Q: Can the IRS go after me personally if I owe payroll taxes or past due employment taxes?

A: Yes. Congress gave the IRS's enforcement power real teeth in the Trust Fund Recovery Penalty (TFRP). Payroll and excise taxes are trust taxes, meaning the employer is obliged to collect these revenues and pass them on to the IRS. The IRS may assess this penalty against anyone-including CPAs, accountants, and bookkeepers-who willfully fails to collect or pay to the IRS withholding taxes as well as collected excise taxes.

"Willfully" is the key word here. The responsible person or persons must have known about the unpaid employment taxes and have willfully failed to turn those trust taxes over to the IRS. This can be a problem with small and mid-size businesses that are struggling and use the tax monies to keep the business going or to pay creditors.

When seeking to assess the TFRP, the IRS uses a two-part test to determine who exactly was responsible to collect and pay the taxes and whether that person or persons willfully failed to perform this duty. The IRS can pursue the individual or individuals whether or not the business is still in operation. Once the TFRP is assessed against the responsible individual or individuals, the IRS will proceed with collection efforts.

Such individuals may attempt to negotiate an Installment Agreement (IA) or may qualify for the IRS Offer in Compromise (OIC) program to settle delinquent payroll taxes. But the surest way to successfully obtain business tax relief is to seek professional help from a tax attorney, CPA, or Certified Tax Resolution Specialist who is best positioned to respond to a TFRP assessment on an individual's behalf and who is best able to negotiate a permanent tax-relief schedule with the IRS.

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