14. RECOMMENDING ASSERTION OF PENALTY

§ 5:70 In General

Having completed a preliminary investigation, the Revenue Officer next prepares proposed Trust Fund Recovery Penalties against the persons whom he or she believes to be responsible persons. For this purpose the Revenue Officer prepares a report titled “Recommendation Re: Trust Fund Recovery Penalty Assessment.” The report calls for the Revenue Officer to determine whether to assert against each potentially responsible person. The Officer can decide not to assert against a responsible person if it is determined that the penalty would not be collectible from that party. (Since the Internal Revenue Service views the Trust Fund Recovery Penalty as a collection device, the author has found that the greater his client’s net worth, the less likely the IRS is to determine the client not to be a responsible person.)

§ 5:71 Notice To Taxpayer

The completed recommendation is presented to the Revenue Officer’s Group Manager for concurrence. Upon approval by the Group Manager, a Letter 1153 and Form 2751 (Proposed Assessment of Trust Fund Recovery Percent Penalty) are mailed to each potentially responsible person. The letter is mailed to the person’s last known address. That letter grants the taxpayer ten days to contact the Revenue Officer to present a defense, or the taxpayer may request an appeals conference within sixty days of the letter. The format for a protest is set forth on the reverse side of the letter.

§ 5:72 Statutory Duty To Give Notice

TBR2 requires the IRS to issue a notice of proposed assessment at least sixty days prior to any notice and demand for payment from the punitive responsible person. lf the taxpayer files a timely protest, the time is extended to thirty days after the Secretary makes a final administrative determination with respect to the protest. There is a jeopardy exception to the provision. [IRC § 6672(b)]

§ 5:73 Reconsideration After Notice

The Revenue Officer may reconsider a proposed assessment when evidence to contradict liability is presented. [IRM 5.7.4.6] Be aware, however, that the Revenue Officer is more apt to propose against all corporate officers and force all to defend liability. Remember every company has at least one responsible person.

§ 5:74 Estoppel

In Re Mando, the President of an eyeglass manufacturing corporation was not liable for the penalty even though he was the responsible person. The IRS’s consistent treatment of him as a non-responsible person estopped the IRS from later pursuing him as a responsible person. The person had the authority to issue checks and to direct which creditors would be paid. In addition, he did not direct that the employment taxes should be paid even though he knew they were delinquent. However, when the delinquency was originally discovered, the IRS agreed to treat the President’s brother, who was the secretary-treasurer of the corporation, as a responsible person, and this did not change until the corporation filed for bankruptcy, Therefore, the President was not held liable for the penalty for failure to pay withheld taxes.