consultation.