IRS Form 4180, The Trust Fund Recovery Penalty Interview

A 4180 interview is part of the IRS's process for identifying a responsible person for unpaid payroll taxes. The purpose of this interview is to determine whether or not the IRS is going to assess a trust fund recovery penalty against you personally - so you need to take these interviews extremely seriously and make sure you're prepared. The IRS can hold owners but also company employees and even third parties responsible for this penalty.

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.

Key takeaways

• Form 4180 interview - used by the IRS to identify individuals to assess the Trust Fund Recovery Penalty against.
• During the interview, the revenue officer asks questions to determine if you were responsible for the unpaid payroll taxes and if you acted willfully.
• If the agency decides to assess the penalty, they will send Letter 1153 with a proposed TFRP assessment.
• You have 60 days to appeal the proposed assessment. 
• Once the IRS levies a TFRP against you, your options are to pay or request a settlement. If you don't, the IRS can seize your assets.

What Happens at a Form 4180 Interview?

Form 4180 interviews can happen in person or over the phone. 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. They are trying to determine if you are responsible for the business not paying its trust fund taxes (aka FICA taxes and income taxes withheld from employees' paychecks), and if so, if you acted willfully.

The agency may also ask questions about your co-workers and colleagues to determine if they are responsible. Many of the questions on Form 4180 are yes-no questions, and then, the revenue officer may attach affidavits from you or other individuals to provide more context to those answers. 

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:

1. Are you responsible for setting financial policy for the company?
2. Do you authorize payments for bills or creditors?
3. Do you sign or send payroll returns? (Those are the quarterly returns you send to the IRS with the company’s payroll information.)
4. Do you make payroll payments?
5. Do you authorize payroll payments?
6. Did you know the taxes weren’t being paid?
7. 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 Business 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 concern 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.

What Happens After a Form 4180 Interview?

The IRS uses the information gathered during the interview to identify potential responsible persons and to assess if they acted willfully - both responsibility and willfulness are required for the TFRP to be assessed. If the IRS moves forward, it will send Letter 1153 proposing a trust fund recovery penalty against you. If you agree, you can fill out Form 2751 to consent to the assessment. Otherwise, you have the right to appeal. 

If you consent to the penalty assessment, if the IRS denies your appeal, or if you don't respond to the proposed assessment on time, the IRS will assess the penalty. At that point, you need to work with the IRS to set up payments or apply for a settlement. Otherwise, the agency can start involuntary collections to go after your assets.   

What to Expect During a TFRP Investigation

If you're an employee or a third-party, the interview request may be your first clue that the IRS is considering levying the TFRP. However, if you're the business owner, a general partner, the head of accounting, or someone in a more senior-level role, you may have heard that issues were happening long before you received the interview request. So, that you know what to expect, here's a quick rundown of what to expect. 

When a business misses payroll tax deposits, the IRS's Federal Tax Deposit (FTD) system flags their account for review and assigns a revenue officer to the file. The revenue officer typically starts with a field call (aka an in-person visit) to the business. If the owner isn't there, the revenue officer will leave Letter 5664. The revenue officer may also send Letter 5857 to request a phone call with the business owner. If the revenue officer cannot come to a resolution with the business owner, they will note that the account has delinquent payroll returns and/or payroll taxes owed. Then, the IRS will start the collections process - if the business owner pays or sets up payments on the payroll taxes, the IRS will consider them to be in good standing. 

If not, the agency will start the TFRP investigation process. Typically, that starts with gathering information about the business using Form 4181 to gather information about the business, its employees, and how it handles payroll. Then, the agency will start looking at individuals who may be responsible, and it will request Form 4180 interviews from a range of individuals associated with the company's payroll tax payments. As explained above, depending on how the interview goes, the IRS may assess a TFRP against you personally, and if that happens, the agency will have the right to go after your personal assets. 

Real Stories About TFRP Interviews

The IRS has broad authority to assess the TFRP against individuals, but it can only do so if the following conditions are met:

1. The person was responsible.

2. The person acted willfully.

However, to identify people who meet these two elements, the IRS may reach out to a variety of people. In this Reddit thread, a secretary at a small business says that she has been contacted by the IRS about a Form 4180 interview. She explains her role in the company - she monitors the bank account balance, makes deposits, and initiates payroll as instructed by the owner, but she does not have the right to sign checks or make withdrawals from the company's bank account. Commenters assure her that she will be able to get through the interview without trouble and that the IRS likely won't see her as responsible, but they also tell her to hire an attorney to be on the safe side.

Get Help With Form 4180 Interviews Now

Do not go through a Form 4180 interview on your own - instead, use TaxCure to find experienced representation to help you through this process. This interview is extremely important, and if you're not prepared, you may end up facing a TFRP assessment. The TFRP is 100% of the unpaid withheld taxes - with a big company, that could mean tens of thousands of dollars or even more in some cases. Although the IRS can assess this penalty against multiple individuals, they can collect it from a single person. For example, if the IRS assesses the TFRP against five people but you're the only one with income or assets, the IRS will go after you for the full penalty. 

Once the TFRP is assessed, it can be very difficult to get out of - often, taxpayers' only choice is to pay the penalty under protest and then request a refund or file a refund suit in court. In all cases - whether you're facing a TRFP interview, have received a notice of proposed assessment, or are just worried about being labeled as a responsible person - you should reach out for help today. Do a search on TaxCure now and narrow down the results to find a pro who has experience with the TFRP.