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Part 5. Collecting Process

Chapter 7. Trust Fund Compliance

Section 4. Investigation and Recommendation of TFRP

5.7.4  Investigation and Recommendation of TFRP Six Month Determination to Pursue TFRP TFRP Interviews and Investigations Calculating the TFRP Payments by Responsible Party on Behalf of the Employer Form 4183 Penalty Assessment Recommendation Manager’s Review of Trust Fund Recommendations Notification of Proposed Assessment Determining Whether To Pursue the TFRP in Installment Agreement, Offer in Compromise, or Bankruptcy Situations  (04-13-2006)

  1. The decision whether to pursue the TFRP should be made:

    • After the initial contact on the BMF trust fund taxpayer

    • As soon as possible but no later than six months (180 days) after the receipt of the balance due accounts in the Collection Field function (ICS will also provide a warning notice when there are 60 days remaining on the determination date and when the determination date has expired)


      The determination date may be shortened if there is an imminent assessment statute expiration date (ASED). See IRM for information on the ASED.

  2. The six month determination date will appear on the Automated Trust Fund Recovery Penalty (ATFR) system. A decision to assert, not assert, or to delay the determination must be made within this time period, unless the TFRP balance is less than the amount in LEM 5.7.2. (See IRM


    Although this decision must be made within the six month time period, there is no requirement that the entire investigation be completed within a specific time period. However, when the revenue officer makes the decision to assert, the investigation will proceed as expeditiously as possible. If the business is no longer operating, the TFRP will generally be completed within 120 days of the determination date.

  3. If the decision is made to delay the TFRP investigation beyond the six month period, the determination screen on the ATFR system must be updated to request the delay. If the delay option is selected, you must enter an explanation and provide a new determination date. The request must be made prior to the expiration of the six month determination period. If the revenue officer wishes to delay the decision due to expected full payment within a reasonable time period; the TFRP investigation will continue pending the payment deadline so that there is sufficient information to proceed with a prompt decision of the TFRP in the event full payment is not received. See IRM through for situations when the business wishes to enter into an installment agreement or submits an offer in compromise, or if the business or a responsible party has filed bankruptcy.

  4. After the delay request is approved by the group manager, the determination date will change on the ATFR screen.


    If the request is not approved, a notification will appear on the ATFR corporate screen and the reason for the disapproval will be shown in the history.

  5. If the case cannot be processed on ATFR, the request to delay the determination beyond the six month time period should be requested via Form 8213, Request to Delay Determination Re: Assessment of Trust Fund Recovery Penalty.  (04-13-2006)

  1. Regardless of the amount of the trust fund, revenue officers will make a reasonable attempt to collect the TFRP amount in full

  2. Revenue Officers will not solicit partial designated payments to bring the amount of the total trust fund below LEM 5.7.2 for the sole purposes of non-asserting the TFRP

  3. Consideration will be given to the following factors when applying LEM 5.7.2 criteria:

    1. Potential to incur additional liabilities on an in-business taxpayer

    2. Potential for additional liabilities from unfiled returns

    3. Taxpayers history of non-compliance

  4. There is no prohibition to assess the TFRP if warranted if the amount is below LEM 5.7.2  (04-13-2006)

  1. Certain facts may surface which indicate that transfers of corporate stock and/or capital assets have occurred. If this is the case, in addition to pursuing the TFRP, consider recovery of the unpaid corporate liability by recommending:

    • Transferee assessment

    • Suit to establish a transferee liability

    • Suit to set aside a fraudulent transfer

    • Examination referral

  2. See IRM 5.17.4 for information on suits by the United States to determine which of these actions may be appropriate based on the facts of a particular case.  (04-13-2006)

  1. During the initial contact with the taxpayer (IRM, the revenue officer will attempt to conduct interviews with all potentially responsible persons. The revenue officer will take the following actions during the interview:

    1. Provide Publication 1, Your Rights as a Taxpayer, and document the history that the publication was delivered.

    2. Explain the TFRP.

    3. Advise all potentially responsible persons, to the extent possible, that they may be held personally liable for the TFRP.

    4. Provide Notice 784, Could You Be Personally Liable for Certain Unpaid Federal Taxes, to the person interviewed and provide sufficient copies of Notice 784 to allow distribution to all other persons associated with the business who, based on the interview and other preliminary investigation, may be liable.

    5. Advise the person(s) being interviewed of the proper actions to take to avoid such liability.

    6. Begin asking questions and gathering information and documents, such as bank statements and cancelled checks, in support of assertion of the penalty.

