Does the Trust Fund Recovery Penalty only apply to business owners?

No. The TFRP applies to any 'responsible person' — defined as anyone who had the authority and duty to collect, account for, and pay over the withheld payroll taxes. This includes officers, directors, partners, shareholders, and employees with financial control — including CFOs, controllers, payroll managers, and bookkeepers with signing authority over business finances. Passive investors who do not make payment decisions typically are not considered responsible persons.

Does filing bankruptcy eliminate the Trust Fund Recovery Penalty?

No. Business bankruptcy does not eliminate the TFRP assessed against an individual. Because the penalty is assessed against responsible individuals personally — not the business entity — it survives business bankruptcy. Individual bankruptcy also generally does not discharge the TFRP, because tax law specifically excludes penalties for willful failure to pay trust fund taxes from bankruptcy discharge protections.

What is the deadline to respond to a TFRP assessment?

When the IRS proposes a TFRP, it sends Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) along with Letter 1153, giving you 60 days to respond and request a conference with IRS Appeals. This 60-day window is critical — missing it makes challenging the penalty significantly harder. If you receive a TFRP proposal, contacting a qualified tax professional immediately is strongly recommended.

What is the Trust Fund Recovery Penalty?