Trust Fund Recovery Penalty

If you receive Letter 1153 and Form 2751 from the Internal Revenue Service (IRS), then the agency has determined that you're responsible for your company's unpaid employment taxes. It's essential to act quickly after receiving this letter, so you don't end up owing more fees and interest to the IRS. An experienced California tax attorney can help you make sense of your Letter 1153 and advise you on your best options.

What Is the Trust Fund Recovery Penalty?

Employers have a responsibility to withhold certain funds from their employees' paychecks. These funds include federal taxes as well as Social Security and Medicare taxes (also known as FICA taxes). After withholding these funds, employers must deposit them with the IRS or relevant agency by their respective deadlines. Employers are entrusted with these funds to hold them for the government until depositing them. When an employer does pay the taxes, the IRS can impose the Trust Fund Recovery Penalty (TFRP).

What Is an IRS Letter 1153?

If the IRS believes you're delinquent on your trust funds, the first letter the agency will send you is Letter 1153. In this letter, the IRS notifies you that you are subject to the TFRP and proposes assessing the uncollected taxes against you as an individual. The IRS sends this letter because the agency has determined you are the person responsible for the unpaid FICA taxes.

What Is an IRS Form 2751?

Along with Letter 1153, the IRS will send Form 2751. If you agree with the IRS' proposed assessment to pay the taxes owed, you will sign Form 2751 and send it back to the IRS. Once you've agreed, the IRS will send you Letter 1155, Notice of Agreed Trust Fund Recovery Penalty, 14 days after receiving your signed Form 2751. Then, the collection process starts, which could include placing a lien on your property. If you can't pay the amount in full right away, you can propose an installment plan.

How to Deal with a Letter 1153 from the IRS

After you receive Letter 1153 and Form 2751, you have 60 days to respond. You can either agree and pay the taxes or appeal the proposed assessment. If you don't respond, the IRS treats your case as “unagreed.” To appeal the TFRP, you must send a written appeal to the IRS within 60 days. Letter 1153 should contain your taxpayer's rights should you wish to appeal and where to send your written appeal.

If you receive Letter 1153 from the IRS and aren't sure what to do, you should contact your California tax attorney as soon as possible. You only have 60 days to act—you should leave plenty of time for your attorney to provide you with all the details you'll need to make the best decision.

Questions About Your IRS Tax Letter?

Receiving a letter from the IRS is usually not a pleasant experience. If you aren't sure what the IRS wants or how to mitigate your situation, a tax professional can help. Contact a California Tax Attorney today to set up a consultation and discuss your rights after receiving an IRS letter.

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