Experienced Glendale​ Trust Fund Recovery Lawyers Ready To Assist You

An attorney and businesswoman talking about trust fund recovery in Glendale.Few tax issues strike fear into the hearts of business owners like the trust fund recovery penalty. Trust fund taxes are those an employer must withhold from an employee’s paycheck and remit to the IRS. These taxes include income tax, Social Security tax, and Medicare tax. Unlike other tax penalties, the trust fund recovery penalty is assessed against a business owner’s personal assets.

Facing an IRS investigation related to the imposition of a trust fund recovery penalty often catches a business owner off guard. You know your business best, but there are times when an issue arises outside of your wheelhouse. You are busy running the day-to-day aspects of your business. So you may not have the time or energy necessary to understand the penalty, how the IRS assesses it, and what you can do to defend against it. That is where we come in. At the Glendale employment tax law firm of Kaczmarek & Jojola PLLC, we help business owners confront their outstanding tax issues head-on to avoid any unnecessary disruption in their business. With decades of experience handling complex business tax matters, we have the know-how to represent those facing these serious IRS penalties effectively.

What Is the Trust Fund Recovery Penalty?

The trust fund recovery penalty is an IRS penalty assessed against those responsible for collecting or paying trust fund taxes who willfully fail to do so. Before the IRS assesses the penalty against you, it must prove two things:

  1. You are a “responsible person”; and
  2. You willfully failed to collect or pay the trust fund taxes.

It is crucial to understand each element of the penalty because the IRS’s failure to establish either of these elements will prevent the imposition of the penalty.

Who Is a “Responsible Person”?

When the IRS begins a trust fund recovery penalty investigation, it will first request specific documentation related to the Glendale business’s structure, such as partnership agreements or articles of incorporation. IRS agents review these documents, identifying the individuals it wants to interview. The IRS will then conduct a series of interviews in an attempt to identify all responsible parties. For example, the IRS may want to know who is responsible for determining the organization’s financial policies, who signs off on the payroll, who signs company checks, and who authorizes payments to creditors.

When it comes to a trust fund recovery penalty, a responsible person is anyone who is charged with collecting and paying trust fund taxes on behalf of the company. In the case of small businesses, this is often the business owner. However, the IRS provides a lengthy list of individuals who may be responsible parties, including:

  • Officers of a corporation,
  • Members of a partnership,
  • Employees of a corporation or partnership,
  • Corporate directors,
  • Corporate shareholders,
  • Members of the board of trustees (for non-profit corporations),
  • Professional employer organizations,
  • Payroll service providers, and
  • Any other person with “authority and control” to distribute funds.

If you face a trust fund recovery penalty, the first line of defense is to show that you were not a responsible person. At Kaczmarek & Jojola PLLC, our sophisticated Glendale​ Trust Fund Recovery Attorneys command an impressive knowledge of business organizations and tax structures, as well as the substantive IRS rules. Through our knowledge and skill, we are often successful in showing the IRS that our client was not a responsible party.

How the IRS Defines “Willful” in the Context of Glendale Trust Fund Recovery Penalties

Even if the IRS identifies you as a responsible party, it cannot assess a penalty unless it can prove that you willfully failed to collect or pay the taxes. According to the IRS, a responsible person acts willfully if they:

  1. Knew or should have known about the outstanding taxes; and
  2. “Intentionally disregarded the law” or were “plainly indifferent to its requirements.”

For example, the IRS would consider using available funds to pay creditors when the Glendale business cannot pay the employment taxes as willful conduct. Notably, there is no requirement that a responsible party act with a bad motive. The IRS needs to show only that they intentionally did not pay the taxes.

At Kaczmarek & Jojola PLLC, our team of employment tax lawyers routinely defends against trust fund recovery penalties. Give us a call to see how we can help.

Reach Out to a Dedicated Glendale Trust Fund Recovery Penalty Lawyer Today

Our trusted legal team also handles other types of tax issues, including:

If you recently learned the IRS is investigating you for a trust fund recovery penalty, you will likely have many questions. At Kaczmarek & Jojola PLLC, we can help. Both Derek Kaczmarek and David Jojola are former IRS tax litigation attorneys with extensive experience handling even the most complex business tax matters. When you bring us on board, you can rest assured that you and your Glendale business are in good hands. To learn more, and to schedule a consultation with one of our Glendale trust fund recovery lawyers, give us a call today. You can also contact us through our online form, and one of our Glendale trust fund recovery attorneys will call you back to discuss your case.