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Trust Fund Recovery Penalty Defenses Lawyers

One complicated branch of tax law involves withholding taxes. These are tax liabilities that are paid by a business entity on assets held in a trust fund. Because of this, they’re most commonly called trust fund taxes. You might also hear them referred to as 941 liabilities, which is a reference to the IRS form they relate to.

If a business fails to pay these taxes, the IRS can be aggressive in their collection processes. They will go after any individuals that are responsible for the business, whether they were part of the situation or not. In most cases, the people billed will have a direct hand in the financial state of the company. But that isn’t always the case.

Corporations often enjoy a certain level of immunity from intense scrutiny and criminal proceedings. A corporation can be convicted of a crime without being fully shut down or needing to do more than pay a fine. But the IRS has authorization to ignore corporate entity protections. They do heavy-duty research to break down corporate finances into a picture of the responsible individuals.

The Trust Fund Recovery Penalty, often referred to as the TFRP, is the assessment that the IRS does when a corporation fails to pay withholding taxes. Rather than slapping the company itself with a fine, the agency looks for the specific people who made the decision to ignore the company’s tax liabilities.

George FernandezGeorge Fernandez
14:16 30 Apr 24
Excellent 10 out of 10, Helped resolve my case. Jeremy explained everything and made everything easy to understand.
RajRaj
21:33 24 Apr 24
If you are looking for a lawyer that listens, is aggressive where needed, and holds his word above all else, Todd is the best pick. I had hired multiple attorneys prior to hiring the Spodek Group for a white collar case. The first thing that stood out to me was the cost, as anyone going through the process and dealing with the system, money was tight at that time - especially after hiring and firing multiple lawyers. The cost was not as high as others which was definitely a plus. Todd's intake process was also unlike other attorneys. He took the time to actually listen. He cared. He was trying to put himself in my shoes while I was explaining the situation to him and he really took the time to understand the whole situation. Other lawyers will give you 15 mins and send you a retainer agreement. Not Todd, I think he spent almost two hours with me as I was explaining everything.Not only was he great during the onboarding process, he was supportive and very informative through the entire plea process and eventually sentencing. After hiring him, I asked if I should hire a prison consultant, he told me to save my money as he would do everything they would. He was right and held up to his word. Later on I would hear from others that went with the prison consultants that they were a waste of money - I am glad I listened to Todd!When it came time for sentencing, two days prior to sentencing, the prosecutor tried increasing my proposed prison time by almost double - apparently a normal move. Todd and his team worked with me non-stop through the weekend prior to sentencing to ensure that I was not given additional prison time. Again, he took the time to listen and came up with a strategy to explain the case with great detail.Unfortunately, I did plead guilty as that was my best option. Todd and his whole team wrote up nearly 300 pages of a summary of what happened and why I should not be given prison time. If I breakdown the amount I spent with Todd versus the amount of work that I saw being done, I am shocked I was not charged four times as much. The other benefit was, a lot of criminal defense lawyers were just a single attorney with a paralegal or two. Todd had a team of people that I dealt with (5-7 people that I interacted with), but he was ALWAYS accessible. It would never take him more than an hour to reply unless he was in court.I was sentenced to prison and I was emotionally distraught. Todd and his team did whatever they could even after sentencing to make sure I was alright. He personally stayed in touch with my family to ensure I was doing alright and offered support to them. Most lawyers would consider the job complete at sentencing, not Todd.After prison, Todd still spent time with me to make sure I was on the right track and avoiding any potential risks in the future. He has also been giving advice on how to navigate probation etc and has not been looking at the clock for billing.Although I wish I had never been arrested in the first place, I am glad I had Todd and his team in my corner. Without them I likely would have had to spend a lot more time in prison than I did.Thank you, Todd, and the entire Spodek Law team, for helping turn what was a nightmare into a manageable situation!
Yelva Saint-PreuxYelva Saint-Preux
19:26 19 Apr 24
I am immensely grateful to the entire team at Spodek Law Group for their unwavering dedication and exceptional expertise throughout my case. From our initial consultation to the final resolution, their professionalism and tireless advocacy made all the difference. Their strategic approach and attention to detail instilled confidence in me every step of the way.Thanks to their hard work and commitment, we achieved a truly favorable outcome that exceeded my expectations. Not only did they navigate the complexities of my case with precision, but they also provided invaluable support and guidance during what was undoubtedly a challenging time. I cannot recommend Spodek Law Group highly enough, especially attorneys Todd Spodek and Claire Banks; they are beacons of excellence in the legal profession.YSP.
Katherine SunKatherine Sun
18:08 18 Apr 24
my lawyer is Alex Zhik. Efficient, patient and professional
Nun yaNun ya
17:48 18 Apr 24
Todd, Ralph and Alex are amazing. Helped my husband get from a double digit number with multiple charges to a single digit, by the time I blink he will be out. They very professional and help with all your needs. They dealt with my anxiety and worry very well and they understand that your family member needs to get home as soon as possible.
Keisha ParrisKeisha Parris
20:45 15 Mar 24
Believe every single review here about Alex Z!! From our initial consultation, it was evident that Alex possessed a profound understanding of criminal law and a fierce dedication to his clients rights. Throughout the entirety of my case, Alex exhibited unparalleled professionalism and unwavering commitment. What sets Alex apart is not only his legal expertise but also his genuine compassion for his clients. He took the time to thoroughly explain my case, alleviating any concerns I had along the way. His exact words were “I’m not worried about it”. His unwavering support and guidance were invaluable throughout the entire process. I am immensely grateful for Alex's exceptional legal representation and wholeheartedly recommend his services to anyone in need of a skilled criminal defense attorney. Alex Z is not just a lawyer; he is a beacon of hope for those navigating the complexities of the legal system. If you find yourself in need of a dedicated and competent legal advocate, look no further than Alex Z.
Taïko BeautyTaïko Beauty
16:26 15 Mar 24
I don’t know where to start, I can write a novel about this firm, but one thing I will say is that having my best interest was their main priority since the beginning of my case which was back in Winter 2019. Miss Claire Banks, one of the best Attorneys in the firm represented me very well and was very professional, respectful, and truthful. Not once did she leave me in the dark, in fact she presented all options and routes that could possibly be considered for my case and she reinsured me that no matter what I decided to do, her and the team will have my back and that’s exactly what happened. Not only will I be liberated from this case, also, I will enjoy my freedom and continue to be a mother to my first born son and will have no restrictions with accomplishing my goals in life. Now that’s what I call victory!! I thank the Lord, My mother, Claire, and the Spodek team for standing by me and fighting with me. Words can’t describe how grateful I am to have the opportunity to work with this team. I’m very satisfied, very pleased with their performance, their hard work, and their diligence.Thank you team!
K MarK Mar
01:37 25 Jan 24
I recently had Spodek Law Group represent me for a legal matter in NYC and I am thoroughly impressed with their services.Alex Zhik secured the best possible outcome for my case.It was a seamless journey from the initial consultation to the resolution of my legal matter. From the moment I spoke to Todd about my case, his enthusiasm to help was evident, setting a positive tone for the entire experience. The efficiency and professionalism displayed by the team is commendable.A particularly noteworthy aspect of their service is their user-friendly portal to upload your documents/evidence. This not only simplified the process, but showcases their commitment to streamline the client experience.Lastly, in an industry where legal fees can often be a concern, I found their pricing to be very reasonable, making needing legal assistance feel accessible and stress-free.I am grateful for their support and wouldn't hesitate to turn to them again in the future.
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The most common reasons that the IRS will assess a person’s TFRP are:

