Q: Can filing/paying unwithheld payroll, from 2020, Q1 2021, before receiving notice from IRS, prevent assessment of TFRP?
A:
Filing and paying unwithheld payroll taxes from 2020 and Q1 2021 before receiving notice from the IRS may help prevent the assessment of the Trust Fund Recovery Penalty (TFRP). Here's why:
1. Voluntary compliance: By filing and paying the unpaid taxes before being notified by the IRS, you demonstrate a willingness to comply with tax laws and correct the issue proactively.
2. Reduced penalties: Filing and paying the taxes before receiving a notice may result in lower penalties compared to waiting until the IRS initiates an investigation or assessment.
3. Avoiding the TFRP: The TFRP is typically assessed when the IRS determines that an individual responsible for collecting, accounting for, and paying withheld income and employment taxes willfully fails to do so. By filing and paying the taxes before the IRS takes action, you may avoid being deemed willful in your failure to pay, thus potentially preventing the assessment of the TFRP.
However, it's important to note that filing and paying the unwithheld taxes does not guarantee that the TFRP will not be assessed. The IRS will consider the specific circumstances of your case, including the reasons for the failure to pay and the actions taken to rectify the situation.
To ensure the best possible outcome, it's advisable to consult with a tax professional or attorney who specializes in payroll tax issues. They can help you navigate the process, communicate with the IRS on your behalf, and work to minimize any potential penalties or legal consequences.
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