5.7.3 Establishing Responsibility and Willfulness for the Trust Fund Recovery Penalty (TFRP)

Manual Transmittal

August 06, 2015


(1) This transmits revised IRM 5.7.3, Establishing Responsibility and Willfulness for the Trust Fund Recovery Penalty.

Material Changes

(1) Minor editorial changes made throughout the text.

(2) Added chapter overview in IRM

(3) IRM contains guidance formerly in IRM

(4) IRM contains guidance formerly in IRM

(5) IRM contains guidance formerly in IRM

(6) Added guidance in IRM regarding TFRP assessments made against business entities.

(7) Added guidance in IRM regarding TFRP assessments related to excise tax on indoor tanning services.

(8) IRM clarifies the use of ATFR to monitor TFRP cases.

(9) Added guidance in IRM regarding collected excise taxes.

(10) Imbedded OUO guidance in IRM formerly contained in IRM Exhibit 5.7.3-1.

(11) Imbedded OUO guidance in IRM formerly contained in IRM Exhibit 5.7.3-1.

(12) Imbedded OUO guidance in IRM formerly contained in IRM Exhibit 5.7.3-1.

(13) IRM clarifies the calculation of the ASED by ATFR.

(14) IRM clarifies that an ASED cannot be extended beyond the CSED of the underlying tax assessment.

(15) IRM clarifies guidance on modules received with less than six months remaining on the ASED.

(16) IRM updated to reflect CP 527 no longer issued in paper format as electronic notifications are made.

(17) Added guidance in IRM regarding the appropriate use of ASEDR-5.

(18) Removed IRM Exhibit 5.7.3-1 as the OUO guidance was incorporated into IRM 5.7.3 as noted above and IRM 5.7.4, Investigation and Recommendation of the Trust Fund Recovery Penalty, in last revision.

Effect on Other Documents

This material supersedes IRM 5.7.3, dated July 19, 2012.


Small Business/Self-Employed Collection Employees

Effective Date


Kristen E. Bailey
Acting Director, Collection Policy

Chapter Overview

  1. This chapter provides guidance for Collection employees on the basis of the Trust Fund Recovery Penalty (TFRP) liability and information regarding the TFRP Assessment Statute Expiration Date (ASED).


  1. The TFRP is based on IRC 6672 and is used to:

    • Facilitate the collection of tax and enhance voluntary compliance

    • Serve as an alternative means of collecting unpaid trust fund taxes when taxes are not fully collectible from the company/business that failed to pay the taxes

  2. To administer the TFRP and for additional guidance, refer to:

    • Policy Statement P–5–14. See IRM, Policy Statement 5-14 (Formerly P-5-60)

    • IRM 5.17.7, Legal Reference Guide for Revenue Officers, Liability of Third Parties for Unpaid Employment Taxes

  3. The TFRP is a penalty provided by IRC 6672 against any person required to collect, account for, and pay over taxes held in trust who willfully fails to perform any of these activities. The penalty is equal to the total amount of tax evaded, not collected, or not accounted for and paid over. TFRP assessments are based on liabilities for the following tax forms:

    • Form 941, Employer's QUARTERLY Federal Tax Return

    • Form 720, Quarterly Federal Excise Tax Return (see IRM, TFRP For Collected Excise Taxes)

    • Form CT-1, Employer's Annual Railroad Retirement and Unemployment Return

    • Form 943, Employer's Annual Federal Tax Return for Agricultural Employees

    • Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

    • Form 945, Annual Return of Withheld Federal Income Tax

    • Form 944, Employer's ANNUAL Federal Tax Return

    • Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests

    • Form 8804, Annual Return for Partnership Withholding Tax (Section 1446)

  4. TFRP assessments against individuals are assessed on the Individual Master File (IMF) using Master File Tax Account Code (MFT) 55 and reference number 618. TFRP assessments against business entities are assessed on the Non Master File (NMF) using MFT 17 and reference number 618.

  5. The TFRP may be imposed, with respect to the taxes described in (3) above for:

    • Willful failure to collect tax

    • Willful failure to account for and pay over tax

    • Willful attempt in any manner to evade or defeat tax or the payment thereof

  6. Although the TFRP is normally applied to employment tax returns for withheld income tax, withheld Social Security tax, or withheld Railroad Retirement Tax, the TFRP provided by IRC 6672 also applies to those excise taxes which are commonly referred to as "collected excise taxes." "Collected" excise taxes (see IRM, TFRP for Collected Excise Taxes) are those which are imposed on persons other than the person who is required by law to collect the tax and pay it over to the Government (a collecting agent). In other words, "collected" excise taxes are those for which the collector, not the taxpayer, must file a return and remit the tax. In many situations the individual taxpayers will not be considered for assessment of the TFRP because of the large number of taxpayers from whom the tax was not collected. The business entity that was required to collect the tax (corporations, S corporations, LLPs etc) will be considered the “responsible person” and that same business entity could be the “collecting agency.”

