Employers hold federal income-tax withholding and the employee share of Social Security and Medicare taxes in trust for the United States. If those trust-fund taxes are not paid, Internal Revenue Code section 6672 allows the IRS to assess a Trust Fund Recovery Penalty, or TFRP, against responsible individuals who acted willfully.
Responsibility is based on actual authority
The IRS does not decide responsibility by title alone. It examines whether a person had sufficient status, duty, and authority over the business’s finances. Relevant facts may include authority to sign checks, control payroll, direct payments, hire or fire employees, sign tax returns, obtain financing, and decide which creditors were paid.
More than one person can be responsible. A shareholder or officer is not automatically liable, and a bookkeeper is not automatically protected. The evidence of actual control matters.
Willfulness does not require an evil motive
In this context, willfulness can be established when a responsible person knew payroll taxes were unpaid—or acted with reckless disregard—and nevertheless paid other creditors with available funds. Financial pressure and the desire to keep a business operating do not automatically defeat willfulness.
Letter 1153 and the proposed assessment
The IRS generally proposes the penalty through Letter 1153 and Form 2751. The letter states the administrative appeal deadline and procedures. Signing Form 2751 is a significant act; ignoring the letter can permit assessment without the person’s evidence being considered through the normal protest process.
Build the factual record early
- Bank signature cards, cancelled checks, and online-banking authority.
- Corporate records, job descriptions, ownership documents, and employment agreements.
- Payroll records and Forms 941.
- Emails showing who directed payments and knew of the delinquency.
- Evidence of restricted authority, lender control, or another decision-maker.
The TFRP is a personal assessment. It should be analyzed separately from the business’s remaining tax debt and any plan to close, sell, reorganize, or continue the company.