    7. Attempt to secure at least one Form 4180, Report of Interview with Individual Relative to Trust Fund Recovery Penalty or Personal Liability for Excise Tax, from a potentially responsible person (See IRM for information on securing Form 4180 and for the evidence that may be used to support the recommendation).


      Secure additional Forms 4180 from all potentially responsible persons to the extent possible.  (04-13-2006)
FORM 4180

  1. Form 4180 is the form to be used for conducting TFRP interviews. It is intended to be used as a record of a personal interview with a potentially responsible person. During the initial contact, attempt to personally secure the form from all potentially responsible persons. If Form 4180 cannot be secured, document the case history with the reasons why it was not secured.

  2. The purpose of the personal interview and completion of Form 4180 is to secure direct, detailed information regarding the individual’s or other person's involvement in the business in order to determine if he or she meets the criteria for responsibility (IRM and willfulness (IRM The questions on the form are intended as a guide and are not all inclusive; supplemental questions may be asked.


    Notice 609, Privacy Act and Paperwork Reduction Act Notice, should be provided to the individual during the interview.

  3. Do not give or mail the form to the potentially responsible person(s) or representative for completion by that person. It will be completed in person or over the phone.

  4. Always request the presence of the potentially responsible person when conducting an interview with a representative having a power of attorney.


    A summons may be necessary to require the potentially responsible person’s presence at the interview (See IRM 25.5 and IRM 5.17.6 for summons procedures).

  5. Enter "unknown" in the appropriate block on the form if the person interviewed cannot answer a specific question.

  6. Enter "not applicable" in the appropriate block on the form if a question does not apply. If any information has already been completed on Form 433-B, Collection Information Statement for Businesses, the revenue officer can enter "See 433-B" in the applicable blocks.

  7. After the interview is completed, request the potentially responsible person or the authorized representative to sign Form 4180. The revenue officer will also sign the form.

  8. If the form can only be partially completed, determine whether to add a statement to page 8 indicating which portions of the form are incomplete.


    A statement can be updated at a later date with the changes initialed by the revenue officer and the person interviewed.

  9. If the potentially responsible person agrees to the assessment during an interview:

    1. Advise the individual of his or her appeal rights and document the history accordingly.

    2. Secure his or her signature on Form 2751, Proposed Assessment of Trust Fund Recovery Penalty.

    3. Advise the taxpayer that interest will accrue on the TFRP from the date of assessment to the date of payment on the underlying trust fund liability and on any unpaid interest. (See IRM for information on processing payments received prior to the assessment of the TFRP).


      Provide Letter 1153(DO) to the taxpayer (IRM as soon as possible when Form 2751 is executed during an interview and explain to the responsible person he is waiving the 60 day restriction on notice and demand set forth in IRC 6672(b).  (04-13-2006)

  1. It may be necessary to contact a third party for the purpose of gathering information concerning other officers or employees. In these cases, be sure the potentially responsible person has received the advance notice (Letter 3164A) that a third party contact may be made (See IRM 5.1.17). The letter will be personally delivered or mailed to all parties who may be investigated as soon as they are identified. Letter 3164A is available on ATFR and as an ICS macro.


    If the revenue officer knows the identity of potentially responsible officers prior to conducting the interview, all potentially responsible officers will be provided with Letter 3164A before any interviews are conducted. Completing the Form 4180 interview should not be viewed as a third party contact with respect to persons who are being identified for the first time during the interview. During the Form 4180 interview, if the revenue officer becomes aware of additional potentially responsible parties, the revenue officer will continue conducting the interview and completing Form 4180; the revenue officer does not need to stop in the middle of an interview whenever another potentially responsible party is identified. If the revenue officer intends to contact third parties to investigate the other potentially responsible parties identified during the interview, he or she must mail or personally deliver Letter 3164A prior to making any further contacts for purposes of determining whether they may be held liable.

  2. If a personal interview cannot be conducted with the third party, send Form 4181, Questionnaire Relating to Federal Trust Fund Tax Matters of Employees.

  3. If the third party is subsequently implicated as potentially responsible and willful, a personal interview will be recorded on Form 4180.  (04-13-2006)

  1. If one or more responsible persons is located in another area or territory and it is necessary to secure Form 4180 in order to determine responsibility and willfulness, it may be necessary to issue Form 2209, Courtesy Investigation.

  2. Form 2209 should not be issued if the information necessary to recommend assertion is available where the employer balance due accounts are assigned.

  3. The initiating office will furnish the receiving area or territory with all information and documents which relate to the responsibility of the person to be interviewed, including page 4 of Form 4183, Recommendation Re: Trust Fund Recovery Penalty Assessment, Form 2751, and information regarding issuance of Letter 3164A.

