Legal Question in Tax Law in North Carolina

Re: Unpaid Employment Tax

Oh yea, they try to get it alright. Death means little to the IRS, including the death of a corporation. The IRS has a nasty little device called the "trust fund recovery penalty" or TFRP. It allows the IRS to assert a penalty equal to 100% of the withheld taxes against all persons who (1) had the responsibility to collect, account for and/or pay over the withheld taxes to the IRS, and (2) who acted "willfully" in failing to do so. Willfully here means only that you knew what you were doing, not that you affirmatively wanted to cheat the IRS.

The TFRP is one of the worst liabilities someone can owe to the IRS. The statute of limitations on collection is ten years from the date of assessment, and unlike an income tax debt, it is not dischargeable in bankruptcy. About all that is left is a long term installment agreement or an offer in compromise.

For more information, see my article on the trust fund recovery penalty in the articles section of my firm's website at www.bjhaynes.com. Good luck!!