IRS Form 2751 & Letter 1153: Proposed Assessment TFRP

If the IRS plans to assess a Trust Fund Penalty Recovery against you personally, they'll send Letter 1153. This letter outlines the proposed TFRP and your appeal rights. It also comes with Form 2751. If you agree with the assessment, sign and return Form 2751. If you don't agree, you have 60 days to appeal (75 days if the letter was sent out of the country). Note that signing Form 2751 does not extinguish your appeal rights. If you sign the form and change your mind, you can still appeal within that 60-day window. 

However, if you miss the 60-day appeal window, the IRS will assess the penalty. Then, they'll demand payment in full. If you don't pay or make arrangements with the agency, they'll pursue your personal assets to collect the penalty. To help you out, the following sections explain what to expect if you receive Letter 1153. They also outline what generally happens during the TFRP investigation process, which plays out before you receive this notice. 

Key takeaways

• Letter 1153 - The IRS has proposed a Trust Fund Recovery Penalty against you individually.
• Form 2751 - You can complete this form if you agree with the penalty assessment. 
• How to respond to Letter 1153 - Make payment arrangements if you agree with the penalty. Appeal if you don't. 
• What happens next - The IRS will assess the penalty. If you cannot pay in full, they may start seizing your assets.  

What Is IRS Letter 1153?

Letter 1153 is the notice the IRS sends to individuals to propose a Trust Fund Recovery Penalty (TFRP). The letter indicates the amount of unpaid tax and the amount of the penalty. Typically, the IRS sends this letter when the business has failed to pay the payroll taxes and the IRS has decided to hold you personally responsible for the taxes owed. 

You may also receive this letter if a business has refused to pay certain excise taxes. In both cases, the last page of Letter 1153 is Form 2751. If you sign this form, you admit that you are liable for the unpaid taxes. In the past, signing this form also negated your appeal rights, but the IRS has changed that policy. You can still appeal by the deadline noted on the letter if you change your mind after signing Form 2751. 

How to Respond to Letter 1153

The way you respond to Letter 1153 depends on whether or not you agree with the proposed TFRP assessment. Here are the options:

Your response	What to do	What happens next
You agree with Letter 1153	Sign Form 2751	The IRS will assess the TFRP against you.
You want to share more info	Ask for a revenue officer review	The RO will look at any new info you provide
You want mediation	Request fast-track mediation	You, the RO, and a mediator will look over the case
You want to appeal	Request small case or formal appeals	The IRS will send the case to the Independent Appeals Office

If you agree, sign Form 2751 and make arrangements to pay.

Signing Form 2751 is an admission that you are responsible for the unpaid payroll tax. Once you return this form to the IRS, they will move forward with assessing the TFRP against you. However, as noted above, if you change your mind before the appeal deadline, you still have the right to appeal. 

If you disagree and want to talk with the revenue officer, contact them within 10 days.

If you disagree with the amount of the TFRP assessment, you have 10 days to contact the revenue officer. You can also present new information about your case. For example, if you have new details to share about why you shouldn't be considered a responsible person, you can share that with the revenue officer. This process may be easier than a formal appeal, but you have to reach out within 10 days.

The revenue officer will call you to let you know the results of your request. If they remove the TFRP from any tax periods, they will send you Letter 1153-W (Proposed Trust Fund Recovery Penalty Rescission Notification). 

If you disagree and want to pursue mediation, let the IRS know.

TFRP proposed assessments are eligible for fast-track mediation (FTM). That is similar to appeals in that an independent party reviews your case, and then, they work with you to mediate a resolution with the revenue officer. The fast track mediation takes 30 to 40 days normally, which is much faster than a traditional appeals case. However, if you choose this option, keep an eye on the clock - if you get close to the 60-day deadline, you should enter an appeal. That way, if you're not happy with the results of the mediation, you can still appeal. Note that you can only use FTM if the revenue officer agrees.