  4. The receiving office will:

    1. Initiate all appropriate correspondence, conduct the necessary interviews, and secure Form 4180.

    2. Ensure compliance with third party notice requirements.

    3. Secure Form 433–A, Collection Information Statement for Individuals.

    4. Secure waivers (IRM, if appropriate.

    5. Secure the responsible party's signature on Form 2751 if the responsible party agrees to the assessment following the guidelines in IRM

    6. Secure and include in the file documentation of sources of income and assets and all necessary supporting documents in order for the initiating revenue officer to make a recommendation for assertion or nonassertion of the TFRP, including nonassertion due to collectibility.

    7. Close the courtesy investigation and submit the documentation to the initiating office for the TFRP determination to be completed.  (04-13-2006)

  1. In the majority of cases, most of the evidence that can be secured to support recommendations of TFRP will be either corporate records or bank records.

  2. The documentation, including bank records, will be requested from the corporation whenever possible. If the corporation does not provide the requested records, a summons will be served on either the corporation, the bank, or both to secure the required documents (See IRM 25.5 and IRM for summons procedures).


    See IRM and (4) and for summons issues specifically related to the 10th Circuit (Kansas, Oklahoma, Wyoming, Utah, Colorado, and New Mexico).

  3. Photocopies of the documentation should be maintained in the TFRP case file as evidence to support the recommendation to assert the TFRP.


    Determine on a case by case basis the amount of documentation required to support the recommendation to assert the penalty. There must be sufficient documentation in the file to support each recommendation for assertion. Bank records and copies of the applicable tax returns will be secured on almost every case. If they are not secured, the case file must be documented with the reason(s) why they were not secured and why they are not necessary to support the recommendation.

  4. Corporate records that can be reviewed include:

    • Articles of Incorporation

    • Minute Books

    • Forms 941 and 1120 or 1065


      For cases where the employment tax returns were submitted in an electronic format (E-file or TeleFile), the signature information is not available on the printed document since the forms are signed via an IRS issued PIN. Use Form 4844 to request the specific items below from the appropriate Submission Processing Center. For TeleFile returns, request the "signature document" from the Cincinnati Submission Processing Center (CSPC). For E-File returns, request a "copy of Form 8633" , or if the authorized signer is a Reporting Agent, request a "copy of Form 8655" from the Andover Submission Processing Center (ANSPC). For On-line returns request a copy of the "PIN signature receipt" from CSPC.

    • Payroll records

    • Any other records that may be relevant to determining the roles and responsibilities of individuals involved with the corporation

  5. The corporate records will be reviewed to determine:

    • Duties (and changes to duties) of officers, directors, etc.

    • Appointments and resignations of officers, directors, etc.

    • Responsibilities of individuals to file and pay tax returns

    • Issuance of stock to officers

    • Assets transferred to officers

    • Loans made to officers

    • Unreported payroll and other taxes

    • Diversion of funds

    • Borrowing of funds not used to pay taxes

  6. Bank records that can be reviewed include:

    • Cancelled checks and bank statements

    • Signature cards and correspondence to the bank relative to changes affecting the signature cards

    • Loan applications and records of loans

    • Any other records that may be relevant to determining which individuals were involved in the financial affairs of the business

  7. The bank records will be reviewed to determine:

    • Authority of persons to sign checks and deposit funds

    • Authority of persons to obligate the corporation by borrowing

    • Diversion of funds to officers, members, etc.

    • Deposits and withdrawals of alleged loans to corporation by officers, members, directors, etc.

    • Excessive salaries, expenses, etc.

    • Payment of other obligations

    • Deposit records for monies received for sale of assets

    • Deposit records of payments for stock in the corporation

    • Any other relevant records  (04-13-2006)

  1. If a taxpayer submits a partial payment of a liability when there are assessments for more than one taxable period, and does not provide specific written instructions as to the application of the partial payment, then apply the payment in a manner serving the best interests of the government. The payment will generally be applied to satisfy the liability for successive periods in descending order of priority until the payment is absorbed. When considering the best interest of the government and period of priority, in addition to statute and lien priority issues, consideration will be given to first applying payments to non-trust fund modules such as Form 1120 and 940. If the amount applied to a period is less than the liability for the period, the amount will be applied to tax, penalty, and interest, in that order, until the amount is absorbed (Section 3.02 of Rev. Proc. 2002–26). This procedure also applies if there are unassessed amounts for which the Service and the taxpayer agree the taxpayer is liable.