  • The person had control over how a company used its assets, and they did not allocate any to the withholding taxes.
  • The person was in charge of some aspect of tax payment, and they chose not to pay the company’s withholding taxes on purpose.

Sometimes innocent people are caught in the crossfire during these proceedings. If you think you might be the target of a TFRP assessment, you should talk to a lawyer right away. Being given a TFRP might be extremely costly. In some cases, the penalty can be 100 percent of your current assets and holdings, or 100 percent of the company’s owed taxes.

A business tax attorney is specifically educated in corporate tax laws. They have experience with negotiating with the IRS, litigating settlements, and guiding clients through the investigation process. Perhaps most importantly, they can make sure that you have your rights protected while the IRS is compiling evidence. You shouldn’t ever talk to a tax agent without speaking to your lawyer first.

Who Might Be Held Responsible

When it comes to small businesses and businesses with a close corporate structure, the IRS doesn’t have to struggle to find the responsible parties. They will simply go after the owner of the business, the principle officers that influenced the financial decisions, and any other high-ranking employees who they reasonably believe were part of the issue.

However, there are also cases where the IRS agents will use a very broad definition of “responsibility” to extract payments from people. You might have a legitimate defense against the accusation. For example, maybe you were responsible for some parts of the company’s tax payments, but withholding taxes were never part of your job.

The most egregious cases happen when the IRS uses the TFRP assessment not only against the higher-ups in a corporation, but also against every single person who handled any type of accounting paperwork whatsoever. That can extend to every employee given the authority to sign checks on behalf of the company, even if they’ve never actually looked at the company finances.

These are some people who might be made responsible for payments through a TFRP, even though they have a defense against wrongdoing:

  • Ground level accountants and bookkeepers who were not involved in withholding taxes, or who were only reporting the information that they had
  • Employees who play the role of corporate officers, but who don’t actually influence the company’s decisions or financial prospects
  • Relatives of the owner of the business, whether they’re employed by the company or not — most commonly the spouse, but sometimes the parents or children
  • Key employees of the company that nevertheless don’t have any knowledge or control over the company’s finances

Defending Against a TFRP

If you are given a TFRP assessment, you can run into serious problems. That’s especially true for people who have relatively low-paying positions and didn’t know about the financial problems with the company.

You will likely be told to pay a large amount. You also can’t discharge the penalty in bankruptcy proceedings the same way you can with other tax penalties. Your credit rating might take a dive, your home and car might be repossessed, and there may be additional strain on your family.

That’s why it’s so important to contact a lawyer the second that you suspect you might be subject to this assessment. Even if you don’t have confirmation of it yet, talking to a lawyer is the best way to take preemptive action. Your attorney can do damage control to help mitigate the situation.

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