IRS Enforcement of Trust Fund Recovery Penalty Likely to Increase

The Treasury Inspector General for Tax Administration (TIGTA) recently studied IRS’ practices in assessing and collecting the IRC Section 6672 “responsible person penalty,” and recommended that group managers pay closer attention to this revenue raising opportunity.

Recall that if an employer fails to pay its payroll taxes, IRS can attempt to collect a penalty equal to 100% of the unpaid taxes from a “responsible person” within the employer’s ranks.

TIGTA notes that when trust fund recovery penalty assessments are not timely made, factors can arise which impede IRS’ chances to collect the trust fund taxes due.

IRS has agreed with all of the TIGTA recommendations, and has indicated that corrective actions will be taken.  The inevitable consequence will be more assertions of the “responsible person penalty” and more assertive collection actions by IRS in the near term.