  7. The revenue officer will explore the possibility of asserting the TFRP against the collecting agent’s responsible persons and will follow the same procedures for investigation and recommendation of the TFRP on employment taxes or "collected" excise taxes.

  8. The full unpaid trust fund amount will be collected only once in a particular case, whether it is collected from the employer/collecting agent, from one or more of its responsible persons, or from a combination of the employer/collecting agent and one or more of its responsible persons.

TFRP For Collected Excise Taxes

  1. Although most TFRPs 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 the taxes to the Government. Taxes in this category and their Code sections are:

    • Tax on certain communication services (IRC 4251)

    • Tax on certain transportation by air (IRC 4261 or 4271)

    • Taxes on indoor tanning services (IRC 5000B)

  2. Excise taxes imposed by IRC 4251,4261, and 4271 are reported on Form 720, IRS Nos. 22, 26, 27 and 28.

  3. Excise tax imposed by the Affordable Care Act IRC 5000B is reported on Form 720, IRS No. 140.

Personal Liability for Excise Taxable Fuel Taxes

  1. IRC 4103 creates personal liability for certain people who are under a duty to assure payments of tax under IRC 4041(a)(1) or 4081, reported on Form 720, who either willfully fail to perform that duty or wilfully cause the taxpayer to fail to pay such tax. Once a willful failure under either IRC 4041(a)(1) or 4081 has occurred, IRC 4103 imposes personal liability for willful failure to perform (IRC 4103(1)) or for willfully causing the taxpayer to fail to pay the tax (IRC 4103(2)). The main difference between the TFRP for collected excise taxes and the personal liability for excise taxes is that the TFRP is an assessment of a civil penalty under MFT code 55, while the personal liability for excise taxes is an assessment of the actual unpaid tax as either transaction code (TC) 150 or 290 under the responsible person's Social Security number.

  2. Taxes reported on Form 720 that are imposed by IRC 4041(a)(1) and 4081 are:

    • 060 - Diesel fuel

    • 071 - Dyed diesel fuel used in trains

    • 035 - Kerosene

    • 062 - Gasoline

    • 069 - Kerosene for use in Aviation

    • 014 - Aviation gasoline

    • 077 - Kerosene fuel for use in commercial aviation (other than foreign trade)

    • 105 - Dyed diesel fuel, LUST (Leaking Underground Storage Tanks) tax

    • 107 - Dyed kerosene, LUST tax

    • 119 - LUST tax, other exempt removals

    • 104 - Diesel-water fuel emission

    • 111 - Kerosene for use in aviation, LUST tax non-taxable uses

  3. Responsible and willful persons can become jointly liable with the business taxpayer for the excise taxes listed above which the business has reported on BMF Form 720. When assessed against an individual, he/she will owe the same tax liability as the business taxpayer who filed the Form 720. The responsible person will also be liable for interest and certain penalties from the same date as the business taxpayer.

  4. The following IRM procedures should be followed for investigating both TFRP and personal liability for excise tax cases:

    • IRM, Establishing Responsibility

    • IRM, Establishing Willfulness

    • IRM 5.7.5, Collectibility Determination

    • IRM, Form 4180

Automated Trust Fund Recovery (ATFR) Program

  1. The Automated Trust Fund Recovery (ATFR) program is a National Standard Application used to control TFRP case inventories.

  2. Revenue officers use the program to:

    • Systemically download from IDRS the business master file name, address, and tax period data to establish a case

    • Control TFRP case inventories

    • Calculate the TFRP

    • Monitor assessment statute expiration dates (ASED) and case action dates

    • Make recommendations regarding assertion and non-assertion of the penalty

    • Systemically generate and control managerial approvals

    • Generate required forms and letters

  3. The application is divided into the following components:

    • Area Office Application (ATFR-AO)

    • Control Point Monitoring (ATFR-CPM)

    • Compliance Center Application (ATFR-CC)

  4. Cases must be worked on the ATFR system whenever possible. This ensures that the correct means of calculation and the current procedures have been followed in case processing, and that systemic records are created of the determination and assessment.


    In those rare instances (e.g., excise taxes) when you cannot use ATFR, contact your Collection Automation Coordinator (CAC) or Functional Automation Support Specialist (FASS) to verify the action cannot be completed on ATFR before completing the process manually.

