Trust Fund Recovery Penalty

Today for the enrolled agent part three exam, we are covering the Trust Fund Recovery Penalty, often abbreviated as the TFRP.

This is a penalty assessed against individuals, not the business, for willfully failing to remit trust fund taxes.

These are the taxes withheld from an employee's paycheck, like federal income tax and their share of FICA taxes, which the employer holds in trust for the government.

The IRS investigation process is also fair game for the exam.

A revenue officer will conduct interviews, often using Form 4180, and gather evidence like bank signature cards to establish who is responsible and willful.

If they believe a person is liable, they will issue Letter 1153, which is the proposed assessment of the Trust Fund Recovery Penalty.

This letter is sent with Form 2751, which the individual can sign if they agree to the assessment.

Here is a number you must remember for the exam.