  2. Do not solicit partial designated payments for the sole purpose of paying the trust fund balance on the case below LEM 5.7.2. The goal of the TFRP investigation is to secure the unpaid trust fund balance from the responsible parties that have the ability to pay.

  3. The ATFR system should be used to calculate the TFRP balance. The system interfaces with IDRS and receives from IDRS all open Form 941 periods with a balance due when it is calculating the trust fund amount. In addition, the user has the ability to add pre-assessed periods and local payments. The system may be used at any time during the investigation to determine the current outstanding TFRP balance.


    If returns were calculated under IRC 6020(b) and the liability is being included as part of the TFRP assessment, these returns must be submitted for processing and included as pre-assessed modules if the assessment has not yet posted. This will allow for the appropriate cross referencing and reconciliation of the trust fund balances required for financial reporting requirements.

  4. Before submitting Form 4183, Recommendation re: Trust Fund Recovery Penalty Assessment, for approval, the TFRP calculation must be updated.

  5. In order to determine the TFRP balance:

    • On cases where the Letter 1153(DO) is issued on or after June 19, 2000

    • For all payments received on or after January 1, 2003 for cases where the Letter 1153(DO) was issued before June 19, 2000

    all undesignated payments on a tax period are applied following the guidelines below:


    1Non-trust fund portion of tax (employer's share of FICA, or the non-trust fund reported on Form 720)

    2Trust fund portion of tax (withholding and employee's share of FICA, or the trust fund (collected) excise tax under IRC 6672 on communications or air transportation)

    3Assessed lien fees and collection costs

    4Assessed penalty

    5Assessed interest

    6Accrued penalty to date of payment

    7Accrued interest to date of payment

    Category of PaymentApply to

    – Federal Tax Deposit (timely or late),
    – Partial payment on or before due date, or
    – Full payment of tax on or before date return is filed1 and 2

    – Partial payment after due date and before date of assessment1, 2, 6 and 7

    – Partial payment on or after date of assessment, or
    – Involuntary payment1 through 7

    – Designated paymentApply as designated (see IRM

  6. For TFRP assessments when the Letter 1153(DO) was issued prior to June 19, 2000, involuntary payments and undesignated payments received through December 31, 2002 were applied to the non-trust fund portion of the tax (sequence 1), before being applied to the amounts described in sequences 3 through 7 above, and then finally to the trust fund portion of the tax (sequence 2). Paragraph (7) of Policy Statement P-5–60 reflects the effective date of the revised manner of applying payments.


    If the taxpayer established that the deposit was in the amount required by Treasury Regulation 31.6302–1(c) (after December 31, 1992, with allowance for safe harbor rule), the FTD was considered a designated payment and applied to 1 and 2 for the specific period covered by the FTD, even before June 19, 2000. The taxpayer must provide payroll records that show the composition of the FTD. The records must reflect exactly how much of the FTD was employer FICA, employee FICA, and income tax withheld. The procedures on ATFR for using designated (split) TC 650 payments should be used in these types of cases.  (04-13-2006)

  1. Proceeds from an offset or a levy on a contract are applied to the liability incurred during the period of the contract even though the application may not serve the best interests of the government.

  2. For payments from court proceedings, i.e., bankruptcy, insolvency, or decedents, contact Insolvency (see IRM 5.5 for Insolvencies, Decedents, and Estates).  (04-13-2006)

  1. When efforts to collect the tax, penalty, and interest from the employer have been unsuccessful, it will suggested to the responsible persons that they have two options:

    • Pay the withheld tax liability on behalf of the corporation. This is the total amount of the tax withheld and not a portion to reduce the withheld amount below LEM 5.7.2.

    • Have the TFRP assessed against them

  2. If a responsible person chooses to pay on behalf of the corporation then:

    1. Payment will be made by cash, cashier’s check, certified check, or other acceptable payment form

    2. The responsible person may provide the funds to the corporation and pay with a corporate check.

    3. If the payment is not made with a corporate check, the responsible person(s) will provide a signed statement certifying that payment is being made on behalf of the corporation for application to the trust fund liability.

    4. The statement will read as follows: " I/We {Name(s)}, hereby tender payment of ${Amount} and specifically request that such funds be applied to the trust fund tax liability of {Business Name}, {Business E.I.N} for the period(s) ending {List Each Period}."

    5. This statement protects the government's position in cases where a responsible person later files a claim for refund of the TFRP, claiming that their personal tax payment was misapplied or applied against their wishes to the corporate liability.

    6. Retain the signed statement along with a copy of Form 4183 as part of both the balance due and any TFRP case files.


      If statements accompanying unsolicited payments are to be accepted as adequate they must clearly indicate the intent to designate payments, along the lines of the statement in (d) above.

