The phrase “trust fund” often brings to mind the wealthy – those who are set to pass down or inherit a large amount of money in the future. However, trust fund recovery has little to do with the concept it’s named after.
Trust fund recovery actually refers to a business owner or representative who, for any number of reasons, failed to pay the IRS the taxes they’ve withheld from their employees’ paychecks throughout the year. The “trust” component refers not to inheritance, but to the fact that the money was held “in trust” with the agreement that it would be paid on-time and in full at a later date.
The consequences of this type of penalty can be severe. They usually start with an investigation conducted by the IRS, during which they uncover if the money was “willfully” unpaid and who should take responsibility for the error. Because the IRS must first be able to verify that the funds were withheld “willfully,” you have the opportunity to resolve the issue with less consequence – with the help of a tax professional.
You won’t be penalized for a trust fund recovery violation until the IRS has completed a thorough investigation. The assessment starts with a notice and proposal of the investigation and penalty, respectively. You will receive 60 days to appeal this notice – and you must act fast. The quicker you are able to produce necessary evidence that you didn’t “willfully” withhold money, the easier it will be to reduce or even fully avoid IRS penalties.
Unfortunately, tax conflicts can be difficult to resolve. You may still be penalized even after presenting evidence that money in trust wasn’t “willfully” withheld. If this is your current situation, know that you still have options. A professional can help you file an appeal and potentially free yourself from the burden of IRS penalties.
The Rocket Tax Relief team is composed entirely of seasoned tax law professionals. You can trust us to help you with a wide array of tax-related problems and needs, no matter their complexity. For more information about our services and how we can assist with trust fund recovery penalties, call us at 800-542-4718 or complete our online form. We offer 15-minute case consultations at no cost.