Monitoring TFRP Cases

  1. The ATFR system is used by revenue officers to:

    • Review cases for imminent statute concerns

    • Calculate the TFRP for presentation during initial contact

    • Ensure the decision whether to pursue the TFRP is made within the determination time period

    • Ensure Form 4183, Recommendation re: Trust Fund Recovery Penalty Assessment, is submitted to the group manager within the recommendation time period if the decision is to pursue the TFRP

    • Ensure Letter 1153(DO) is issued timely

    • Ensure TFRP cases are forwarded timely to CPM for processing

    • Update the TFRP calculation

  2. The group manager uses the ATFR system to approve revenue officer case actions and review ATFR reports monthly to ensure timely TFRP actions as follows:

    • Monitor the period within which the revenue officer must determine whether to pursue the TFRP (Pending Determination Report)

    • Monitor the timely submission of Form 4183 for approval (Pending 4183 Report)

    • Monitor the issuance of Letter 1153 following approval of Form 4183 (Pending 1153 Report)

    • Determine if imminent statute cases have been addressed (ATFR ASED Report)

    • Monitor timely submission of TFRP case files to CPM (Pending 2749 to CPM Report)

  3. Control Point Monitoring (CPM) uses the ATFR system to:

    • Track and monitor TFRP cases received from Field Collection

    • Release Form 2749, Request for Trust Fund Recovery Penalty Assessment(s), to the Compliance Center

    • Monitor cases assigned to Appeals

    • Input pertinent bankruptcy information

    • Set the final case disposition

Basis for Liability Under IRC 6672

  1. The revenue officer must establish responsibility and willfulness when determining whether to proceed with assertion of the TFRP. A person is liable for the TFRP if the two statutory requirements below are met:

    1. The person against whom the penalty is assessed must be "responsible" (IRM, Establishing Responsibility).

    2. The responsible person must have "willfully" failed to collect or pay over trust fund taxes to the government (IRM, Establishing Willfulness).

  2. Unpaid withholding taxes may also be pursued under the provisions of:

    • Section 3131 of Title 40 of the United States Code (IRM, Performance Bond Provisions of the Miller Act)

    • IRC 3505 (IRM, Liability for Third Party Paying Wages or Supplying Funds for Payment of Taxes)

Establishing Responsibility

  1. Responsibility is a matter of status, duty, and authority. A determination of responsibility is dependent on the facts and circumstances of each case.

  2. Potential responsible persons include:

    • Officer or employee of a corporation

    • Partner or employee of a partnership

    • Corporate director or shareholder

    • Another corporation

    • Employee of a sole proprietorship

    • Limited liability company (LLC) member, manager or employee

    • Surety lender

    • Other person or entity outside the delinquent business organization

    • Payroll Service Provider (PSP)

    • Responsible parties within a PSP

    • Professional Employer Organization (PEO)

    • Responsible parties within a PEO

    • Responsible parties within the common law employer (client of PSP/PEO)

    • Business entities (including corporations, S corporations, LLC, etc.) that are determined to be the collection agency in the case of certain collected excise taxes


      See IRM, Third-Party Payers and Common Law Employers/Clients, for additional information.

  3. A responsible person has:

    • Duty to perform

    • Power to direct the act of collecting trust fund taxes

    • Accountability for and authority to pay trust fund taxes

    • Authority to determine which creditors will or will not be paid

  4. To determine whether a person has the status, duty and authority to ensure that the trust fund taxes are paid, consider the duties of the officers as set forth in the corporate by-laws as well as the ability of the individual(s) to sign checks. In addition, determine the identity of the individuals who:

    • Are officers, directors, or shareholders of the corporation

    • Hire and fire employees

    • Exercise authority to determine which creditors to pay

    • Sign and file the excise tax or employment tax returns, such as Form 941, Employer’s Quarterly Federal Tax Return

    • Control payroll/disbursements

    • Control the corporation’s voting stock

    • Make federal tax deposits

  5. The TFRP is available and may be appropriately asserted when the taxpayer is organized as a Limited Liability Company (LLC). The need for a TFRP investigation is based on how the LLC is classified for tax purposes and when the liability accrued. See IRM, Trust Fund Recovery Penalty, for additional information on LLCs.

    1. When the LLC is a disregarded entity -
      1. For certain excise taxes that accrue prior to January 1, 2008 and for employment taxes on wages paid before January 1, 2009, a single member LLC that did not elect to be treated as a corporation is disregarded as an entity separate from its owner, and the owner (SMO) is personally and fully liable for all employment taxes, not just the trust fund portion. However, a TFRP investigation may need to be conducted for other potentially responsible individuals under IRC 6672, such as a manager.
      2. A TFRP investigation is required under regulation changes that provide for the otherwise disregarded LLC to be treated as a corporation for certain excise taxes that accrue on or after January 1, 2008 and for employment taxes on wages paid on or after January 1, 2009.
      3. If the SMO and the LLC are the liable taxpayers for different tax periods under the same Employer Identification Number, see IRM, Calculating the TFRP.

    2. When the LLC is classified as a corporation or partnership for tax purposes, the usual procedures for determining responsibility and willfulness apply.


      The TFRP determination must be made on an LLC classified as a partnership. Under state law the members of an LLC classified as a partnership are not liable for the debts of the partnership.

Indicators of Responsibility
  1. The full scope of authority and responsibility is contingent upon whether the person had the ability to exercise independent judgment with respect to the financial affairs of the business.

  2. If a person is an officer or owns stock in the corporation, this cannot be the sole basis for a responsibility determination.

