Trusted Paradise Valley Trust Fund Recovery Lawyers Ready To Help You
Part of an employer’s tax responsibilities include withholding and paying certain employment and payroll taxes from employees’ paychecks. These taxes include federal income tax, Medicare tax, Social Security tax, and others. Collectively, these taxes are referred to as trust fund taxes. If the IRS believes that someone willfully failed to send these payments to the IRS, the IRS may impose a Trust Fund Recovery Penalty. These penalties are assessed against an individual’s personal assets, meaning a corporation’s typical protections will not apply.
At Kaczmarek & Jojola PLLC, our Paradise Valley business tax lawyers help clients effectively deal with their employment tax issues, including trust fund recovery penalties. We understand that there may be any number of valid reasons why a business did not pay taxes. From the moment we begin working on your case, we will identify the strengths and weaknesses of your case to develop a compelling defense. Our experienced Paradise Valley trust fund recovery attorneys will also help prepare clients for the IRS trust fund interview, so they know what to expect.
Trust Fund Recovery Penalty Amounts
If a Paradise Valley business owner does not deposit payroll and employment taxes that were withheld from employee’s paychecks, they may face a trust fund recovery penalty. The trust fund recovery penalty is one of the largest penalties the IRS imposes. Specifically, the trust fund recovery penalty is equal to the amount of unpaid taxes. For example, if a Paradise Valley small business owner withheld $1,000 in taxes from an employee’s paycheck but failed to send this money to the IRS, the business owner would be responsible for the unpaid balance plus an additional $1,000. If the IRS identifies unpaid taxes pertaining to multiple employees over an extended period, the amount of the trust fund recovery penalty can be enormous.
Who Can Be the Target of a Trust Fund Recovery Penalty
The IRS can assess a trust fund recovery penalty against any person who willfully fails to collect and deposit trust fund taxes. Thus, while trust fund recovery penalties are often issued to business owners, they can also be assessed against C-suite executives, directors, individual employees, accountants, bookkeepers, and even third-party payroll administrators. Any person within an organization, or hired by the organization, whose job it is to collect and pay these taxes, can be held responsible. Additionally, the IRS can levy a trust fund recovery penalty against any person with control over the funds who knew that the taxes were not being paid, even if it was not within their job duties to pay the taxes.
The Trust Fund Recovery Penalty Process
When the IRS believes that an organization is not paying some or all of its trust fund taxes, it will open an investigation. An investigation starts with an IRS officer requesting documents and certain information to determine who is responsible for collecting and paying the taxes. For example, an IRS officer may request bank statements or other business documents such as articles of incorporation or a partnership agreement. Officers request these documents to determine who is involved in the company and what each person’s responsibilities are. The IRS will also want to know who has access to the organization’s accounts, including through online-banking or debit cards. Eventually, the IRS will determine who it believes is responsible and request an interview with those parties.
An interview related to the investigation of a trust fund recovery penalty is called a 4180 interview, named after the IRS form containing the interview questions. Questions in a 4180 interview include:
- Are you responsible for setting the financial policy for the company?
- Do you sign and send payroll returns?
- Do you authorize payments for bills or to creditors?
- Do you make payroll payments?
- Did you know that the trust fund taxes were not being paid?
- Do you have access to the organization’s online banking?
Those facing a trust fund recovery penalty interview should reach out to a dedicated Paradise Valley business tax law firm for assistance. At Kaczmarek & Jojola PLLC, we routinely help our clients prepare for these challenging and stressful interviews, while working towards a compelling defense to the imposition of the penalty.
Reach Out to a Dedicated Trust Fund Recovery Penalty Tax Lawyer Today
If the IRS recently notified you or your employer that it is pursuing a trust fund recovery penalty against you, contact the attorneys at Kaczmarek & Jojola PLLC. You do not need to face the IRS alone, and you may have a strong defense to the penalty. Our experienced Paradise Valley trust fund recovery lawyers will patiently and effectively go through the tax issues you are facing and work towards a favorable resolution.
Our trusted legal team also handles other types of tax issues, including:
To learn more, contact our offices either by phone or through our online form.