    7. The TFRP investigation will continue while awaiting designated payments from a responsible person.  (04-13-2006)

  1. Review all of the documentation in the case file as well as all Forms 4180 in order to make a determination regarding responsibility (IRM and willfulness (IRM for each potentially responsible party.

  2. A collectibility determination must be completed (IRM 5.7.5) for each potentially responsible person determined to be both responsible and willful. If the TFRP will not be recommended based on collectibility, prepare Form 9327, Recommendation for Nonassertion of the Trust Fund Recovery Penalty Based on Collectibility, prior to submitting Form 4183 for approval.

  3. The revenue officer must address all person(s) considered for assertion of the TFRP on Form 4183 and must state the reasons for assertion or nonassertion for each person considered. This will include all individuals who were in a position that would warrant consideration. The revenue officer must also indicate whether the individual is fully responsible for all periods or partially responsible for some periods.


    When there are multiple officers and one or more are partially responsible for a particular quarter, the Form 4183 narrative section should also address any unique cross-referencing issues by outlining how much of the liability should be cross-referenced upon payment of a partially responsible officer.

  4. This documentation will include a statement of facts concerning responsibility and willfulness for each person listed, including those persons considered but not recommended for assertion. Do not routinely target all of the principals in the business or prepare the narrative with no specific reasoning with the expectation that Appeals will make the final determination as to responsibility and willfulness. An example of a statement to support the recommendation for assessment is as follows:


    Mr. A was president of the corporation. He was responsible for filing the tax returns and exercised his signature authority on corporate checks. He indicated on Form 4180 that he was aware of the liability but allowed other creditors to be paid. He is both responsible and willful. A review of his financial statement shows equity in assets reflecting collection potential if the TFRP is assessed.

  5. The following statement is not adequate to support a recommendation for assessment:


    Mr. B was an officer. He should have known that taxes had not been paid. He was also authorized to sign corporate checks. He is responsible and willful.

  6. The case file must contain adequate information to support the recommendation for assertion of the penalty. Bank records and copies of the applicable tax returns will be secured in almost every case. If these items are not secured, the file must be documented with the reason(s) why they were not secured. There must be enough other documentation to support the recommendation for assertion.

  7. Prepare and submit a completed Form 4183 recommending assertion or nonassertion to the group manager for approval as soon as possible after the investigation has been completed. Before submitting the file for approval, the revenue officer will consider the following:

    • Are photocopies of all related tax returns in the file and have all returns been assessed or forwarded for assessment?

    • Are all periods addressed, including unfiled returns?

    • Is the computation correct, that is, are all payment applications in compliance with IRM guidelines?

    • Is the recommendation supported by adequate documentation?

    • Have all potentially responsible individuals been considered?

    • Has collectibility been addressed on each potentially responsible person?

    • Was all information submitted by the potentially responsible person considered before making the recommendation?

    • Have all issues been adequately addressed?

  8. If collection appears to be in jeopardy based on the reasons identified in IRM, the revenue officer will prepare and submit Form 2644, Recommendation for Jeopardy Assessment, for approval.

  9. If the case is below the dollar criterion in LEM 5.7.2 and assertion of the TFRP is not being recommended against any individual, only complete page four of Form 4183. The potential liability of any unfiled returns must be considered when closing the TFRP account based on the dollar criterion in LEM 5.7.2.  (04-13-2006)

  1. The group manager must complete a thorough review of the TFRP recommendation to determine the adequacy of the TFRP recommendation prior to the revenue officer issuing Letter 1153(DO).

  2. The group manager must also review and approve any related Forms 9327 for nonassertion due to collectibility prior to approving Form 4183. If the Form 9327 is not approved, Form 4183 must be updated before it can be approved.

  3. The manager’s review of the recommendation must address the same issues that the revenue officer addressed before submitting Form 4183 for approval (IRM When the answer to any of the questions is "no" , the manager will consider whether to return the recommendation to the revenue officer for corrective action and/or further development. Manager's must ensure all required documents are in the casefile and a collectibility determination has been made on each potential responsible officer.  (04-13-2006)

  1. Local management may determine that a centralized unit will be responsible for processing the TFRP files after the Form 4183 has been approved.