  3. If a person has the authority to sign checks, the exercise of that authority does not, in and of itself, establish responsibility.


    Signatory authority may be merely a convenience.

  4. Persons with ultimate authority over financial affairs may generally not avoid responsibility by delegating that authority to someone else. If a potentially responsible person asserts that the duty to pay taxes or otherwise handle the financial affairs of the business was delegated to an employee:

    • Evaluate the facts and circumstances of the case

    • Determine whether the delegation rendered the person (delegator) powerless to disburse funds or dictate fiscal policy


      Delegation may be relevant when determining willfulness.

  5. Persons serving as volunteers solely in an honorary capacity as directors and trustees of tax exempt organizations will generally not be considered responsible persons unless they participated in the day-to-day or financial operations of the organization and had actual knowledge of the failure to withhold or pay over the trust fund taxes. This does not apply if it would result in there being no person responsible for the TFRP. Refer to IRC 6672(e).

Non-Owner Employees
  1. IRM, Policy Statement 5-14 (Formerly P-5-60), states individuals performing ministerial acts without exercising independent judgment will not be deemed responsible. In general, non-owner employees who act solely under the dominion and control of others, and who are not in a position to make independent decisions on behalf of the business entity, will not be assessed the TFRP. Non-owner employees are those who do not own any stock, interest, or other entrepreneurial stake in the company that employs them.

  2. Ministerial acts are performed under the supervision of someone else and do not require independent judgment or decision-making ability.


    The bookkeeper of a company is not an owner and is not related to an owner. She has check signing authority and pays all of the bills the treasurer gives her. She is not permitted to pay any other bills, and when there are not sufficient funds in the bank account to pay all of the bills, she must ask the treasurer which bills to pay. The bookkeeper is performing a ministerial act and should generally not be held responsible for the TFRP.

  3. A person is "responsible" for purposes of the TFRP if that person has "significant control" over the company's finances. "Significant control" means more than having the mere mechanical duty of signing checks or preparing tax returns or having a title that appears to have authority. However, a responsible person need not have the final word in the company regarding the payment of creditors. Officers and higher level employees of a company who are non-owners may still be required to sacrifice their jobs (i.e., quit) to avoid being responsible for the TFRP, rather than obey the orders of an owner to pay other creditors but not to pay current federal trust fund taxes as they become due. See Brounstein v. United States, 979 F.2d 952, 956 (3rd Cir. 1992).

  4. A non-owner employee is generally not a "responsible person" if the employee's function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid. However, if a non-owner employee, such as an officer, has significant control over making the company's other financial decisions about who to pay or has the ability to obtain financing for the company, then such an employee cannot avoid being responsible for the TFRP by merely showing that an owner or a lender limited his discretion on the specific matter of paying taxes that the company owed. See the examples below.


    A non-owner employee works as a clerical secretary in the office. She signs checks and tax returns at the direction of and for the convenience of the owner or a supervisor who is a non-owner. She is directed to pay other vendors, even though payroll taxes are unpaid. The secretary is not a responsible person for the TFRP because she works under the dominion and control of the owner or of a supervisor who is a non-owner and she is not permitted to exercise independent judgment.


    The long-time controller of a company was never a shareholder, director, or officer of the company, but he was responsible for overseeing the finances of the company, including the preparation of the payroll and filing the company's federal employment tax returns. He had the authority to sign checks in any amount and he dealt with the company's lender on a regular basis when the company experienced financial troubles, though he did not arrange or sign the lending agreement on the company's behalf. When the lender directed the company to pursue an orderly liquidation of its assets, the controller requested funds from the lender to make full payroll and pay the taxes due on the remaining employees, but the lender forwarded only enough funds for the company to make net payrolls. The controller made out net payroll checks to the remaining employees and paid none of the taxes due, rather than prorate the funds available to the company between payroll and taxes. The controller could be a responsible person for the TFRP. See Hochstein v. United States, 900 F.2d 543 (2nd Cir. 1990).


    An experienced businessman was never a shareholder, director, or officer of a new company, but he served as the general manager of the new company during a seven month period. As general manager, he signed most of the company's checks to creditors, as well as signing net payroll checks to employees, and there was no monetary limit placed on his check signing authority. He told the bookkeeper which bills to pay. When the company was experiencing cash flow problems, he spoke to one of the owners about the company's delinquent payroll taxes. The owner told the general manager that these unpaid taxes were none of the general manager's business and he should not worry about paying the company's net payroll and missing its tax payments. Both the general manager and the owner believed that the general manager could not be held liable for the TFRP because he was not an owner or officer of the company; the general manager turned down an offer to become the company's president specifically because he was worried about the company's tax situation. The general manager could be a responsible person for the TFRP. See Gephardt v. United States , 818 F.2d 469 (6th Cir. 1987).

Establishing Willfulness

  1. Willful means intentional, deliberate, voluntary, reckless, knowing, as opposed to accidental. No evil intent or bad motive is required.

