Tax Relief Blog

If a responsible person willfully fails to pay trust fund taxes (income tax withheld, FICA, RRTA, Medicare) to the IRS, is he personally liable for the trust fund recovery penalty?

December 20, 2013 | Mike Habib, EA

The trust fund recovery penalty (TFRP) can be applied to any responsible person who willfully fails to collect or pay trust fund taxes. The penalty amount is equal to the total amount of the tax that was not paid, up to the full amount. This is why it is sometimes known as the 100% penalty. The penalty is separate from the tax and the employer’s liability for such taxes.

Get professional IRS representation. Our firm represents taxpayers before all administrative levels of the IRS.

Please call us at 877-788-2937 or email us to schedule an appointment.

Focus on the Affordable Care Act

December 6, 2013 | Mike Habib, EA

In March 2010, President Obama signed the Patient Protection and Affordable Care Act (the “Affordable Care Act”) into law. While some provisions of the ACA have already gone into effect, a number of new provisions are scheduled to take effect January 1, 2014.

Although we do not intend this newsletter to be the answer-all to the ACA, we thought this would be a good time to look at some of the provisions that might affect you.

What is the TFRP trust fund recovery penalty?

November 21, 2013 | Mike Habib, EA

The trust fund recovery penalty (TFRP) is a 100% penalty on an employer’s failure to pay its trust fund taxes. The TFRP can be assessed against any person in the employer’s business who is (1) responsible for collecting, accounting for, and paying withheld employment taxes, and (2) who willfully fails to collect or pay these taxes.

A director, officer, shareholder or employee of a corporation, a member or employee of a partnership, or any other person with the authority and control over these taxes can be held liable as a responsible person under the TFRP.

Get professional IRS representation. Our firm represents taxpayers before all administrative levels of the IRS.

Please call us at 877-788-2937 or email us to schedule an appointment.

Is a taxpayer that fails to file or pay payroll taxes subject to penalty?

November 3, 2013 | Mike Habib, EA

The taxpayer may be subject to several different penalties.

Failure to File
If a taxpayer fails to file on the date the return should have been filed (determined with regard to any extension of time for filing) the taxpayer will be subject to a failure to file penalty unless it is shown that the failure to file a return is due to reasonable cause and not due to willful neglect. This penalty is 5% of the net amount of tax due for each month (or fraction thereof) during which there is a failure to file any return, up to a maximum penalty of 25%. If the return is not filed within 60 days of the due date, the minimum penalty will be the lesser of $135 or 100% of the tax liability on the return (even if there are no unpaid taxes when the return is filed).

If both the “failure to file” and the “failure to pay” penalties apply for the same period, the failure to file penalty (5%) is reduced by the failure to pay penalty (0.5%). This generally results in a 4.5% per month failure to file penalty and a 0.5% per month failure to pay penalty.

When will IRS collection action be initiated? Back taxes help?

October 21, 2013 | Mike Habib, EA

Two events must occur before the IRS may begin collections activity:

• First, the tax must be assessed and due. The tax may be shown on a tax return showing a balance due, an audit closing agreement, an audit deficiency that was not contested, an SFR substitute for return filed by IRS or a Tax Court judgment.

• Second, the IRS must give the taxpayer a Notice of Tax Due and Demand for Payment, which will request payment within 10 days. The notice is usually mailed to the taxpayer. Generally, if the taxpayer does not respond and the liability is for individual income taxes and the liability is small, the IRS will send a series of notices and attempt to make telephone contact with the taxpayer.

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October 3, 2013 | Mike Habib, EA

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Can the IRS take a lien out on property for payroll taxes?

September 23, 2013 | Mike Habib, EA

Do you owe 941 employment and payroll back taxes?

The answer is:

Yes the IRS take a lien out on property for payroll taxes.

Under IRC §6321, the federal government can encumber property with a general tax lien. Generally, this lien can be used to encumber any property that the taxpayer owns (this is generally determined under state law). A tax lien will be imposed on a taxpayer when he neglects or fails to pay taxes after demand by the government.

Have You Been Notified of an IRS Tax Audit? Help is Available.

September 2, 2013 | Mike Habib, EA

About 1.1% of taxpayers are selected for a tax audit each year. The IRS examines tax returns to verify that the tax reported is correct. Some of those people are selected randomly, others have items on their returns which raise a red flag and trigger the audit. Whichever category you fall into, you should know your rights, know what to expect, and know that you are entitled to be represented by a tax professional that can assist you with every aspect of the audit.

Upon receiving a letter informing you of the audit, you’ll be required to phone within 10 days to acknowledge the letter and schedule an appointment. It’s important that you do this in a timely fashion. Within the letter, or during that call, you will be advised on what items are being called into question. Depending upon your ability to obtain the supporting documentation, you will make an appointment with the IRS auditing agent. You may choose to have representation before you make that appointment, because a tax specialist will advise you of the time frame you’ll need to prepare for the meeting and in most cases you do not have to appear, your representative, power of attorney, would handle the audit for you.

How long does the IRS have to collect income tax?

August 16, 2013 | Mike Habib, EA

Generally, the statute of limitation for collection expires 10 years after the date the tax was assessed (for tax assessed after November 5, 1990). For tax assessed before November 5, 1990, the statute of limitation for collection is six years. This period may be extended by an agreement between the taxpayer and IRS. In addition, there are numerous circumstances which suspend the running of the statute of limitation for some period of time. For example, the statute of limitation is suspended during the 90-day period after the issuance of a Notice of Deficiency and for an additional 60 days thereafter.

Note: The IRS does not necessarily have to collect the tax during this period, but does have to take collection action (e.g., levy or begin court proceedings) before this time has expired.

What assets may be seized by the IRS to pay back taxes?

August 1, 2013 | Mike Habib, EA

The IRS may seize all property and rights to property (except for exempt property), whether the property is real or personal, tangible or intangible, belonging to any taxpayer who neglects or refuses to pay back taxes, or any property on which there is a tax lien for payment of any tax.

Get professional IRS representation. Our firm represents taxpayers before all administrative levels of the IRS.

Please call us at 877-788-2937 or email us to schedule an appointment.