If you just opened a certified letter from the IRS containing Letter 1153, your personal bank account, your home, and your credit score are now officially in the crosshairs.
This letter is from the IRS notifying you that they intend to assess the Trust Fund Recovery Penalty (TFRP) against you personally for the unpaid payroll taxes of your business. In the eyes of the IRS, you are no longer just a business owner; you are a "responsible person" who willfully neglected a federal duty.
The clock is ticking: You have exactly 60 days to respond, or the liability becomes permanent.
What is the Trust Fund Recovery Penalty?
When you pay employees, you withhold federal income tax and their share of Social Security and Medicare. These funds are called "trust fund" taxes because you hold them in trust for the U.S. government.
If the business fails to pay these, the IRS doesn't care whether it's an LLC or a Corporation. They use IRC Section 6672 to "pierce the veil" and collect 100% of that debt from the individuals in charge.
Step 1: Determine if You Are a "Responsible Person"
The IRS casts a wide net. You can be held liable if you had the status, duty, and authority to ensure taxes were paid. This includes:
- Corporate officers and directors.
- Shareholders and members.
- Anyone with check-signing authority.
- Payroll managers or outside bookkeepers with control over disbursements.
Step 2: The "Willfulness" Test
To win an appeal, you must prove you didn't "willfully" disregard the tax. However, the IRS defines willfulness broadly. If you knew the taxes were due and chose to pay any other creditor (like your landlord, a vendor, or even utility bills) instead of the IRS, you are considered "willful."
Step 3: Navigating the Form 4180 Interview
Before the penalty is finalized, an IRS Revenue Officer will likely ask you to sit for an interview (recorded on Form 4180).
- The Trap: The officer will ask seemingly innocent questions about who signs the checks and who decides which bills get paid.
- The Strategy: Never go into this interview without a tax attorney. One wrong answer can seal your personal financial fate.
Step 4: Filing the Protest (The 60-Day Window)
If you disagree with the assessment, you must file a formal written protest within 60 days. This stops the IRS from seizing your personal assets while the Office of Appeals reviews your case. If you miss this window, the IRS can immediately place a Federal Tax Lien on your personal property.
How Wolf Tax Protects Your Future
A Letter 1153 is a "Code Red" event. At Wolf Tax, we specialize in:
- Challenging "Responsibility": Proving you didn't actually have the authority to pay the taxes.
- Negotiating Settlements: If you are liable, we work to lower the amount or set up a payment plan that doesn't ruin your life.
- Appeals Representation: We handle the IRS Office of Appeals so you don't have to face them alone.
