IRS Trust Fund Recovery Investigations

You may be facing a trust fund recovery investigation because you didn’t pay the 941 taxes. The IRS considers this a loan they didn’t agree to. They don’t like making loans.

A trust fund recovery investigation is governed by the Internal Revenue Manual 5.7.4 Investigation and Recommendation of the TFRP. They are conducted by the revenue officer assigned to your case.

The revenue officer is going to interview you as the potentially responsible person. I wrote about responsible parties in a previous article called Personal Liability for Unpaid Trust Fund Taxes.

The IRS revenue officer uses the following core evidence in determining the trust fund penalty liability:

  • Form 4180 interviews
  • Articles of Incorporation
  • Bank signature cards or electronic PINs/Passwords assignment information
  • Copies of a sampling of cancelled checks demonstrating payment to other creditors in preference to the government or
  • If the taxpayer predominately uses electronic banking, bank statements demonstrating debit transaction payments in preference to the government

The Form 4180 is the questionnaire the IRS revenue officer will use when conducting the interview. The 4180 form is used as the record of the interview.

The purpose of the Form 4180 and the interview, is to secure direct detailed information regarding the potentially liable person’s involvement in the business. It is used to determine if the potentially liable person meets the criteria for willfulness and responsibility, which I wrote about in a previous article called Personal Liability for Unpaid Trust Fund Taxes.

The problem with the Form 4180 is that it reduces the investigation into yes and no answers. IRS tax problem cases can’t be boiled down to yes and no answers. There are always more facts involved that aren’t brought up in the trust fund recovery penalty interview.

At the end of the interview, the person being investigated will be asked to sign the Form 4180. This is a slippery slope. You could be agreeing to things you don’t mean to agree to.

If you find yourself being asked to submit to an IRS trust fund penalty investigation and interview, get some experienced help. Going it alone could be disastrous.

Sources:

5.7.4 Investigation and Recommendation of the TFRP