Payroll Tax/Trust Fund Penalty Appeals
The Trust Fund Recovery Program for IRS is one of the most contentious powers in IRS’ collection arsenal. The assessment is generally derived from unpaid employment tax, usually by a corporation. The IRS must make a determination of “willfulness” and “responsibility” before assessing the liability against an individual or entity. The IRS is inclined to make one or more assessments based on what information it has, and to ask questions later. Often, these assessments should never have been made.
The State of California has a similar determination of the willfulness and responsibility requirement for the Board of Equalization (Sales tax) and Employment Development Department (Payroll tax). Determinations made by the state are, like the IRS, usually related to unpaid corporate tax filings.
These assessments based on willfulness and responsibility by the IRS and State of California are the most debated and challenged issues by the taxpayers. When a tax agency is considering making such an assessment against a taxpayer, it is essential that every possible defense be raised to dispute the labeling of “willfulness” and “responsibility.” Defenses of either issue can lead to exoneration. Many times an assessment has already been completed by the tax agency. That does not mean the determination cannot be overturned. It is critical to carefully analyze all issues of willfulness and responsibility and to apply case law if necessary in order to raise a position for appeal. In addition, there are statutory and time limitation requirements that must be satisfied in order for the tax agency to successfully assess a taxpayer. We examine that statutory process as well to discern if the assessment is valid or not.