Friday, August 8, 2014


The IRS sends out a lot of mail.  Any letter from the IRS should be taken seriously, but some have more legal ramifications than others.  Here are three of the most important IRS letters – what they mean, and how to respond:

Trust Fund Recovery Penalty – IRS Letter 1153.   The IRS cannot make an assessment against business owners for unpaid employee withholding taxes unless prior notice and appeal rights are first provided. This is called a trust fund recovery penalty, and an IRS Revenue Officer will issue Letter 1153 to any person with decision making authority over the payment of the employee withholding.  (It is called a trust fund recovery penalty because the decision-makers had a caretaking (trust) responsibility to pay the employees’ withholding to the IRS; failing that trust can result in the business owners being held responsible for repayment of the employment taxes.)  This is authorized by Internal Revenue Code section 6672.
The IRS Letter 1153 is sent by an IRS Revenue Officer after an investigation into finding the decision-makers.  Many times, the IRS targets for the trust fund penalty were not decision-makers and should not be held responsible for the failures of the business.  If the IRS target disputes the liability, there is a 60 day window of time to file an appeal.  The appeal prevents an assessment being made against the target, and provides independent review of the Revenue Officer’s findings.
The Notice of Deficiency, Final Notice of Intent to Levy and Trust Fund Recovery Penalty Letter 1153 all involve proposed actions by the IRS, and rights to review before those actions can be implemented.  The tax code has restrictions on the IRS acting unilaterally to finalize an audit, levy on property or conclude an investigation into personal responsibility for trust fund taxes.  When dealing with the IRS, itt is essential to know these rights, what they mean, and how to respond.
Are you facing an IRS Audit or getting levied? contact us now:

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