What is the Trust Fund Recovery Penalty?

Responsible persons are defined broadly: anyone with the duty and authority to collect, account for, and pay over trust-fund taxes. That can include officers, directors, controlling shareholders, and sometimes bookkeepers or controllers — depending on actual authority over financial decisions. Title alone doesn't determine responsibility; functional authority does.

Willfulness is a lower bar than people expect. It means the responsible person knew the taxes weren't being paid and chose to use the funds for other purposes (paying suppliers, paying themselves, keeping the doors open). Mere inability to pay is not willfulness — but knowing the taxes were unpaid and writing checks to other creditors generally is.

Letter 1153 starts the formal proposal. The taxpayer has 60 days to request a Conference of Right with the IRS Appeals Office or to file Form 4180 contesting responsibility/willfulness. Ignoring Letter 1153 is one of the most expensive mistakes in employment-tax controversy — the assessment becomes final and the IRS moves directly to collection against the individual's personal assets.

• IRC § 6672
• IRC § 6671