There are several types of cases and issues involved with TFRP. TFRP cases are sent to Appeals from Collection. These cases could obtain the following types of issues:

Although most trust fund recovery penalties are asserted for failure to pay over withheld employment taxes, the penalty also applies to "collected" excise taxes. Penalties on collected excise taxes may be asserted on persons responsible for collecting, accounting for, and paying over taxes to the Government. Taxes in this category and their Code sections are:

The trust fund recovery penalty on excise taxes is usually asserted against the collecting agency. If there is doubt about collectibility of the penalty from the collecting agency, other than a partnership or sole proprietorship, the penalty may be asserted against the responsible persons, the collecting agency, or both.

The penalty is asserted for:

If a collecting agency’s failure to collect a tax is not willful, it cannot be held liable for the trust fund recovery penalty for failure to collect the tax.

Each person that Collection determines is responsible for the trust fund recovery penalty and each quarterly period in dispute will be considered a separate work unit. The corporate name will be noted on each work unit.

Separate assessments are made against each responsible person for the total amount of the person’s liability for each quarter. Separate assessments will be made for each responsible person for each quarter.

The Service does not divide the assessments between the responsible persons, so the full amount may be collected from any one of them. In cases where a person is found responsible for only part of the liability, assessments are made for those portions only.

In years prior to 2001, trust fund recovery penalty assessments were combined such that in the examples above, only one assessment would have been made against each of the responsible persons for the total amount of all quarters.

Even though the Service may make assessments against more than one responsible person for a specific quarterly liability, it only collects the total amount once. See Policy Statement P-5-60. The business or one responsible person may pay the entire amount, or everyone involved may split payment of the amount among themselves. Depending on the timing of Collection efforts, the Service may collect one portion from one, a larger or smaller portion from another, and the balance from yet one or more other responsible persons.

When possible, related cases involving two or more officers of the same corporation are transmitted to Appeals at the same time. However, responsible persons may be in different locations and considered by different Appeals offices. When these cases are under separate jurisdictions, Appeals employees need to coordinate their findings.

Counsel may ask for assessments against a party who was not previously determined to be a responsible person to support a third-party action before court against persons potentially responsible for the liability. Administrative appeals will not be available in these cases. In such cases, to avoid running afoul of IRC section 6672(b) the Service should defer from making notice and demand for the TFRP assessment that was requested by Counsel. If the Government is successful with respect to the assessed third party in the refund proceeding, then the Service may rely on the judgment (rather than on its usual federal tax lien) in order to effect collection of the TFRP amount sustained by the court.

The Taxpayer Bill of Rights 2 (TBOR2), enacted on July 30, 1996, included a requirement to send a 60-day preliminary notice of proposed assessment before making notice and demand for payment of the trust fund recovery penalty and a provision that extends the assessment statute under certain circumstances. Letter 1153 is this notice, which Collection sends with a certificate of mailing or delivers in person.

When the 60-day notice is issued before the expiration of the assessment statute, the statute will not expire before the later of:

If Form 2750is executed, whichever period is longer, i.e., the period extended by waiver or the IRC section 6672(b)(3) period will govern. IRC section 6672(b)(3) provides that if the assessment period is still open when the IRS mails or delivers the notice of proposed TFRP assessment, the period will not expire before the date that is 90 days after the date on which the notice was mailed or delivered or, if there is a timely protest, the date that is 30 days after the final administrative determination. In other words, if the assessment period, either the original period or the period extended by waiver, is open but will expire during the 90 period or, if a timely protest is filed, while the IRS is considering the protest, the period of limitations will not expire until after the 90 or 30 day period. However, if the original or extended assessment period still has a year on it when Appeals makes its final determination, the original or extended period will govern. In the table below, the taxpayer signed a waiver extending the assessment of the TFRP penalty for six months. On the same day the taxpayer signed the waiver, the taxpayer files a protest of the proposed penalty.

The date the original (whether perfected or unperfected) protest was mailed or delivered determines whether the ASED is extended under IRC section 6672(b)(3)(B) If the ASED is not protected by TBOR2, Appeals employees must verify the actual ASED on ACDS.. Appeals employees working trust fund recovery penalty cases should review IRC Section 7503 and follow the guidelines if the final day for assessment is a Saturday, Sunday, or legal holiday

The trust fund recovery penalty liability is separate and distinct from the employment or excise tax liability it relates to. An extension of the period of limitations on one party’s liability does not extend the period of limitations on any other party. A bankruptcy proceeding involving liability for employment or excise tax, or an offer to compromise liability for employment or excise tax does not extend the time for assessing trust fund recovery penalties against the responsible person. See IRM 5.9.4, Common Bankruptcy Issues, BRA 94 and BAPCPA's Effect on Assessments.

