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The following summarizes guidelines which Revenue Officers  and Managers are to follow in targeting potentially responsible persons.  (The source is the Internal Revenue Manual ).  Both Civil and Criminal liability exposure exists. For discussion about the criminal liability exposure,  read more here.


The Trust Fund Recovery Penalty is based upon IRC section 6672 and serves as an alternative means for the IRS to collect unpaid trust fund taxes when the taxes are not fully collectible from the business that failed to pay the withheld taxes. (IRM 

The IRS uses form 4180 (a copy is here ) as part of the procedures for investigation, recommendation and approval of the Trust Fund Recovery Penalty against individuals who are potentially responsible for the non-payment of the business trust fund taxes.


During the initial contact with the taxpayer, the revenue office will attempt to conduct interviews with potentially responsible persons. The revenue officer is instructed to secure at least one form 4180, Report of Interview with Individual Relative to the Trust Fund Recovery Penalty or Personal Liability for Excise Taxes, from a potentially responsible person (See IRM, Form 4180, and IRM, Evidence That May Support Recommendations). Of course, the revenue office is instructed to secure additional Forms 4180 from all potentially responsible persons to the extent possible.


During the interview, if the taxpayer states that he or she wishes to consult with an authorized representative, the IRS employee is to suspend the interview to permit such consultation.

The form to be used for conducting the Trust Fund Recovery Penalty is Form 4180, and it is intended to used as a record of a PERSONAL interview to be completed in person or over the phone (IRM5.  The purpose of the personal interview and the completion of Form 4180 is to secure “direct, detailed information regarding the individual’s or other persons involvement in the business in order to determine if he or she meets the criteria for responsibility and willfulness.” The questions on the form are a guide, and supplemental questions may be asked.

The IRS employees are instructed NOT to give out or mail Form 4180 for completion or review prior to the interview.  Imagine going into an interview,  not even knowing what the questions are going to be?  That is only compounded by the fact that the targeted taxpayer doesn’t fully appreciate the legal significance of the questions, and may feel “pressure” to just go along with the  IRS representative in hopes that things will work out for the best. One must realized that many taxpayer’s are in the position to begin with because they had “false optimism” (e.g., similar to the view that - business cash flow would improve). That is why, a taxpayer must be represented by legal counsel. Also, the revenue office is instructed to reference form 433B, Collection Information Statement for Businesses, for information relative to the investigation.

Page 1 of Form 4180 incorporates the core willfulness and responsibility questions to support finding of liability.


Additionally, in the majority of cases, the IRM advises that the core evidence necessary to support a Trust Fund Recovery Penalty recommendation will be:

           Form 4180 interviews

           Articles of Incorporation

           Bank signature cards or electronic PINs/Passwords assignment information

           Copies of a sampling of cancelled checks demonstrating payment to other creditors in

             preference to the government or

           If the taxpayer predominately uses electronic banking, bank statements demonstrating

            debit transaction payments in preference to the government.

Documentation, including bank records, will be requested from the business entity whenever possible. If the business entity does not provide the requested records by the deadline provided, a summons will be served on either the business entity, the bank, or both, to secure the required documents (See IRM 25.5 , Summons, and IRM, Third-Party Contact Requirements of IRC § 7602(c), for summons procedures).


Individual case factors will influence the amount of additional documentation needed to support the TFRP determination. The revenue officer must exercise judgment to determine if documentation beyond the core items is needed prior to submitting the TFRP recommendation for managerial approval.  ( IRM

The Revenue Officer is instructed to exercise judgment in determining if documentary evidence beyond the core items is necessary to support a TFRP assertion.  Additional business records that may be reviewed include:

           Partnership Agreements; or other documents establishing/forming the business entity.

           Minute Books.

           Forms 941, Employer's Quarterly Federal Tax Return; 1120, U.S. Corporate Income Tax

            Return; 1065, U.S. Return of Partnership Income; or, 1040, U.S. Individual Income Tax

            Return (for disregarded LLCs).

