The trust fund refers to employee taxes (trust fund) held in trust by the employer and remitted to the IRS at the due payment date. Failure to remit employee taxes held in trust is a grievous offense that comes with repercussions from the government. The IRS is tasked with the responsibility of collecting taxes and is backed by the law to impose a penalty on any erring individual who refuses to pay the payroll taxes of their employees.
The internal revenue code empowers the IRS to prosecute the responsible individual or group of persons responsible for willful failure to remit the payroll taxes. It is worth mentioning that the IRS treats the case of trust fund recovery penalty on an individual basis as it seeks to identify the sole individual that was supposed to remit such funds to the IRS.
If you are found to be complicit in the failure to pay the payroll taxes, a trust fund recovery penalty will be brought against you.
The definition of a responsible party is an employee, shareholder, or director of the company who makes decisions on which creditors get paid. Some of them are also among the signatories of the bank account, but not always. Above all, the IRS seeks to prosecute the decision makers, not just the signatories, as some signatories might be a junior employee who’s merely following orders.
One of the factors that determine the IRS verdict during a trust fund recovery penalty is whether you willfully failed to pay the payroll taxes or not.
The term “Willful” connotes if it’s a very low standard and a low standard is when you choose to pay other creditors before paying the IRS trust fund.
So, if the IRS also finds out that you paid a mortgage, rent, and other expenses, they could even charge you with gross payroll before bringing up the issue of the payroll taxes that you are held liable for.
For matters concerning trust fund recovery penalty, employees cannot be protected by their company and could be held liable for the company’s unpaid payroll taxes. Most times, the IRS targets the accountants or bookkeepers; however, it could be anyone else from an officer to the director that has a level of control over the finances.
In the situation where you have been targeted as the potential individual responsible for trust fund liability, you should take action immediately in a bid to absolve yourself of the blame. You should organize your documents in a sensible manner that quells any form of suspicion and any other relevant piece of evidence as the investigations proceeds by the IRS Revenue Officer. It’s imperative that you make a solid presentation early in the trust fund recovery penalty interview. At this point, the services of a competent tax attorney should be employed to help you compile all the documents required to prove your innocence. Your licensed tax professional might also represent you when invited by the IRS revenue officer as you intend to settle trust fund recovery penalty.
If you or someone you know thinks that he/she is eligible for a claim of Trust Fund Recovery Penalty or any other Tax Liability issue now would be a great time to come in and let us help you resolve the issue. I can be contacted at (212) 320-8191 or by email at firstname.lastname@example.org.
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