Firm name
August 2014

Expect Increased Assessment and Collection of Trust Fund Recovery Penalties


Enforcement of The Trust Fund Recovery Penalty (TFRP) is a source of potential government revenue that, according to the Treasury Inspector General for Tax Administration (TIGTA), needs to be revamped to become more efficient. Under existing law, employers are required to withhold from their employees' salaries amounts to cover Federal income, Social Security, and Medicare taxes. These are referred to as "trust fund taxes." When the employer fails to pay these taxes, the IRS can collect them from "responsible persons," who have willfully failed to pay them. In determining who is a responsible person, the critical test is whether the person has the effective power to pay the taxes owed.


As the taxes get older, the possibility of collection by the IRS continues to decrease. As of June 2012, employers owed the United States government approximately $14.1 billion in delinquent employment taxes. That's one big employment tax problem! In their study of 265 statistically valid cases, TIGTA found that TFRP actions were not always timely or adequate in 99 cases. Sixty-five cases had untimely TFRP actions, twenty cases had TFRPs that could not be assessed because assessment statutes had expired, ten did not have adequate support for collectability determinations when the TFRP was not assessed, and nine cases with incomplete TFRP investigations were closed with an installment agreement or considered "currently not collectible" before determining whether a TFRP should be assessed.


TIGTA set forth a list of recommendations for the IRS with respect to the TFRP, which were all accepted and agreed to be implemented in the coming year. Many of the suggestions emphasized the responsibility of the group managers; for example, one recommendation was to emphasize to managers their responsibility to use the Automated Trust Fund Recovery System (ATFR) monthly and to increase the level of training offered.


There are also a number of technical improvements that TIGTA recommended. For example, components would be added to review and measure the timeliness of actions, systemic messages will be used to remind revenue officers about functions already in place to facilitate timely TFRP actions, and there will be an updated checklist box for installment agreements. TIGTA also encouraged an increased amount of cooperation between different groups. For example, revenue officers and managers were encouraged to work more closely with the IRS Information Technology organization to ensure the completion and adequacy of the improvements listed above. Also, revenue officers should coordinate with Collection Policy to revise the Internal Revenue Manual (IRM), to hold group managers more accountable.

Contact our experienced former IRS tax attorneys at 1-800 Tax Litigator (1-800- 380.8295) for a confidential consultation to discuss available options if you have employment tax problems.

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Picture of Dennis Brager
Dennis N. Brager, Esq.
Former IRS Senior Trial Attorney
Nationally Recognized California State Bar Certified Tax Specialist

Upcoming Speeches & Webinars 
Dennis will be speaking at the following upcoming events.

"New FBAR Reporting Regulations Navigating Offshore Voluntary Disclosure Programs"
10:00 am- 11:30 am
September 10, 2014

"Changes to IRS Offshore Voluntary Disclosure Program"
12:00 pm 
September 11, 2014

"Tax Issues and Domestic Abuse"
11:00 am- 12:00 pm
September 18, 2014

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Dennis' webinar, "The IRS Collection Process: What You Need to Know to Advise Your Clients" is available on the Brager Tax Law Group Website: 
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The Brager Tax Law Group is a tax litigation and tax controversy law firm, which represents clients with tax problems and tax disputes with the IRS, the California Franchise Tax Board (FTB), the State Board of Equalization (SBE) and the Employment Development Department (EDD). All of the firm's tax lawyers are former trial attorneys with the IRS. 

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