A trust fund recovery penalty against a corporate officer or employee is a separate and distinct liability from the corporate tax. Therefore, statute controls must be established for each person and care must be taken when different quarterly periods are involved in multiple-person cases.

Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty, is a self-explanatory four-part form.

For additional discussion on the statutory assessment period, refer to IRM 5.7.3, Establishing Responsibility and Willfulness for the TFRP relating to Statutory Assessment Period and Extension of Statutory Assessment Period .

The IRS must provide for a Form 843 Claim for Refund and Request for Abatement. When Congress enacted IRC section 6672(b) as part of TBOR2, it gave the taxpayer an additional opportunity to appeal a TFRP, e.g., this new right was an appeal of a proposed TFRP prior to assessment. IRC section 6672(b) does not affect the taxpayer's right to file a refund claim with the IRS once the assessment is made. When a taxpayer receives a notice of proposed assessment of the TFRP, he or she may file a timely protest or appeal the proposed assessment. Even if the taxpayer received a timely Letter 1153 notice of proposed assessment and, for whatever reason, decided not to protest the proposed assessment, once the IRS goes ahead and assesses the penalty, the taxpayer has a right to pay the appropriate amount of the assessment and file a refund claim with the IRS. IRC section 6672(b) did not affect this right. If the taxpayer decides not to or fails for whatever reason to appeal a Letter 1153 proposed assessment, he or she still has the right to have Appeals consider a refund claim.

If the taxpayer protested the proposed assessment Letter 1153,to Appeals and raises no further issues in his or her Form 843 refund claim, Technical Services Advisory is not required to send the refund claim to Appeals. However, if the taxpayer raises new issues in his or her refund claim, the claim should be sent to Appeals. This generally will ensure/strengthen the Government's position in any litigation filed by the claimant

The trust fund recovery penalty is one of the most litigated statutory provisions of the Internal Revenue Code. Settlement and Appeals Officers need to consider settlement of appropriate cases when evaluating the trust fund recovery penalty

Where agreement is secured, the Settlement or Appeals Officer must try to get payment of the liability from the responsible person(s).

Form 2751-AD, Trust Fund Recovery Penalty—Offer of Agreement to Assessment and Collection, may be used in any case in which each responsible person agrees with the proposed settlement. In certain cases a closing agreement may be used instead of a Form 2751-AD. See IRM 8.13.Closing Agreements.

In related trust fund recovery penalty cases where all responsible parties are not in agreement with an Appeals settlement based on hazards of litigation, a Form 2751, Proposed Assessment of Trust Fund Recovery Penalty, should be secured from the agreeing responsible person(s). Inform the agreeing responsible person(s) by closing letter that the case can be reopened if the Department of Justice decides to join all potentially responsible persons in a refund suit before the assessment limitation period expires.

Appeals may settle a trust fund recovery penalty case by allocating the trust fund liability among the responsible individuals. However, the Settlement or Appeals Officermust secure certified payment of the entire trust fund liability and agreement forms such as Form 2751-AD, Proposed Assessment of Trust Fund Recovery Penalty, or closing agreements which state that the taxpayer(s) will not file a claim for refund. The agreement form(s) and the subsequent assessment(s) should be for the amounts of the liabilities each responsible individual is paying. Appeals may not allocate the liability unless the entire corporate trust fund liability is paid by certified funds and the appropriate agreement forms are secured.

Settlement and Appeals Officers need to be alert to possible misapplication of payments on trust fund recovery penalty cases. A taxpayer may designate application of payments, but designated payment requests must be in writing and made at the time of the payment. Voluntary corporate payments will be applied first to non-trust fund taxes and next (after June 18, 2000) in the manner described by paragraph (7) of P-5–60 unless they are designated payments. If the taxpayer advises of misapplication of payments, prepare an Appeals Referral Inquiry (ARI) to Technical Service Advisory with supporting documentation to have the payments corrected.

Technical employees should explain all the payment options to the taxpayer, including full payment of the liability, installment agreements, or Offer in Compromise (Doubt as to Collectibility, Doubt as to Liability or Effective Tax Administration). Unless the taxpayer full pays the liability, all payment options will be implemented by Collection not Appeals.