  2. To show willfulness, the government generally must demonstrate that a responsible person was aware, or should have been aware, of the outstanding taxes and either intentionally disregarded the law or was plainly indifferent to its requirements. A responsible person's failure to investigate or correct mismanagement after being notified that withholding taxes have not been paid satisfies the TFRP "willfulness" element. See IRM, Willfulness.

  3. It is difficult to establish "willfulness" in the types of assessments shown below:

    If. . . Then. . .
    The assessment is a Combined Annual Wage Reporting (CAWR) assessment It is normally difficult to establish willfulness to the degree necessary to assert the TFRP (See IRM for situations where the TFRP should be pursued).
    An employment tax assessment is made under IRC 3509 It requires a determination of intentional disregard of the requirements to deduct and withhold taxes (See IRM
    The assessment involves a volunteer director or trustee of a tax exempt organization The IRS may need to show the person's "actual knowledge" of the organization's failure to collect or pay over trust fund taxes, if the person was serving as a volunteer solely in an honorary capacity (IRC 6672(e)).
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Third-Party Payers and Common Law Employers/Clients

  1. Common law employers may designate a third party who is not the common law employer or a statutory employer under Section 3401(d)(1) to take over some or all of the employer’s Federal employment tax withholding, reporting, and payment responsibilities and obligations. The common law employer becomes the “client” of the third party. A common law employer is any person who has the status of employer under the usual common law rules applicable in determining the employer-employee relationship. Generally an employer-employee relationship exists when the person for whom the services are performed has the right to direct and control the worker who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. Some common third-party arrangements include:

    • Payroll Service Provider (PSP)

    • Professional Employer Organization (PEO) that is not the common law employer or statutory employer


    Professional Employer Organizations may also be referred to as employee leasing companies.

  2. Each recommendation for assertion of the TFRP against a third-party payer, i.e., a related responsible person (RRP), must stand on its own merits based on the facts the revenue officer discovers during the TFRP investigation regarding “responsibility” and “willfulness.”

  3. The factors to be considered when determining the potential “responsibility” and “willfulness” of a third-party payer are:

    • Responsibility - Identification of the person(s) within the third-party payer who had significant control over the payment of the client’s employment taxes.

    • Willfulness - Willful means intentional, deliberate, voluntary, reckless, knowing, as opposed to accidental. No evil intent or bad motive is required.

  4. The factors to be considered for establishing “responsibility” and “willfulness” of a responsible person within a common law employer/client where there is a third-party payer arrangement are:

    • Responsibility - The use of a third-party payer such as a PSP or a PEO does not relieve the common law employer and employees of the common law employer who are responsible for collecting, accounting for, and paying over the common law employer’s employment taxes from the responsibility of ensuring that all of the common law employer’s Federal employment tax obligations are met.

    • Willfulness - Willful means intentional, deliberate, voluntary, reckless, knowing, as opposed to accidental. No evil intent or bad motive is required.

  5. Additional factors to be considered when determining “willfulness” include:

    • Whether the responsible person had knowledge of a pattern of noncompliance by the third-party payer at the time the delinquencies were accruing.

    • Whether the third-party payer used fraud or deception to conceal the noncompliance from detection by the client.

    • Whether the client had received prior IRS notices indicating that employment tax returns have not been filed, or are inaccurate, or that employment taxes have not been paid.

    • The actions the client has taken to ensure its Federal employment tax obligations have been met after becoming aware of the tax delinquencies, e.g. timely reporting the problem(s) to the IRS and the proper authorities, ensuring current tax debts have been timely reported and paid, and working with the IRS on a reasonable plan to resolve past debts.

  6. Consult with your local Area Counsel in any case involving whether a third-party payer is a responsible person(s) under IRC 6672 for the TFRP.


    The same guidance for contacting third parties and for issuing L3164A, as outlined in IRM, Third-Party Interviews and Third-Party Contact Considerations, applies when working TFRP investigations involving third-party payers.

Considerations for Employment Tax Examination (ETE) Assessments

  1. IRC 3509 applies to an audit or adjustment procedure reclassifying workers from independent contractors to employees. Under this section, the tax is assessed at a lower rate.

  2. The TFRP assessment would not be applicable on Section 3509 balance due accounts unless there is a combination of full and IRC 3509 rates. The TFRP could be asserted against that portion of the ETE assessment that represents full rates.


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  3. To determine the portion of the ETE assessment that represents full rates for assertion of the TFRP:

    • Request Form 941 for the last quarter of each year of the audit

    • Review the attached Form 4668, Employment Tax Examination Changes Report, to determine the amount assessed at the full rate

  4. To determine the portion of the Employment Tax Adjustment Program (ETAP) assessment that represents full rates upon which the TFRP can be asserted:

    • Request the Form 941 for the first quarter of each year of the adjustment

    • Review ETAP under-reporter or full rate issues


      No combination of rates applies to ETAP adjustments.

