This one is personal. The IRS wants to hold you personally liable for payroll taxes your business didn’t pay over. The penalty is 100% of the unpaid trust fund taxes, and the clock is 60 days.
When a business withholds income tax and the employee share of Social Security and Medicare from paychecks, that money is held in trust for the IRS. Under Internal Revenue Code section 6672, if a responsible person willfully fails to collect it, account for it, or pay it over, the IRS can assess a penalty equal to 100% of the unpaid trust fund taxes, against that person personally.
Two things matter: you were a responsible person, and the failure was willful. The penalty covers withheld income tax and the employee share of Social Security and Medicare. It does not cover the employer share of FICA or FUTA tax. It reaches past the company to the people who decided which bills got paid.
The IRS has to prove two things before it can assess the penalty:
| The question | What it means |
|---|---|
| Responsible person? | Anyone who had authority over the business finances: owners, officers, partners, bookkeepers, or anyone who decided which bills were paid. |
| Willful? | You knew the trust fund taxes were unpaid and paid other creditors anyway. It does not mean you stole anything or acted with malice. |
| How much? | 100% of the unpaid trust fund taxes, plus interest. |
| Joint liability? | Each responsible person is liable for the entire amount, but the IRS collects the full trust fund amount only once. |
Letter 1153 proposes the penalty and includes Form 2751. You have 60 days to respond, or 75 days if the letter was addressed outside the United States. A protest is timely if postmarked, or mailed by certified or registered mail, by day 60. Agree by signing Form 2751, or protest in writing to send the case to Appeals.
Find the date on Letter 1153. Count 60 days from the mailing date, not the day you opened it. No response by day 60 and the IRS can assess the penalty without the pre-assessment appeal.
Send me a photo of your Letter 1153. Black out everything except the last four digits of your SSN if you like, and book a free call. You’ll leave the call knowing who is a responsible person in your case and whether a protest is worth filing, whether or not you hire me. Bring the letter and any other IRS letters for the same periods.
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No. Section 6672 applies to any responsible person, including officers, owners, partners, and anyone with authority over the business finances, whether the business is a corporation, LLC, or partnership.
Willful does not mean malicious. In this context it generally means you knew, or recklessly ignored, that the trust fund taxes were unpaid and paid other creditors anyway. Paying rent, vendors, or suppliers while payroll taxes sat unpaid is the classic example.
The IRS can assess the penalty without the pre-assessment appeal. Your options narrow to post-assessment routes, such as paying the penalty and filing a refund claim (Form 843) for each period.
Reviewed by Alex Volkov, NY-licensed CPA, November 2026. Sources: IRS, “IRM 5.7.3, Establishing Responsibility and Willfulness for the Trust Fund Recovery Penalty” (irs.gov/irm/part5/irm_05-007-003r); IRS, “IRM 5.7.6.2, Responsible Person’s Response to Letter 1153” (irs.gov/irm/part5/irm_05-007-006).
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