The first task before the revenue officer in the investigation process is to determine the amount of money owed and who is to be held accountable.

To achieve these objectives, the IRS usually issues an administrative summon. This is an order which is difficult or impossible to decline. The summon demands for records of bank transactions, including canceled checks, signature cards, etc.

The Revenue Officer (RO) launches an investigation to find the responsible parties within a business. The RO typically relies on several indicators to determine who is responsible. The revenue officer usually draws a wide net to include shareholders, officers, owners, or anyone that has ever signed a check.

However, these set of individuals are potential suspects as it doesn’t mean they have been termed as a willful and responsible person by the law.

Unfortunately, many innocent employees who aren’t part of the business decision-making and with no financial control have been held liable for the Trust Fund Recovery Penalty merely because they were the primary point-of-contact for the IRS.

People within this category should be wary of such risk, and seek ways to protect themselves if they find themselves in this situation.

It’s a straightforward process. Firstly, the revenue officer pays a visit to the business to set up a meeting with the business owners, officers, and other parties responsible. At this meeting, the revenue officer will conduct a Form 4180 interview with these selected individuals.

This information assists the RO with determining who should be held responsible for the outstanding Trust Fund liability of the corporation. This is the tricky part of the process as the answers of the interviewee can be used against him in favor of the government’s interest. The revenue officer could ask questions in an intimidating manner just like a detective in a bid to identify the responsible individual.

Afterward, the individual responsible will be “asked” to sign Form 4180, which is the Report of Interview done with Responsible Individuals in regards to Trust Fund Recovery Penalty.

At the completion of the investigation, if the revenue officer believes that the identified individual is “responsible” and “willful,” Letter 1153 will be issued, which is a proposal to assess Trust Fund Recovery Penalty on the responsible person. The revenue officer then sends the file to a supervisor who will approve and rubber stamp the issuance of Letter 1153.

As disheartening as this letter can be, it may also be good news, depending on your perspective as it indicates that the matter has left the auditor’s hands and has passed onto another person.

The new officer may not be well-furnished with facts about the issue and may be willing to renegotiate favorable terms. Additionally, you have a period of 60 days upon receiving the letter to protest and challenge the trust fund recovery penalty proposal.

At the last page of Letter 1153 is Form 2751 which states the amount of trust fund taxes owed and the amount you are penalized for.