When people call about this
What this usually looks like
- Payroll tax deposits were missed to keep the business running
- A revenue officer is asking who signed the checks
- You received a Letter 1153 proposing a Trust Fund Recovery Penalty
- The company has closed and the balance is now pointed at you personally
How it actually works
The part that decides the outcome
Trust fund taxes are amounts withheld from someone else to be paid to a taxing authority — income and payroll tax withheld from employees, and state sales tax collected from customers. The law treats them as held in trust, which is why the consequences differ from an ordinary business debt.
The Trust Fund Recovery Penalty pierces the entity. It reaches individuals who were responsible for collecting or paying the tax and who acted willfully in failing to do so. Both elements are questions of fact. Responsibility is about actual authority over the money rather than a title on an org chart, and willfulness has a specific meaning that is narrower than the everyday word.
These investigations move on interviews. What is said early, and by whom, tends to decide the outcome long before any assessment is proposed.
The engagement
How we work a case like this
1. Map the authority
Who actually decided which creditors were paid, in which periods, and on what evidence.
2. Contest the elements
Responsibility and willfulness argued separately, on the facts, before assessment.
3. Resolve what is assessed
Personal liability that survives becomes a collection matter with its own remedies.
Related matters
These rarely arrive on their own
Tax problems overlap. The pages below are the ones that most often belong in the same file as this one.
Worker Classification
Reclassifying contractors as employees creates payroll liability retroactively.
Open — Worker ClassificationIRS Tax Debt & Collections
An assessed recovery penalty is collected against you personally, like any other balance.
Open — IRS Tax Debt & CollectionsTax Investigations & Fraud
Unremitted trust fund money draws criminal attention more readily than an unpaid income tax.
Open — Tax Investigations & FraudThis page is general information, not advice for a specific situation. Available procedures depend on the actual record and on current law, which changes. Confirm before acting, or ask this office to review your own facts.