  2. These actions may include:

    • Generating and delivering Letter 1153(DO) and Form 2751

    • Monitoring the responsible person's response to Letter 1153(DO)

    • Forwarding any appeals documents to the revenue officer for a determination

    • Generating Form 2749, Request for Trust Fund Recovery Penalty Assessment, (including updating the computation) and inputting "2749 to CPM" date on ATFR to release it to the appropriate unit in Technical Services responsible for processing of the file

    • Forwarding the case file to Technical Services on Form 3210, Document Transmittal  (04-13-2006)

  1. Once Form 4183 is approved by the group manager, the revenue officer will prepare Form 3177, Notice of Action on the Master File, to request input of the TC 130 to freeze any potential refunds for all individuals determined to be responsible for the TFRP. The form may be prepared using the ATFR program. Form 3177 will then be submitted to the CP 44 Unit in Accounting Control/Services for input of the TC 130.

  2. Letter 1153(DO) and Form 2751 should then be prepared on the ATFR system. The ATFR system does not input a date on the Letter 1153, therefore it is important that the revenue officer date stamp the Letter 1153 with the date of service. Publication 1 will be included with Letter 1153(DO) and Form 2751 when they are delivered to the taxpayer (see IRM for the recommended method of delivery). A copy of page 4 of Form 4183 showing the penalty computation may also be included with the documents delivered to the taxpayer so they are aware of how payments were applied to the account.

    Letter 1153(DO)Form 2751

    – Notifies the responsible party of the proposed assessment
    – Contains a description of the available appeal rights
    – Affords the responsible party the opportunity to agree to or to appeal the assessment
    – Will be modified if the responsible person has filed a bankruptcy proceeding and the automatic stay is still in effect, to delete any references to:
    • the Service "collecting" the TFRP
    • any actions the taxpayer should take to delay collection activity by the Service
    • any collections the Service may take in Jeopardy circumstances
    – The modified version will print from the ATFR system if the responsible party's bankruptcy information is input to the ATFR system
    – Provides a report of the corporate liability
    – Provides a breakdown of the proposed TFRP assessment for each quarter for which the TFRP assessment is proposed
    – Allows the responsible party to agree to the proposed assessment
    – Waives the 60 day restriction on notice and demand if signed by the taxpayer
    – May be signed by the responsible party at any time during the TFRP investigation or after the Service has issued Letter 1153(DO)
    --A Power of Attorney (POA) may sign From 2751 if the Form 2848 is filled in properly. Item 3 of Form 2848 must say "Trust Fund Recovery Penalty (TFRP)" under type of tax, "Form 2751 " under Form and all periods for which the TFRP is proposed to be assessed must be listed.

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


    The method of delivery and any discussions with the responsible party related to receipt of the Letter 1153(DO) will be documented in the ICS history for the employer's case. These procedures are recommended in order to ensure that the responsible person learns of the Service's proposed TFRP assessment and has an opportunity to question the revenue officer about potential appeal opportunities. If the responsible person later forgets having received the Letter 1153(DO), the ICS history notes regarding the method of delivery may help show that the responsible person is not entitled to another opportunity to contest the correctness or amount of the TFRP in a Collection Due Process hearing.

    Required ActionRecommendations/ Exceptions

    •A 60 day preliminary notice, Letter 1153(DO), must be mailed to the responsible person's last known address or (after July 22, 1998) delivered in person to the responsible party before giving notice of assessment and demand for payment to the responsible party.
    •See IRM for the impact the proper delivery of Letter 1153(DO) has on the assessment statute.
    — It is highly recommended that the Service now deliver Letter 1153(DO) in person, whenever practical
    — Alternatively, it is recommended that the Service use Certificate of Mailing (e.g., U.S. Postal Service Form 3817) or certified mail to deliver Letter 1153(DO)
    — If a revenue officer mails the Letter 1153(DO) and does not request return receipt from the Postal Service, it is further recommended that the revenue officer call the responsible person a suitable number of days after mailing (e.g., five days) to confirm that the responsible person has received the 60 day preliminary notice and is aware of his or her right to receive a hearing in the Service's Appeals function

    The Service must wait 60 days (plus five days for receipt and processing of timely mailed protests) after proper delivery of Letter 1153(DO) before issuing notice and demand for payment (Form 3552).The 60 day rule does not apply:
    — To a Jeopardy Assessment (Form 2644)
    — If the responsible person signs Form 2751, Proposed Assessment of Trust Fund Recovery Penalty, waiving the restriction on notice and demand set forth in IRC 6672(b)

  4. The ATFR program will be updated when Letter 1153(DO) is delivered. Include a copy of Letter 1153(DO) and part 3 of Form 2751 in the TFRP case file. Process the case file according to the instructions in IRM based on the potentially responsible person's response to the Letter 1153(DO).  (04-13-2006)

  1. The TFRP will normally be pursued when efforts to collect the unpaid tax, penalty, and interest from the employer have been unsuccessful.

