When a corporation has unpaid Form 941 liability (Employer’s Quarterly Federal Tax Return), the IRS may propose to assert the Trust Fund Recovery Penalty (“TFRP”) against the owners, officers, directors, shareholders or employee of a company. By taking this action, the IRS asserts the corporation’s liability against the people that run the business and will collect this liability from their personal assets. IRS collection efforts can include levies or garnishments on wages, levies on bank accounts, and seizure of assets. The corporation provides no protection to individuals should the IRS choose to assert the Trust Fund Recovery Penalty against them. In determining whether to assert the Trust Fund Recovery Penalty against an individual, the IRS looks at various factors including, but not limited to, check signing authority, the position held within the company, the percentage of ownership, the amount of control one can exercise over decision-making authority, who signed the tax returns and who hired and fired employees.

These factors are used to determine whether the TFRP should be asserted against the persons involved in the operation of the corporation. By asserting the TFRP against individuals, the IRS expands its collection potential to the people that operate the business. The Trust Fund Recovery Penalty consists of all of the income tax that was withheld from employees’ wages and the employees’ share of FICA and Medicare. The Trust Fund portion of the Form 941 liability is typically around $.70 of every dollar but does not include penalties or interest. We can help a company prepare a strategy and defense against this type of collection. Call us if you are experiencing this issue and allow us to help.