Trust Fund Penalty Investigation


#1

Need help understanding a TFRP Investigation. Client has unpaid payroll taxes around $119k. Trying to work with RO to set up an installment agreement. RO sent me a fax requesting information regarding the TFRP and wants to set up an appointment at my office. Their is no question that the officer was responsible for the payment of payroll taxes. My question is: Do I have to sit through an interview? Officer does not have the ability to pay (considered currently not collectible) and would like the company to pay the liability. The RO is requesting information and a interview a week from now. Can I ask for an extension of time or do I need to do what I can to get everything together. Or can I just send the RO the Form 4180 and a Form 433-A from the Officer of the company and wait for the RO determination?


#2

Your client can actually decline the interview. The R/O will summons for bank info and propose the assessment. You can advise the R/O that the client is not disputing responsibility and supply the 433-A. It’s rare that they will not assess due to inability to pay. As a former R/O I can tell you that their policy is “just because they can’t pay now, doesn’t mean they can’t pay later.” They have 10 years to collect so have nothing to lose by going ahead with an assessment…which could well end up in CNC for a while. They will make the assessment with or without the interview and with or without the signed F2751 based on summoned bank information and any other info they have acquired. They don’t need the client’s cooperation at all basically! I know attorneys who just ignore the whole process and wait for the assessment, especially if they are stalling for time.
Good luck.


#3

I would assume that ignoring would not be in the best interest, correct?! Just give the RO the requested information, tell the RO the client is not disputing responsibility, and the business wants to set up an IA to move forward and pay the liability. I just want to get an installment agreement in place and move on. I saw on another thread that RO’s won’t assess the trust fund if the business is current on filings, payroll deposits, and can pay the balance on a payment plan within 24 months. Is that true?


#4

Have you spoken to the RO?
Generally they don’t need to come to you, if you can answer their questions, or fax them the info, a meeting is probably not even needed. You can always politely say, your client can’t pay anyways, so there isn’t a point in fighting the TFPI at all, so just go ahead and assess however you feel like.

  1. You said your client is CNC. Make sure that is official and showing in the IRS system. Not just, it’s your opinion he would be CNC, but if the RO looked at your client’s account, it would show CNC. (if it’s not, try the “standard” rates over the phone with the IRS to see if you can get it set to CNC quickly, as his account might not be assigned to the RO yet, so it might go through easily.)

  2. Call RO (they don’t bite), say, can we go over what your needing to complete this TFRP Investigation? My client is CNC and doesn’t have an ability to pay anyways. Is there any information your really needing from me that could help my client?

  3. If he asks you more than just basic questions, make sure you say “I’ll check with my client and get back to you on that”. And write down all the questions. Then you can go over and figure out the best worded answers.

  4. So the thing is. The TFRP is going to be assessed to your client no matter what. You already said he was responsible for the payments and didn’t do them. Best thing you can do is, make sure your client’s account is officially in CNC status, don’t spend a lot of time on the case, let it complete, and advise your client not to have a refund on their tax return for the next 10 years because it will be taken to pay this. Also an offer in compromise isn’t going to work on this ever either.

  5. You can also ask the RO if there is a way to lower the TF Penalties for your client given that he can’t actually pay. However, be aware he might simply tell you there isn’t a lot he can do without it being paid. However, generally an RO will tell you a lot of info if you ask. Their job now a days is more like bring client into compliance, most of them don’t care if that means there is more money that the IRS can collect or not, they just want compliance. And to them CNC often means apply the penalty, future payroll deposits are being made, and so now the tax payer is compliance, case closed.


#5

There is a statutory limit on how long the R/O has to make the TFRP assessment. The R/Os used to get a “waiver” of that time if the business was on a payment plan but I haven’t found an R/O that will agree to that any more. As to other advice you are being given, you can’t just give them info on the phone instead of going in for a F4180 interview. Technically they can summons the client to appear for the interview but given the current understaffed atmosphere, I haven’t had an R/O do that in years. They just go with the client’s admission and summon for the bank info. If they come up with other potential responsible persons (who signed loan documents or are on the sig card) they will contact them for interviews as well.
Also, you can’t “be sure your client is in CNC” as was suggested to you unless he has other liabilities. If the TFRP isn’t assessed, how do you get them into CNC?
There actually is a possibility of lowering the trust fund amount under certain conditions. Check out the IRM at 5.7.4.3(8). I have been able to use this successfully many times but I always have to instruct the R/O because none of them seem to be aware of it…even their Managers!


#6

Good Morning Lindsey,
Sounds like you have received some pretty good guidance on this thread. Let me throw in a couple of thoughts. First, it doesn’t sound like your client meets the criteria for non-assessment of the TFRP based upon the potential balance owed:

Second, if you are already negotiating an installment agreement, you can possibly “shield” the officers from collection while the business pays the balance. See IRM 5.14.7.4.1.11.c and 5.14.7.4.1(8):

Hope this helps,
Jeff