  2. In certain situations, the Service may decide to withhold assertion of the TFRP while the employer is attempting to resolve the liability through another method. These situations could involve an in-business installment agreement (IRM, offer-in compromise (IRM, or bankruptcy (IRM and  (04-13-2006)

  1. A revenue officer can secure an in-business installment agreement rather than recommending immediate assertion of the TFRP, as long as:

    • The taxpayer qualifies for an in-business installment agreement (IRM 5.14.7)

    • The TFRP assessment limitation period is appropriately extended

    • The investigative aspects of the TFRP inquiry are documented and preserved


      No TFRP determination is required on cases that meet the requirements for In-Business Trust Fund Express Installment Agreements (IRM

  2. Installment agreements are not appropriate for taxpayers who are considered to be repeaters (see IRM 5.7.8) since they are not in compliance and therefore do not qualify for an in-business installment agreement. Repeater trust fund taxpayers are those that:

    • Are in-business

    • Are not current with Federal Tax Deposits (FTD's)

    • Have at least three trust fund modules assigned to the collection field function

  3. If, after contact, taxpayers originally classified as repeaters do not continue to accrue liabilities but begin making FTD's and file all appropriate returns so that they are in compliance, they are no longer considered repeaters and may qualify for an installment agreement.

  4. If a revenue officer determines that an in-business installment agreement is the appropriate case action, generally the TFRP will not be assessed if taxpayers meet the terms of the installment agreement. However, based on the taxpayer's prior history as a repeater or because of the length of the proposed installment agreement, the revenue officer may determine that assertion of the TFRP would be in the best interest of the government. If the TFRP is not being assessed, the following actions must be taken relative to the TFRP if the agreement will not fully pay all balances due at least one year prior to the earliest ASED:

    1. Complete interviews for all potentially responsible persons and any other interviews necessary to determine responsibility and willfulness.

    2. Secure the appropriate Collection Information Statement from all potentially responsible persons and complete the collectibility determination (IRM 5.7.5).

    3. Request a signature on Form 2750, Waiver Extending the Statutory Period For Assessment of Trust Fund Recovery Penalty, from all potentially responsible persons (see IRM for the actions required when securing a waiver) to extend the statute to the expected end-date of the agreement plus one year.

    4. Assemble all documentation for completion of the penalty to the point of assessment (including securing approval of Form 4183).


      If a potentially responsible person refuses to extend the ASED and his or her TFRP is determined to be collectible, or if Appeals has already upheld the TFRP recommendation, submit the TFRP file for assessment. After assessment, collection may be withheld (IRM ) on these cases if appropriate.

  5. For cases where the installment agreement will fully pay all balances due at least one year prior to the earliest ASED, the revenue officer and the group manager should determine how far to proceed with the TFRP investigation in the event the agreement defaults. The decision should be based on the facts of the case, including:

    • Financial condition of the business

    • Financial position and actions by the responsible parties

    • Length of the agreement compared to the ASED

    • Ability to secure documentation in the future to support the recommendation

  6. Inform the responsible parties whether or not the penalty will be assessed. If the assessment of the TFRP is being held pending completion of the terms of an installment agreement, advise the responsible parties that default of the agreement will result in the processing of the recommendation for assessment.

  7. When an in-business trust fund installment agreement (IBTF) is granted, and the TFRP is not being assessed, the TFRP file must be sent along with the IBTF installment agreement to Centralized Case Processing where the agreement is being monitored. Label the TFRP file, "Unassessed TFRP-IBTF IA Backup Documents - Earliest ASED is:" Additional information on processing and monitoring these cases is contained in IRM and


    While under an approved installment agreement, a corporation may not designate that it's monthly installment payment be applied to the trust fund portion of the tax (IRM

  8. If an in-business installment agreement defaults (usually some time prior to the actual termination of the installment agreement), Centralized Case Processing (CCP) will assign the case to a revenue officer in the FORT unit of CCP for appropriate collection activity which may include the completion of the TFRP process that was started by the originating RO.

  9. If the responsible party was not previously given appeal rights, follow the procedures in IRM for notifying the responsible party of the proposed assessment and of his or her appeal rights.

  10. If the responsible party was already given appeal rights and Form 2751 was previously secured:

    1. Compute the new balance using ATFR (no assessment may be made for periods or balances for which the taxpayer was not previously given appeal rights).