If you disagree and want an independent review of the case, appeal the assessment.

If you don’t agree with the proposed TFRP assessment, you have 60 days to appeal (75 days if the notice was sent to you out of the country). If the proposed penalty is less than $25,000, you can appeal using small case procedures - which is simply a more casual process. However, if the penalty is over $25,000 (that's the total for all tax periods), you must write a formal appeal request.

When you enter your appeal, the IRS will stop the penalty assessment process and have the independent appeals office review the case. During the appeal, you need to prove that you were not responsible for the unpaid taxes. The IRS will generally ask you to sign a waiver (Form 2750) to extend the assessment statute expiration date if you're near the end of this period. Talk with a tax professional before agreeing to anything.

What if you ignore Letter 1153?

Finally, if you want, you can just ignore the letter. In that case, the IRS will assume you’re responsible, and the agency will assess the penalty and start trying to collect the amount due after 60 days.

What If You Miss the Deadline to Appeal Letter 1153?

If you miss the appeal deadline, you lose your appeal rights, but you still have the option to pay under protest and request a refund using Form 843. If the IRS doesn't respond to your request for a refund within a certain amount of time, you can file suit in Tax Court. This is not an easy option, and if you have to take this route, you should consult with a tax professional.

Why Did I Receive Letter 1153?

You received Letter 1153 because the IRS has decided that you are personally responsible for a business's trust fund taxes not being paid. The IRS can only assess this penalty if: 1) you're a responsible person and 2) you acted willfully. That generally happens after a Form 4180 interview. The IRS schedules these interviews to identify responsible parties, which may include owners, managers, employees, and potentially even third parties (payroll service providers, accountants, bookkeepers, etc.). 

Why did multiple people receive this letter on behalf of the same business?

The IRS can assess the TFRP against any person it deems responsible for the unpaid payroll taxes. Then, the agency can hold all responsible parties jointly and severally liable. That means if one person pays the penalty, the others are off the hook. However, it also means that you aren't just responsible for your portion of the penalty. The IRS can come after you for the full penalty, even if it's been assessed against multiple people. However, the IRS will only collect the penalty once - it won't collect the full penalty from multiple people. 

For example, say that the IRS assesses this penalty against you and your business partner, your partner pays in full, and you owe nothing. In contrast, imagine your partner has no ability to pay, or they settle through an offer in compromise. Then, the IRS will come after you for the full tax or the portion that was settled through the offer in compromise. 

The Path to TFRP Assessment and Letter 1153

Letter 1153 comes late in the TFRP process. Here's a look at what happens before you or any other responsible parties receive this letter:

• Unpaid payroll taxes - First, the business doesn't make its payroll deposits, and the IRS assesses a failure-to-deposit (FTD) penalty.
• FTD alert - When the IRS computers notice irregular or missing payroll tax deposits, they generate an FTD alert.
• Revenue officer assignment - The IRS assigns a revenue officer (RO) to the account. 
• Revenue officer meeting - The RO pays a visit to the business and leaves letter 5664 if the owner isn't there. The RO may also request a phone call with Letter 5857.
• Possible resolution - The RO will attempt to get the business owner into compliance by securing payment in full or setting up a payment plan on payroll taxes. 
• TFRP investigation if resolution not secured - If the RO can't come to a resolution with the company, they will start the TFRP investigation. Typically, that involves collecting info about the company using Form 4181 and then identifying possible responsible parties with Form 4180 interviews. 

If the 4180 interview indicates that you might be responsible, the agency will send Letter 1153, and then the case will move forward as explained above. 

Find Representation Now

The TFRP is one of the IRS's most serious penalties, and to protect yourself, you need to respond to Letter 1153 carefully and promptly. Ideally, you should reach out for help from a tax pro before you receive this letter, but if you're at this point, you can still get help. Use TaxCure to find a licensed tax professional who can help you now - start your search below and then narrow down the results to find a pro who has experience with the TFRP.