By Mitch Rice
The 4180 interview is part of a more extensive inquiry to assist in identifying the Responsible Individual(s) of the indebted company. When a firm owes social security tax, the IRS conducts an interview to determine which persons involved with the business are accountable for tax withholding and making financial decisions for the company.
One of the critical factors the IRS evaluates when deciding whether or not the corporation could have paid the trust fund taxes is whether or not your paid other payments. So expect some queries in that vein. Did you, for example, directly pay other bills? Did you hear that other bills in your company were being paid? If so, who spent the invoices, and who approved the payments?
What if you can’t get out of the interview?
In rare situations, you may be unable to cancel the interview. However, you should be prepared if you have to attend the interview. It is also a good idea to talk with a tax specialist to aid with the problem. There’s a vast network of specialists at Idealtax, and only particular individuals can assist with this situation. So contact one of their tax professionals now, and see what suits your situation.
Why did I get the Employment Taxes and the Trust Fund Recovery (TFRP) penalty?
Congress established the TFRP to encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes and collected excise taxes. Trust fund taxes are so-called because you hold the employee’s money in trust until you make a federal tax deposit in that amount. If the IRS cannot collect these outstanding trust fund taxes immediately from the business, the TFRP may apply to you.
Who can be penalized?
The Trust Fund Recovery Penalty can be triggered by any willful failure to collect, truthfully account for, or pay over the Social Security and income taxes that are supposed to be withheld from employees’ earnings.
To elaborate, the penalty may be levied on anyone “responsible” for tax collection and payment. This “obligation” is widely defined as any corporation employee, director, or shareholder who is required to collect and pay the tax. It also covers the partners in a partnership and any business employee with such a duty. Under some conditions, even volunteer board members of tax-exempt organizations can be subject to this penalty, although being normally immune from obligation. In certain circumstances, responsibility has even been delegated to attorneys, accountants, and business-related family members
When is it worth my time to fight the penalty?
The taxpayer failed to adequately record and develop a case demonstrating that, despite their involvement in the company’s finances, they did not influence how payroll contributions were made. In addition, it could be that the taxpayer or his representative failed to appeal appropriately.
In some cases, pressure accounts for so much that the taxpayer signed a paper to satisfy a threatening Revenue Officer, or a “ganging up” against a non-responsible party that didn’t know how to fight back occurred. Some individuals don’t recognize the importance of fighting. While the hearing can be pretty casual, many individuals do not comprehend what is happening and suffer from long-term debt by underestimating the repercussions.
Am I solely liable for this penalty?
Several people in a company might be held accountable, yet each is still subject to the whole punishment. On the other hand, you might develop into a responsible person even if you aren’t directly involved in your company’s payroll tax withholding procedure if you have the authority to pay over collected taxes and discover a failure to make the payments but decide to pay creditors and other parties instead. If you find a faulty payroll tax withholding procedure, contact one of our tax professionals immediately, or get legal help as soon as possible.
Can my tax advisor do my interview?
No. However, your representative may attend the meeting or join in the interviewing video conference. Your representative cannot answer your queries for you, but she can explain them and step in if the investigator goes too far. A good representative will also assist you in preparing for the interview.