    2. Update the assessment information on the ATFR system.

    3. Advise the taxpayer of the pending assessment.

    4. Process the case according to IRM  (04-13-2006)

  1. It is the Service's policy that the amount offered to compromise a corporate employment tax liability must include, in addition to what can be collected from the corporation an amount equal to what can be collected from all responsible persons, up to the amount of the TFRP (plus interest, if the penalty has been assessed). However, if the Service enters into a compromise with an employer for a portion of the trust fund tax liability, the remainder of the trust fund taxes may still be collected from a responsible person pursuant to Section 6672 of the Internal Revenue Code. See IRM

  2. In order to determine who the responsible person(s) are and to determine the amount that can be collected from the responsible person(s), the TFRP investigation must be completed. The TFRP process can be ongoing while the offer is pending, but the determination of responsible parties must be completed before the offer determination is finalized.


    Because these are cases where the corporation is attempting to compromise it's liability for less than the full amount due, LEM 5.7 considerations do not apply. In addition, non-assertion determinations based on collectibility should only be made if there is no reasonable collection potential for that individual.

  3. If an offer is going to be recommended for acceptance and the TFRP assessment has not been made, complete the TFRP investigation up through issuance of the Letter 1153. Secure Form 2751 from each responsible person as a condition of the offer acceptance.


    A signature on Form 2751 is not required when a non-assertion decision has been made based on collectibility.

  4. Assessment of the TFRP may be held in abeyance pending the outcome of the offer investigation. Since the offer does not extend the statute of limitations for assessing the TFRP against the responsible person(s), secure Form 2750 (see IRM for the actions required when securing a waiver) from each person who has been determined to be responsible and willful extending the ASED to a date 2 years beyond the latest date of:

    • The anticipated completion date of all terms and conditions of the offer

    • The applicable compliance date

    • Any related collateral agreements

  5. If a responsible person refuses to extend the statute, a decision must be made to either:

    • Accept the offer without protecting the Service's ability to later assess the penalty

    • Assess the penalty

    • Reject the offer

  6. The completed TFRP file will be submitted along with the accepted offer when the offer file is forwarded for processing. If there is a default on the offer, the file will be returned to the local office for processing and assessment of the TFRP.  (04-13-2006)

  1. If a trust fund taxpayer (employer) files bankruptcy, the TFRP ASED is not suspended. When a revenue officer learns that a trust fund taxpayer has filed bankruptcy, he or she should immediately contact Insolvency.

  2. If the TFRP determination and investigation have not been completed, the field group manager will review the facts of the case and determine whether to issue a Form 2209, Courtesy Investigation, to conduct the TFRP investigation. The determination should be based on the dollar amounts involved, collection potential of the TFRP assessments, effect on compliance, as well as any other relevant factors.

  3. In making the TFRP assessment determination, consider all available information including:

    • Refusal of potentially responsible individuals to sign Form 2750 waivers

    • Pyramiding of additional unpaid liabilities after the petition date

    • Business continuing to operate at a loss

    • Liquidation of assets

    • Excessive compensation to officers during the proceeding

    • Inability to effectuate a plan

    • Unreasonable delay in proposing a plan

  4. Once it is determined that assessment of the TFRP is appropriate, collection may or may not be suspended against responsible persons in certain situations. See IRM Revenue Officers must contact the controlling Insolvency office for local guidelines addressing lien determination and conditions under which accounts are to be suspended, if applicable.

  5. Secure waivers whenever possible from all responsible persons to protect the TFRP assessment statute (see IRM for the actions required when securing a waiver). A waiver will be secured if the assessment statute will expire within one year following the scheduled full payment date of the plan. If a potentially responsible person refuses to sign the waiver, continue with the investigation and assertion of the penalty.  (04-13-2006)

  1. If a potentially responsible party files a bankruptcy petition after October 21, 1994, the statutory period for assessment will not be automatically extended by the bankruptcy filing.


    If the bankruptcy was filed before October 22, 1994, the statutory period for assessment is extended for the period the automatic stay is in effect, plus 60 days.

  2. If the potentially responsible person has filed bankruptcy, immediately contact Insolvency and advise them of the potential liability so that a proof of claim may be filed.

  3. If the bankruptcy is a Chapter 13, it is crucial to file a timely proof of claim because of the super discharge provision under Section 1328(a) of the Bankruptcy Code.


    Use the appropriate L1153(DO) when a potentially responsible party is in bankruptcy (IRM The modified version will print from the ATFR system when entering "Y" when asked if the responsible party is in bankruptcy during the L1153 generation process on ATFR.



Thomas F. DiLullo, P.C.

A Hackensack law firm serving Bergen County, as well as, New Jersey, New York and Connecticut, and Federal tax cases nationwide.

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