Two conditions must be met for the TFRP to apply to a person. What are they?

The person was responsible for collecting, accounting for and paying the taxes, and willfully failed to do so

The person was the CEO and the business was insolvent

The person owned more than 50% of the business and knew that the withheld payroll taxes were not being paid on time

The person signed the Form 941 and was an employee

Which conduct is typically evidence of willfulness for the TFRP?

Knowingly paying other creditors, such as rent or suppliers, while trust fund taxes remain unpaid

Being unaware of the unpaid taxes because of embezzlement or fraud committed by another trusted employee

How long does a person have to appeal a proposed TFRP assessment after receiving Letter 1153?

60 days (75 days if the letter is addressed outside the U.S.)

90 days (120 days if the letter is addressed outside the U.S.)

Several people are assessed the TFRP for the same unpaid taxes. How is the liability collected?

Each is jointly and severally liable, but the IRS may collect the total only once

Each pays a pro rata share only

The IRS may collect the full amount from each person, so the total may be collected several times

A business's employees' income tax and FICA were withheld but not deposited. Which party can be personally assessed the TFRP?

An officer, employee, partner or other person responsible for paying over the taxes, including in some cases a third party such as a payroll service provider

Only the bookkeeper who calculated payroll

Where does a responsible person generally make a voluntary payment toward trust fund taxes to reduce his TFRP exposure?

Designate the voluntary payment to the trust fund portion of the employment tax liability

Pay the employer's share of FICA first, since that portion is assessed against the responsible person

What is the assessment statute for the TFRP for quarterly Form 941 taxes timely filed?

3 years from April 15 of the year after the calendar year that included the quarters, because the returns are deemed filed then

10 years from the end of each quarter, because the TFRP is a collection device subject to the collection statute rather than an assessment statute

Trust fund recovery penalty (TFRP)

When a business fails to pay over withheld income tax and employees' share of FICA, the IRS can assess a trust fund recovery penalty equal to 100% of those trust fund taxes against any responsible person who acted willfully, after proposing it in Letter 1153 with 60 days to appeal.

Updated 2026-09-23 · 3 sources · By the EnrolledAgentKit team

Exam part

Part 3

Representation, Practices and Procedures

IRS domain

Specific Areas of Representation

20 of 85 scored Qs

Tax year tested

2025

2026-27 SEE

Practice questions

10 free below

The rules the exam tests

Figures for tax year 2025, the year the 2026-27 SEE tests. Verify against the cited primary source.
Rule	What it says (2025)	Source
Amount	100% of unpaid withheld income tax + employee FICA (not employer share)	IRC 6672
Responsible person	Duty and authority to collect, account for and pay (officers, owners, some employees and third parties)	IRS TFRP page
Willful	Knew of the taxes and failed to pay (e.g., paid other creditors) or reckless disregard	IRS TFRP page
Interview	Form 4180	IRM 5.7
Proposal	Letter 1153; 60 days to protest (75 if abroad)	IRC 6672(b)
Liability	Joint and several; collected once; contribution suits allowed	IRC 6672(d)
Bankruptcy	Not dischargeable	11 USC 507, 523
Voluntary payments	Can be designated to trust fund portion	Rev. Proc. 2002-26
Assessment statute	3 years from April 15 after the calendar year (timely Forms 941)	IRC 6501(b)(2)

Worked example

Facts: A corporation withheld $30,000 of income tax and $15,000 of employee FICA in Q1-Q2 2025 but paid rent and suppliers instead of depositing; the employer share of FICA was also $15,000. The president signed the checks and knew.

TFRP: $30,000 + $15,000 = $45,000 (the $15,000 employer share is excluded). The president is responsible and willful; any other signers who knew could also be assessed, but the IRS collects the $45,000 only once.

Exam traps

Employer FICA share is not trust fund tax.
Willfulness does not require bad intent; paying other creditors is enough.
Letter 1153 appeal window is 60 days.
Designate voluntary payments to trust fund taxes.