The business records may be reviewed to determine:

           Duties (and changes to duties) of officers, directors, etc.

           Appointments and resignations of officers, directors, etc.

           Responsibilities of individuals to file and pay tax returns.

           Issuance of stock to officers, directors, etc.

           Assets transferred to officers, directors, etc.

           Loans made to officers, directors, etc.

           Unreported payroll and other taxes.

           Diversion of funds.

           Borrowing of funds not used to pay taxes.

           Responsible parties within a Payroll Service Provider (PSP).

           Responsible parties within a Professional Employer Organization (PEO).

Additional bank records that may be reviewed include:

           Correspondence to the bank relative to changes affecting the signature cards or PIN

             assignment information.

           Loan applications and records of loans.

           Any other records that may be relevant to determining which individuals were involved

            in the financial affairs of the business.

 The bank records can be reviewed to determine:

           Authority of persons to sign checks and deposit funds.

           Authority of persons to obligate the business by borrowing.

           Diversion of funds to officers, members, etc.

           Deposits and withdrawals of alleged loans to business by officers, members, directors,


           Excessive salaries, expenses, etc.

           Payment of other obligations.

           Deposit records for monies received for sale of assets.

           Deposit records of payments for stock, membership, or other ownership rights in the


           Payments to third-party payers.

           Any other relevant records.


All  Forms 4180, and documentation in the case file, are to be reviewed in order to make a determination regarding responsibility (IRM, (Establishing Responsibility) and willfulness (IRM, Establishing Willfulness) for each potentially responsible person.

Thus, the Interview Forms 4180 are a part of the process and documentation reviewed to make a determination as to both Responsibility and Willfulness for each potentially responsible person.


The questions on  Form 4180 are geared directly to these vital elements of Responsibility and Willfulness. For any targeted individual to attend an IRS interview without legal counsel,  is a big mistake. You simply are not aware of the significant civil and potential criminal aspects of this process. Moreover, the Interview form 4180 is not the “end” of the investigation. Other documents and facts will be reviewed.  Accordingly, it would be a mistake to start making statements of  “fact” without having reviewed the factual background  of a case.  Taxpayers may have forgotten about facts and circumstances.  

Here are some of the questions on Form 4180:

Did you -   “Determine financial policy for the business?”

Did you -   “Direct or authorize payments of bills/creditors?”

Did you -   “Prepare, review, sign or authorize transmit payroll tax returns?”

Did you -   “Have knowledge withheld taxes were not paid?”

Did you -    “Authorize or make federal tax deposits?”

Did you -    “Authorize the assignment of any EFTPS or electronic banking PINS/passwords?”

It is easy to correlate the above questions to those factors necessary to establish willfulness and responsibility, as set forth below.  But note,  at least some of the questions are compound questions and a “Yes” to one part may indicate liability, when such is not the case.  Thus,  a  simple “yes” or “no” is not appropriate.  

Also, it is common for taxpayer’s to use terms when they do not appreciate the actual meaning or significance. For example, assume that you are in the accounting department and receive instructions from the Chief  Financial Officer telling you to instruct the secretary  to mail out specific bill payments to certain creditors only and not pay others.  Have you “authorized payments”?  Under IRS pressure, you might answer “yes”, after all, you told her what bills to pay, and you were her “boss”.  Also, the Secretary is going to advise the IRS that you “authorized” payments because you are the one that told her what to do, and she dealt only with you on a day to day basis. She “assumed” you were the guy in charge!   However, your actions were in fact were “ministerial”.  You were  a middle man without any actual authority.  Further, you  answered  “yes” to the question under pressure by the Revenue Officer because the list of “approved payments” that you gave the secretary  had your initials on it.

One must recognize that in the real world,  many times the Revenue Officer has already made up his or her mind as to who is “liable”  before the investigation is done.  Further, the case may have been handed over to the current Revenue Officer from a prior person working the case and the “administrative position” (verbal and unwritten) follows the case.   The Revenue Officer thus pushes for the result they want, even when they are wrong as a matter of law.  