  5. By comparing the balance due assessment amounts with the rates as shown below, the revenue officer will be able to determine if the assessment is at the reduced rate or full rate, as long as the assessment is not a mixture of IRC 3509 rates:

    • Single rate (all applicable returns filed timely by the employer) – Employer’s portion of FICA; 20 percent of the employee’s portion of FICA plus 1.5 percent of the wages as income tax withholding

    • Double rate (no applicable returns filed timely by the employer) – Employer’s portion of FICA; 40 percent of the employee’s portion of FICA plus 3 percent of the wages as income tax withholding

Referral from Examination

  1. If during examination of the employment tax returns, the examiner finds that the TFRP may apply, the examiner should secure Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty, if the ASED is within one year on both agreed cases and on unagreed cases to allow sufficient time for the case to go through the appeal process plus one year. The examiner should also request input of TC 971-330 on the corporate account to indicate that the potentially responsible party has signed Form 2750. If Form 2750 cannot be secured, Form 6238, Referral Report for Potential Trust Fund Recovery Penalty Cases, should be completed by the Examiner and sent to Advisory.

  2. Advisory will determine within 30 days whether or not an investigation will be opened by Field Collection and notify Examination of that determination.

  3. If an investigation is to be opened, Advisory will issue a Courtesy Investigation to Field Collection with a copy of the Form 6238.

Statutory Assessment Period

  1. Before beginning a full investigation for the assertion of the penalty, determine whether the statutory period for assessment is still open.

  2. The usual limitation period for assessment of the TFRP is as follows:

    Type of Tax Statutory Assessment Period
    Withholding or Federal Insurance Contribution Act (FICA) With respect to any taxable period within a calendar year, three years from the succeeding April 15 or from the date the return was filed, whichever is later.
    Excise or Railroad Retirement Tax Act (RRTA) Three years from the due date of the return (without regard to any extension) or from the date the return was filed, whichever is later.
  3. There is no limitation period for assessing the TFRP on withholding, FICA, excise, or RRTA until a return is filed; however, the following returns do not start the limitations period:

    • Substitutes for returns prepared by the IRS under IRC 6020(b)(1)


      The statutory assessment period does apply to a return that the taxpayer files after the IRS had created a liability for the same period under IRC 6020(b)(1).

    • False return or fraudulent return (IRC 6501(c)(1))

    • A filing made in connection with a willful attempt to evade tax (IRC 6501(c)(2))

  4. See IRM, Extension of Statutory Assessment Period, for actions that extend the statutory period for assessment.

Extension of Statutory Assessment Period

  1. The table below identifies whether or not a particular action extends the TFRP assessment statute.

    If. . . Then. . .
    A responsible person filed a bankruptcy petition after October 21, 1994 The statutory period for assessment of the TFRP will not be automatically extended by the bankruptcy filing.
    A responsible person filed a bankruptcy petition before October 22, 1994 The statutory period for assessment is automatically suspended for the period the automatic stay is in effect, plus 60 days.
    The corporation is in a bankruptcy proceeding The statutory period for assessing the TFRP against potential responsible persons is not automatically extended.
    An Offer in Compromise is submitted for the corporate tax liability The corporate offer does not automatically extend the statute for assessing the TFRP against any responsible corporate officer, employee, or other responsible person.
  2. ATFR will calculate the TFRP ASED based upon the return received date shown on IDRS for the underlying employer module. The revenue officer will verify that the ASED is correct and applicable to potentially responsible parties since certain actions, such as a Substitute for Return (SFR) (RCC 4 on TXMODA with TC 150 $0.00) prepared by examination or agreed examination assessments affect the actual ASED. SFRs prepared by examination create a return receive date used by ATFR. This return received date does not start the actual ASED. Only an actual return filed by the taxpayer, or an agreed assessment, indicated by a TC 300 Disposal Code 03, 04 and 09, begins the ASED.


    In these instances contact your local CAC or FASS for assistance to update ATFR to reflect the correct ASED.

Form 2750 Waiver

  1. In order to extend the ASED, a potentially responsible person may sign Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty. This waiver can extend:

    • The ASED to a date where the TFRP investigation may reasonably be expected to be resolved

    • An ASED already extended by a previous waiver

  2. Form 2750 extends the ASED only for the person who signs the waiver; therefore, a waiver must be secured from all potentially responsible persons in order to properly protect the statute.

  3. The law does not impose a maximum limit on the time period the assessment statute for TFRP may be extended by a potentially responsible person and the IRS, however the ASED cannot be extended beyond the Collection Statute Expiration Date (CSED) of the underlying tax assessment.

    1. In the case of approved and adhered to business installment agreements and bankruptcy payment plans, it is ordinarily the IRS' policy to withhold TFRP assertion recommendations if there are no statute considerations. If there are statute concerns, Form 2750 can be secured to extend the assessment limitation period beyond the projected length of the business installment agreement or bankruptcy payment plan. See IRM, Considerations for In-Business Installment Agreements, for additional guidance on Form 2750 waivers secured in conjunction with an installment agreement. See Policy Statement P-5-14.

