Early identification of and addressing the nonpayment will likely obviate the possibility of a criminal referral and may even preclude the need for a TFRP assessment.
(56) Again, the quicker the trust fund portion is paid, the less likely the need for a TFRP investigation and the less likely there will be a subsequent, or concurrent, criminal investigation.
TFRP cases rely heavily upon the fact pattern, and a tax advisor's success in defeating the penalty depends on presentation of the evidence and knowledge of the IRS's TFRP procedures.
There are two statutory components that must be established under IRC section 6672(a) before a person can be held liable for the TFRP. First, the individual must be a "responsible person" for withholding and paying employment taxes to the IRS.
The surveys implemented by the TFRP
field enumerators carefully examine households, financial institutions, and community leaders.
Recommendation: To ensure that TFRP
payments are always and accurately credited to all related parties when received, the Commissioner of IRS should direct the appropriate IRS officials to formalize and implement the quarterly reviews of TFRP
payment transactions to monitor compliance with IRM requirements.
The IRS is prohibited from assessing the TFRP
against a taxpayer without 60-day notice that the taxpayer is subject to an assessment of the penalty, unless the collection of the penalty is in jeopardy.
Where applicable, IRC section 6672(e) exempts voluntary board members of tax-exempt organizations from being subject to the TFRP
. IRC section 6672(e) applies to any unpaid, voluntary member of any board of trustees or directors of a tax-exempt organization if such member, 1) is solely serving in an honorary capacity; (2) does not participate in the day-to-day or financial operations of the organization; and (3) does not have actual knowledge of the failure on which such penalty is imposed.
While a corporate structure may generally shield individuals from personal liability, it does not shield individuals from the TFRP
, and a "responsible person" may be personally liable for the TFRP
if the business fails to properly remit the requisite amounts.
The IRS imposes this TFRP
on "responsible persons" under IRC section 6672, distinct from the employer's responsibility to pay over the taxes it withholds from employees.
In addition to CDP, CAP and OIC, the Office of Appeals previously considered (and continues to hear) other types of collection-related issues, such as TFRP
, PENAP and jeopardy levies.
The ability to hire and fire employees, the authority to disburse funds (as distinguished from the authorization to sign checks) and the holding of a corporate office are viewed by all of the circuits above as important indicators of liability for the TFRP
. No factor, however, is ever considered determinative on its own.