IRM  (08-06-2015) sets forth the following to establish willfulness:

1.         Willful means intentional, deliberate, voluntary, reckless, knowing, as opposed to accidental. No evil intent or bad motive is required.

2.         To show willfulness, the government generally must demonstrate that a responsible person was aware, or should have been aware, of the outstanding taxes and either intentionally disregarded the law or was plainly indifferent to its requirements. A responsible person's failure to investigate or correct mismanagement after being notified that withholding taxes have not been paid satisfies the TFRP "willfulness" element.  See IRM, Willfulness.

The IRS sets forth the following as to establishing  Responsibility  (IRM  (08-06-2015):

1.         Responsibility is a matter of status, duty, and authority.  A determination of responsibility is dependent on the facts and circumstances of each case.

2.         Potential responsible persons include:

                       Officer or employee of a corporation

                       Partner or employee of a partnership

                       Corporate director or shareholder

                       Another corporation

                       Employee of a sole proprietorship

                       Limited liability company (LLC) member, manager or employee

                       Surety lender

                       Other person or entity outside the delinquent business organization

                       Payroll Service Provider (PSP)

                       Responsible parties within a PSP

                       Professional Employer Organization (PEO)

                       Responsible parties within a PEO

                       Responsible parties within the common law employer (client of PSP/PEO)

                       Business entities (including corporations, S corporations, LLC, etc.) that are

                        determined to be the collection agency in the case of certain collected excise taxes

3.         A responsible person has:

             •          Duty to perform

                       Power to direct the act of collecting trust fund taxes

                       Accountability for and authority to pay trust fund taxes

                       Authority to determine which creditors will or will not be paid

4.         To determine whether a person has the status, duty and authority to ensure that the trust fund taxes are paid, consider the duties of the officers as set forth in the corporate by-laws as well as the ability of the individual(s) to sign checks. In addition, determine the identity of the individuals who:

                       Are officers, directors, or shareholders of the corporation

                       Hire and fire employees

                       Exercise authority to determine which creditors to pay

                       Sign and file the excise tax or employment tax returns, such as Form 941,     

                        Employer’s Quarterly Federal Tax Return

                       Control payroll/disbursements

                       Control the corporation’s voting stock

                       Make federal tax deposits


            The TFRP is available and may be appropriately asserted when the taxpayer is organized as a Limited Liability Company (LLC). The need for a TFRP investigation is based on how the LLC is classified for tax purposes and when the liability accrued. See IRM, Trust Fund Recovery Penalty, for additional information on LLCs. , etc … .


1.         The full scope of authority and responsibility is contingent upon whether the person had the ability to exercise independent judgment with respect to the financial affairs of the business.

2.         If a person is an officer or owns stock in the corporation, this cannot be the sole basis for a responsibility determination.

3.         If a person has the authority to sign checks, the exercise of that authority does not, in and of itself, establish responsibility.  The IRM acknowledges that signatory authority may be merely a convenience.

4.         Persons with ultimate authority over financial affairs may generally not avoid responsibility by delegating that authority to someone else. If a potentially responsible person asserts that the duty to pay taxes or otherwise handle the financial affairs of the business was delegated to an employee:

           Evaluate the facts and circumstances of the case

           Determine whether the delegation rendered the person (delegator) powerless to disburse funds or dictate fiscal policy . The IRM also advises that - Delegation may be relevant when determining willfulness.

5.         Persons serving as volunteers solely in an honorary capacity as directors and trustees of tax exempt organizations will generally not be considered responsible persons unless they participated in the day-to-day or financial operations of the organization and had actual knowledge of the failure to withhold or pay over the trust fund taxes. This does not apply if it would result in there being no person responsible for the TFRP. Refer to IRC 6672(e).