    2. Otherwise, unless there are unusual circumstances, the IRS ordinarily should not seek extension dates of the TFRP assessment period beyond December 31 of the year following the year in which the ASED will expire (e.g., 1 year and 260 days after the April 15 statutory due date of the Form 941 returns for statute of limitation period purposes).


    This policy, ordinarily applicable outside of business installment agreement or bankruptcy payment plan circumstances, allows the IRS to make its TFRP determinations when the evidence is still likely to be available.

  4. The IRS Restructuring and Reform Act of 1998 (RRA 98) states the IRS must:

    • Ensure that taxpayers are aware that they have the right to refuse to extend the limitations period for tax assessments

    • Notify the taxpayer of such right

  5. Every time an extension is requested (IRC 6501(c)(4) as amended by RRA 98), the IRS must notify the taxpayer that they may:

    • Refuse to extend the period of limitations

    • Limit the extension to particular issues or a particular period of time

  6. If a third party is authorized to act on behalf of the potentially responsible person, Form 2750 may be solicited from and signed by the authorized representative. If the third-party information is not available on the Centralized Authorization File (CAF), the instrument which authorizes the representative to act for the responsible person should be attached to Form 2750 or included in the TFRP case file.

  7. After the potentially responsible person or representative executes the waiver:

    1. Have the authorized delegate for the IRS manually sign and date the waiver and include the authorized delegate’s title.


      Form 2750 is considered invalid if it is not signed by an authorized IRS representative.

    2. Write, type or stamp the Collection Area Director's name. Refer to Delegation Order 25-2 (IRM, Delegation Order 25-2 (Rev.2) (formerly DO-25-2 and DO-42, Rev. 28).

    3. Give Part 2 to the responsible person or authorized representative.

    4. Follow the procedures in IRM, Dispositionof Executed Waivers.

Impact of Letter 1153(DO) on Assessment Statute

  1. For IRC 6672 assessments made after the enactment of the Taxpayer Bill of Rights 2 on July 30, 1996, the following actions are required:

    1. A 60-day preliminary notice, Letter 1153(DO), must either be mailed to the potentially responsible person's last known address or, after July 22, 1998, delivered in person to the potentially responsible person.


      See IRM, Notification of Proposed Assessment, for instructions on proper delivery and documentation regarding the delivery of Letter 1153(DO).

    2. The IRS must wait 60 days after issuance of Letter 1153(DO) before issuing notice and demand for payment (Form 3552, Prompt Assessment Billing Assembly).


      See IRM, Notification of Proposed Assessment, for exceptions to the 60-day requirement for jeopardy situations or if the taxpayer signs Form 2751, Proposed Assessment of Trust Fund Recovery Penalty, agreeing to the assessment.

  2. If the 60-day notice was properly mailed or delivered in person to the potentially responsible person before the expiration of the assessment limitation period for the TFRP, then the assessment statute will not expire before the later of:

    • The date 90 days after the date on which the 60-day notice was mailed (or delivered in person)

    • 30 days after Appeals' "final administrative determination" if the potentially responsible person files a timely protest (mailed, or faxed, if applicable, on or before the 60th day after the proper mailing or personal delivery of Letter 1153(DO))


      See IRM, Notification of Proposed Assessment, for instructions on proper delivery and documentation regarding delivery of Letter 1153(DO).

Disposition of Executed Waivers

  1. The revenue officer will take the following actions when a waiver is secured:

    1. Update the ATFR-AO application with the date the waiver was signed.

    2. Include Part 1 of Form 2750 in the TFRP recommendation file.

    3. Retain Part 3 in the balance due case file.

  2. After a waiver has been secured, request input of transaction code TC 971 AC 330 on the corporate account to indicate that the potentially responsible party has signed a waiver. The transaction code will include the Social Security number of the potentially responsible party and the date the ASED is extended to for that individual. This will allow the information to be readily available on IDRS in order to determine if the ASED has been extended for a particular party. The transaction code must be input for each potentially responsible party for each period for which a waiver was secured. Until the information is able to be systemically uploaded via ATFR, request input using Form 4844, Request for Terminal Action.


    Securing a waiver from one or more potentially responsible parties will not change the corporate ASED shown on IDRS or ATFR.

Waivers on Examination Cases

  1. In order to determine if Examination has already secured a waiver to extend the TFRP assessment statute:

    1. Request the return and examination papers; the waiver will be in the file if secured by examination.

    2. Check IDRS for TC 971 AC 330 indicating the responsible party signed a waiver.

  2. If a waiver is appropriate and was not previously secured, follow the instructions in IRM, Form 2750 Waiver, for securing Form 2750.

Cases Received With Less Than Six Months Remaining on the Assessment Statute

  1. When a balance due account is received with less than six months remaining on the assessment statute, immediately bring it to the attention of the group manager and determine:

    • Priority of the case

    • Whether there is adequate time to conduct the TFRP investigation


    Whenever possible, a reasonable effort should be made to conduct the penalty investigation.

