Disclaimer: The following employment tax audit material is intended for general information only and not legal or tax advice.
Zaher Fallahi, IRS Tax Attorney At Law, CPA, represents clients nationwide with the IRS Audit, IRS Payroll Tax Audit, Cryptocurrency Tax, Offshore Accounts, Foreign Gifts, and California Tax Audit Including Employment Tax Audit ( EDD Payroll Tax Audit). Consultation is available via toll free 1-(877) 687-7558.
Harvard Law School
Zaher Fallahi, Defense Tax Attorney, CPA, has completed “Negotiation and Leadership”, and “Leveraging the Power of Emotions as You Negotiate” Certificate Programs at Harvard Law School.
IRS Trust Fund Recovery Penalty (TFRP)
To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the TFRP. These taxes are called trust fund taxes because you hold the employee’s money in trust until you timely transfer it to the IRS.
The TFRP may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business. The business does not have to have stopped operating for the TFRP to be assessed.
Who Can Be Responsible for the TFRP?
The TFRP may be assessed against any person who:
1- Is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes; and,
2- Willfully fails to collect or pay them.
A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:
1- an officer or an employee of a corporation,
2- a member or employee of a partnership,
3- a corporate director or shareholder,
4- a member of a board of trustees of a nonprofit organization,
5- another person with authority & control over funds to direct their disbursement, or
6- another corporation or third-party payer.
For willfulness to exist, the responsible person:
1- must have been, or should have been, aware of the outstanding taxes and
2- either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).
Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness (Emphasis by Zaher Fallahi, CPA, Esq). You may be asked to complete an interview to determine the full scope of your duties and responsibilities. Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business.
An employee is not a responsible person if the employee’s function were solely to pay the bills as directed by a superior (Emphasis by Zaher Fallahi, CPA, Esq), rather than to determine which creditors would or would not be paid. Notice 784, Could You Be Personally Liable for Certain Unpaid Federal Taxes? contains additional information regarding the TFRP.
CA Employment Development Department (EDD)
In California, the Employment Development Department (EDD) is a department of government that provides a variety of services to businesses, workers, and job seekers. EDD is also in charge of collecting CA income, employment and other taxes and has similar laws to those of the IRS.
We Help With IRS and EDD Payroll Tax Audit
Zaher Fallahi, IRS Tax Attorney, CPA, represents clients nationwide with the IRS Audit, IRS Payroll Tax Audit, Cryptocurrency Tax, Offshore Accounts, Foreign Gifts, and California Tax Audit Including Employment Tax Audit ( EDD Payroll Tax Audit). Telephone Attorney-Client Privileged Consultation is available via toll free 1-(877) 687-7558.
(877) 687-7558 Nationwide Toll Free
(310) 719-1040 (Los Angeles)
(714) 546-4272 (Orange County)