1.         IRM, Policy Statement 5-14 (Formerly P-5-60), states individuals performing ministerial acts without exercising independent judgment will not be deemed responsible. In general, non-owner employees who act solely under the dominion and control of others, and who are not in a position to make independent decisions on behalf of the business entity, will not be assessed the TFRP. Non-owner employees are those who do not own any stock, interest, or other entrepreneurial stake in the company that employs them.

2.         Ministerial acts are performed under the supervision of someone else and do not require independent judgment or decision-making ability.


The bookkeeper of a company is not an owner and is not related to an owner. She has check signing authority and pays all of the bills the treasurer gives her. She is not permitted to pay any other bills, and when there are not sufficient funds in the bank account to pay all of the bills, she must ask the treasurer which bills to pay. The bookkeeper is performing a ministerial act and should generally not be held responsible for the TFRP.

3.         A person is "responsible" for purposes of the TFRP if that person has "significant control" over the company's finances. "Significant control" means more than having the mere mechanical duty of signing checks or preparing tax returns or having a title that appears to have authority. However, a responsible person need not have the final word in the company regarding the payment of creditors. Officers and higher level employees of a company who are non-owners may still be required to sacrifice their jobs (i.e., quit) to avoid being responsible for the TFRP, rather than obey the orders of an owner to pay other creditors but not to pay current federal trust fund taxes as they become due. See Brounstein v. United States, 979 F.2d 952, 956 (3rd Cir. 1992).

4.         A non-owner employee is generally not a "responsible person" if the employee's function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid. However, if a non-owner employee, such as an officer, has significant control over making the company's other financial decisions about who to pay or has the ability to obtain financing for the company, then such an employee cannot avoid being responsible for the TFRP by merely showing that an owner or a lender limited his discretion on the specific matter of paying taxes that the company owed. See the examples below.


A non-owner employee works as a clerical secretary in the office. She signs checks and tax returns at the direction of and for the convenience of the owner or a supervisor who is a non-owner. She is directed to pay other vendors, even though payroll taxes are unpaid. The secretary is not a responsible person for the TFRP because she works under the dominion and control of the owner or of a supervisor who is a non-owner and she is not permitted to exercise independent judgment.


The long-time controller of a company was never a shareholder, director, or officer of the company, but he was responsible for overseeing the finances of the company, including the preparation of the payroll and filing the company's federal employment tax returns. He had the authority to sign checks in any amount and he dealt with the company's lender on a regular basis when the company experienced financial troubles, though he did not arrange or sign the lending agreement on the company's behalf. When the lender directed the company to pursue an orderly liquidation of its assets, the controller requested funds from the lender to make full payroll and pay the taxes due on the remaining employees, but the lender forwarded only enough funds for the company to make net payrolls. The controller made out net payroll checks to the remaining employees and paid none of the taxes due, rather than prorate the funds available to the company between payroll and taxes. The controller could be a responsible person for the TFRP. See Hochstein v. United States, 900 F.2d 543 (2nd Cir. 1990).


An experienced businessman was never a shareholder, director, or officer of a new company, but he served as the general manager of the new company during a seven month period. As general manager, he signed most of the company's checks to creditors, as well as signing net payroll checks to employees, and there was no monetary limit placed on his check signing authority. He told the bookkeeper which bills to pay. When the company was experiencing cash flow problems, he spoke to one of the owners about the company's delinquent payroll taxes. The owner told the general manager that these unpaid taxes were none of the general manager's business and he should not worry about paying the company's net payroll and missing its tax payments. Both the general manager and the owner believed that the general manager could not be held liable for the TFRP because he was not an owner or officer of the company; the general manager turned down an offer to become the company's president specifically because he was worried about the company's tax situation. The general manager could be a responsible person for the TFRP. See Gephardt v. United States , 818 F.2d 469 (6th Cir. 1987).

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The above limited information is intended for informational purposes only.  If legal advice or other expert assistance is required, the services of a competent professional should be sought, and this general information should not be relied upon without such professional assistance. 








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