IRS Form 4180, The Trust Fund Recovery Penalty Interview
If you can’t get out of a 4180 interview, you need to be prepared for what’s going to happen there. Basically, the agent is going to ask you a series of questions from Form 4180. To get ready, you may want to look at a copy of that form, but in the meantime, here’s what to expect.
What Happens at a Form 4180 Interview?
The interview starts with questions about personal information like your name, social security number, phone number, and address. Then, the interviewer asks about your job title or your relationship with the business.
What Questions Are Asked at a 4180 Interview?
There is a checklist of questions that the interviewer works through. The questions are designed to reveal how you were involved with the company’s finances and payroll in particular. Expect questions such as the following:
- Are you responsible for setting financial policy for the company?
- Do you authorize payments for bills or creditors?
- Do you sign or send payroll returns? (Those are the quarterly returns you send to the IRS with the company’s payroll information.)
- Do you make payroll payments?
- Do you authorize payroll payments?
- Did you know the taxes weren’t being paid?
- Are you involved in the company’s electronic banking?
The agent may ask more pointed questions like if you have login information for online accounts, PINs for bank cards, or authorization to sign checks for the company. All of these questions help clarify your connection to the company’s financial matters.
Does the IRS Ask About Other Payments at a 4180 Interview?
One of the main issues the IRS considers when determining whether or not the company could have paid the trust fund taxes hinges on whether or not other bills were being paid. Expect some questions in that vein.
For instance, did you personally pay other bills? Did you hear that other bills (mortgages, vendors, utilities, loans, etc) were getting paid? If so, who paid those bills and who authorized the payments?
To explain why the IRS is concerned about this, imagine you own a restaurant. You draft paychecks for your employees and withhold income tax and FICA taxes (Social Security and Medicare contributions) as usual. However, instead of paying the IRS, you use that money to pay your meat vendor.
Even if you meant to eventually pay the IRS, this is not ideal. The IRS looks at this situation as if you are purposefully taking tax money.
What Is the Purpose of a Form 4180 Interview?
The purpose of this interview is to figure out who is responsible. The agent is trying to determine if you are responsible, but the agent is also trying to uncover the names of other responsible people in the organization.
Expect questions like the following: When did you become aware of the issue? What did you do when you heard about it? Did you ever hear stockholders, officers, or others talking about unpaid trust fund taxes or unpaid payroll taxes? Who handles the IRS paperwork in your organization?
If you use a third-party payroll company, there are a series of questions about that as well. In addition, if you don’t work for the primary company but you work for the payroll company, you will also get a special set of questions. In both cases, the questions concerning how the funds are distributed to the payroll company and what the payroll company employees knew about the situation.
Luckily, you don’t always have to go through the interview process. It is possible to avoid a 4180 interview.