One of the most distressing situations a business can find itself in is facing allegations of misuse of trust fund money. Companies that withhold taxes from an employee’s paycheck are required to keep these funds separate and secure until they can be sent to the IRS. The IRS can assess a penalty any time there are issues with these accounts.
The good news is that the right tax attorney can help protect your business from facing these consequences. If you have been notified of an IRS investigation, reach out to a Richmond trust fund recovery penalty lawyer today.
A Trust Fund Recovery Penalty (TFRP) is a personal penalty used by the IRS against businesses that do not submit their payroll taxes. When you run a business and withhold Social Security or Medicare from employees’ wages, you hold that money until it is time to send it on to the government. If those funds are not turned over, the IRS can assess the penalty not against the business, but on those individuals responsible for collecting and paying them.
The IRS has the power to pursue anyone, from owners to executives, so long as they had control over a company’s finances and made decisions about which bills to pay. These individuals, known as “responsible persons,” can be held personally liable if those taxes are not paid. That means the IRS could levy your bank accounts, put a lien on your home, and make other collection efforts against you directly. Thankfully, a Richmond trust fund recovery penalty attorney can help.
Different circumstances could lead the IRS to take action against you, and a trust fund recovery penalty lawyer in Richmond can assist you with all of them.
Some businesses fall behind and use withheld payroll taxes to cover operating costs like payroll or rent. While this may seem like a short-term fix, the IRS views it as a serious violation because those funds never belonged to the business in the first place.
Employers must deposit payroll taxes on a regular schedule. The IRS can assess penalties if the deposit does not happen, even if the business has enough cash on hand to complete it.
The IRS usually sends multiple notices before taking action, as these issues often boil down to honest mistakes. If you ignore these warnings or fail to respond, you can expect an investigation.
You may rely on a bookkeeper or other third party to handle your tax obligations, but you have to be careful of who you put your trust in. If you have authority over the finances of your business, you can still be held liable for a bookkeeper’s mistake.
Shutting down operations and closing your business does not make your payroll tax obligations disappear. If you close your company, you are still obligated to make these payments.
A Richmond attorney can step in early and help you respond to the IRS before a trust recovery fund penalty is assessed. This can be invaluable, as they might be able to resolve the conflict before a formal investigation ever kicks off.
If the IRS has already started an investigation, your attorney can represent you during interviews and prevent statements that could be used against you. They can also challenge the IRS’s findings and present evidence that limits or avoids personal liability.
Having the support of your attorney can be invaluable during every stage of this process. Reach out to a Richmond trust fund recovery penalty lawyer today to get started.