Back to the Basics: Can I Reduce My Trust Fund Recovery Penalty with an Offer in Compromise?
The past two weeks, we have talked about the Trust Fund Recovery Penalty:
The Trust Fund Recovery penalty is generally a business tax that is being assessed against the owner of a business personally. Many times, but not always, this tax is assessed against an individual after the business has closed, or because the business is simply not profitable and the IRS has a better chance of collecting more taxes from the individual through the Trust Fund Recovery Penalty than through the employment taxes and income taxes owed by the business.
Just like any other tax a person or business owes, the Trust Fund Recovery penalty may be reduced by filing an offer in compromise. As with any other offer in compromise situation, the IRS investigates your income and expenses as well as all the equity in assets that you own to prove that you do not have the ability to pay the tax liability in full. When the IRS accepts an offer in compromise, that is to compromise all of the taxes that you owe (including all outstanding income taxes, employment taxes, trust fund recovery penalties, interest, and other penalties).