  2. If there are not indicators of willfulness and responsibility to support an assessment before the statute expires, do not assess the penalty.

    1. If all modules will expire in less than six months and no indicators of willfulness and responsibility exist, prepare Form 4183, Recommendation re: Trust Fund Recovery Penalty Assessment, outlining the facts and circumstances. Set the responsible party indicator on ATFR to "all modules not responsible" (N) and submit the form for approval (IRM, Form 4183 Penalty Assessment Recommendation). The ATFR system will automatically upload the ASEDR with the appropriate definer code (generally definer code "2" - see IRM, Input of ASEDR Definer Codes) when the "Not Assert" request is approved by the manager.

    2. If not all modules will expire in less than six months, document the ICS and ATFR histories regarding the ASEDs that will expire in inventory, and the investigation should continue on the remaining modules.

  3. If there are indicators of willfulness and responsibility but not all core documentation has been secured, attempt to secure a waiver (IRM If the waiver cannot be secured, issue Letter 1153(DO) and wait 60 days for assessment of the TFRP.


    The quality of the investigation and determination should not be compromised because of an imminent statute. If additional documentation is needed, the investigation should continue during this 60-day time period.

Reporting Expiration of the TFRP Statute

  1. When a balance due account is received after the assessment statute has expired, document the case file that the case was received after expiration of the ASED.

  2. When a statute expires on a case assigned to a revenue officer, the revenue officer will:

    1. Report the expiration of the statute by memorandum.

    2. Forward the memorandum through appropriate management channels to the Field Collection Area Director - Group Manager, Territory Manager, Area Director.


    Managers will attach any comments they may have to the revenue officer's report, including indications of performance deficiencies and what corrective actions have or will be taken.

  3. A report is not required for the following types of cases:

    • Aggregate trust fund below the dollar criterion in IRM, Determination to Pursue and Recommend Assessment of the TFRP (also consider the potential liability on unfiled returns when making this determination)

    • CAWR assessment and willfulness cannot be established

    • Employment Tax Assessment under IRC 3509 where willfulness cannot be established

    • Received by the revenue officer with less than six months remaining on the assessment statute and the TFRP assessment could not be completed (See IRM, Cases Received With Less Than Six Months Remaining on the Assessment Statute)

Issuance of Imminent Statute Notices

  1. CP 527 Notices are no longer issued in paper format as electronic notifications are made.

  2. ICS will provide notification of imminent ASEDs. Upon receipt of the ICS ASED notification, the revenue officer will determine if the notification is valid or if an ASEDR indicator (IRM, Input of ASEDR Definer Codes) should be input.


    ASED notices are issued on partnership entities as well as for corporations (IRM, Partners). Since the assessment is not precluded in certain partnership situations, processing of ASED notices on these cases is required.

  3. If the notification is valid, the revenue officer will ensure the:

    • Investigation is proceeding properly

    • The potentially responsible person will receive all required pre-assessment appeal rights

    • Final decision on the penalty will be made before the assessment statute expires

    • A waiver will be secured (IRM, Form 2750 Waiver) when appropriate

  4. If the notification is not valid, follow the procedures in IRM, Input of ASEDR Definer Codes, for input of the appropriate ASEDR indicator.

Input of ASEDR Definer Codes

  1. The ASEDR indicator should be selected as follows:

    ASEDR Definer Code Definition
    1 TFRP Assessed and the corporate account is not being closed
    2 Unable to locate any responsible person(s)
    3 No collection potential exists for any responsible person(s)
    4 All trust fund amounts paid
    5 TFRP is not applicable


    ASEDR-5 is not to be used on a module closed from ATFR as "Below IRM 5.7.4 criteria." ASEDR-5 (TFRP Not Applicable) is reserved for situations such as sole proprietorships, after it is determined there are no other responsible parties, as well as for partnerships and LLC for which the TFRP is precluded. ASEDR-5 is also not to be used on modules being closed as In-Business Trust Fund Installment Agreements as the potential exists for additional liabilities to accrue.

  2. ASEDR indicators of 2, 3, 4, or 5 should be input via Form 4844, Request for Terminal Action, with managerial approval, if the related action has already been completed and the ASEDR did not automatically upload from ATFR. Complete the entity and employee information blocks, and enter in the Remarks section "Request input of Command Code ASEDR" with the appropriate indicator shown.


    The ASEDR with the appropriate indicators should automatically be uploaded from ATFR after the "2749 to SC" date is input.

  3. An ASEDR indicator 1 is systemically uploaded by ATFR when an assessment is made.

  4. Only one indicator can be requested per module. Select the most appropriate indicator based on the facts of the case.

  5. ASEDR indicators will appear on ICS Module Summary Screen.

  6. If an ASEDR indicator of 1, 2, 3, 4, or 5 is input to IDRS, the appropriate indicator will appear on Entity and on the ATFR reports.