When a company fails to pay withheld employment and income taxes to the IRS, the IRS has the authority to impose a trust fund recovery penalty against any responsible person, i.e. a person who had the duty to perform and the power to direct the collection and payment of withheld income and employment taxes. Frequently, those responsible persons include an officer or an employee of a corporation, a member or employee of a partnership, a corporate director or shareholder, or another person with authority and power to direct the disbursement of funds. The amount of the penalty personally attached is equal to the full amount of withholdings taken from employees and not turned over to the IRS.
If you receive a notice from the IRS identifying you as a responsible person, you have a very short window of time in which to contest the proposed assessment of the trust fund recovery penalty. Therefore, it is imperative that you engage an experienced tax attorney to respond on your behalf and protect your rights. If you do not respond timely, the penalty will be imposed against you.