Can the IRS Hold Me Personally Responsible for My Company’s Payroll Taxes?
Yes. Under the Trust Fund Recovery Penalty (TFRP), Internal Revenue Code section 6672, the IRS can make an individual personally liable for unpaid payroll taxes that were withheld from employees’ wages. The IRS must show the person was “responsible” for paying the taxes and “willfully” failed to pay them. This applies even if the business is a corporation or LLC.
What the penalty covers
The penalty equals the unpaid “trust fund” taxes: federal income tax withheld from employees, plus the employees’ share of Social Security and Medicare. It does not include the employer’s own share of those taxes. The IRS treats this money as held in trust for the government, which is why it pursues it so firmly.
Who can be a “responsible person”
The test is about authority, not job title. The IRS looks at who:
- Signs or has authority to sign checks.
- Decides which bills and creditors get paid.
- Controls payroll and bank accounts.
- Is an owner, officer or director with financial control.
More than one person can be found responsible. Bookkeepers or payroll providers may also be investigated, depending on their authority.
What “willful” means
Willful does not require bad intent. It generally means the person knew the taxes were unpaid and chose to pay other bills, such as rent, suppliers or wages, instead.
How the IRS process works
A Revenue Officer investigates, usually with an interview using Form 4180.
The IRS sends Letter 1153 proposing the penalty to each person it finds responsible.
You have 60 days from the letter date to file an appeal before the penalty is assessed.
If no appeal is filed, the penalty is assessed and personal collection can begin, including liens and levies.
The IRS collects the trust fund amount only once in total, but it can collect it from any of the responsible people.
How we help
- Represent you in the Form 4180 interview, so your answers are accurate and complete.
- Review records to show whether you truly had authority and knowledge.
- File a timely protest and appeal of Letter 1153.
- Resolve the business balance first, where possible, to reduce or prevent personal assessment.
- Negotiate payment plans, Offers in Compromise or other relief if a penalty is assessed.
If you received Letter 1153 or a Revenue Officer wants to interview you, contact us right away.
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Every situation is different. We review your IRS transcripts and explain your options in plain terms.
This page provides general information, not tax or legal advice for your specific situation. IRS rules, fees and thresholds can change. Past results do not guarantee a similar outcome, and every case depends on its own facts. Franskoviak Tax Solutions, operated by Titan Tax Solutions, P.C., provides representation where permitted.
