Before assessing the trust fund recovery penalty, a revenue officer will conduct an investigation of the employer to determine which individuals have a duty to ensure that employment taxes are withheld, collected, and/or paid to the government. At the end of the investigation, the revenue officer will make a recommendation for assessment of the trust fund recovery penalty against individuals identified as responsible persons. The statute of limitations for assessment of the penalty is three years from the later of April 15 of the year after the employment tax returns were due or the date that the employment returns were actually filed.
When a penalty assessment is proposed, the recommending revenue officer will send a letter to the responsible persons identified. This letter informs the individual that the penalty is being proposed and requests that the individual agree to the assessment.
If the individual does not agree with the assessment of the penalty, he or she may discuss the issue with the revenue officers manager and may appeal the decision with the appeals office. If an agreement cannot be reached at the appeals level, the individual may elect to litigate the issue in federal district court or the Court of Claims.