Got a trust fund penalty letter? Answer it within 60 days

The IRS says you are personally on the hook for payroll tax your business withheld and never paid. The trust fund recovery penalty equals that unpaid tax, and you have 60 days from the date on the IRS letter to appeal. A tax pro can answer that letter with you.

• 60 days

  You have 60 days from the letter's date to appeal, or 75 if it is addressed outside the United States.

  silence lets the IRS charge you and collect from your own accounts.

  count 60 days from the date on the letter and write it down today.

• 2 tests

  The IRS must show you were responsible and that the failure was willful.

  a bookkeeper who only paid bills as told is not a responsible person.

  gather proof of who decided which bills got paid.

Who gets charged personally

Hollis owns a cleaning company. In 2025 the company withheld $18,000 from workers' pay and did not pay it to the IRS. If he is found responsible, the IRS can collect that $18,000 from his own bank account and home.

The IRS trust fund page names two tests. The person was responsible for collecting or paying the tax, and willfully failed to do it.

Responsible people can include officers, partners, directors, shareholders, nonprofit board members, and payroll companies. Willful does not mean evil. It means you knew or should have known the tax was owed and paid others first. Paying rent or suppliers instead of the IRS is the IRS's own example.

The 60-day letter

Before it charges you, the IRS sends a letter saying it plans to. You have 60 days from the letter's date to appeal, or 75 days if it is addressed outside the United States.

If you don't answer, the IRS charges the penalty and sends a demand for payment. After that it can file a lien or take money from your accounts, per the IRS page. Mark the 60th day on your calendar the day the letter arrives.

Defenses

• You were not responsible. You paid bills only as a boss told you, with no say over which got paid.
• It was not willful. You did not know the tax was unpaid and had no reason to know.
• The amount is wrong. The penalty covers only the withheld income tax and the workers' share of Social Security and Medicare.

The IRS may ask you to sit for an interview about your duties. That is a good time to have a licensed professional with you.

Settling it

Paying the business's trust fund tax stops the penalty from being collected twice. A charged person can also ask for a refund later. The Form 843 instructions say you first pay the part tied to one employee for each quarter, then file Form 843.

If you can't pay, a payment plan may help. For the deposit penalties that come first, see Form 941 penalties.

FBAR penalties are a different thing

People with money abroad sometimes confuse this with the FBAR penalty. The FBAR is a yearly report of foreign accounts worth more than $10,000 in total, due April 15 with an automatic extension to October 15. The IRS FBAR page explains it and its separate penalties. It is not a payroll matter, and First Time Abate does not apply to it.

For other business penalties, see S corp late filing or start at IRS penalty removal.