Updated: Oct 20
Are you facing a trust fund recovery penalty? If yes, don’t panic. There are several steps you can take to resolve the issue and come out on the other side without feeling too much of a financial sting. The following are some tips to help you navigate the penalty:
1. Get informed
It’s crucial to understand why the penalty was issued. Trust fund recovery penalties usually arise when a company fails to pay payroll taxes or employee taxes, and the IRS holds an individual responsible for the unpaid taxes. In other words, the IRS is holding you responsible for the money your company withheld from employees' wages but didn’t pay to the government. You should also learn about your rights as a taxpayer and seek professional help.
2. Take action
Once you understand the situation, take prompt action. If you disagree with the penalty, file an appeal and dispute the decision. If the penalty is accurate, begin paying it off as soon as possible. If you cannot afford to pay in full, set up an installment agreement with the IRS.
3. Don’t ignore the penalty
Ignoring the trust fund recovery penalty will only make things worse. The longer you delay payment or fail to resolve the issue, the more the penalty will increase due to additional interest and penalties. So, don’t delay and address the situation as soon as possible.
4. Seek professional assistance
Finally, don’t hesitate to seek the assistance of a professional. An experienced tax attorney or certified public accountant can help you navigate the complex legal and financial implications of a trust fund recovery penalty.