Appeal the proposed penalty
If you disagree that you're a responsible person or that you acted willfully, you can appeal within the 60-day window. Publication 5 explains how to prepare a protest. (IRS · Publication 5)
When a business doesn't pay the income and FICA taxes it withheld from employees, the IRS can assess the Trust Fund Recovery Penalty against a responsible person personally. You have 60 days from the date of the IRS's proposed assessment letter to appeal. After assessment, the IRS can file a lien or levy your personal assets.
Source: IRS, Employment taxes and the TFRP
Our team of Enrolled Agents, CPAs and former state auditors reviews your Letter 1153 or payroll tax notices, explains your appeal window, and helps you choose a plan for the business and for you.
Two quick questions. Our team will call you within one business day.
Tell us which quarters are unpaid, which IRS letters arrived, and the dates on them. We explain where you stand and how much time is left to respond.
You sign IRS Form 2848 so our Enrolled Agent can pull the business and personal transcripts and see every Form 941 period that's due.
We help prepare for the IRS interview, file an appeal if you disagree with the proposed penalty, and work out a payment plan or other option for what's owed.
| Step | What happens | Key point |
|---|---|---|
| 1 | Trust fund taxes go unpaid | Withheld income tax and the employee share of FICA are held in trust for the IRS. The penalty may apply if they can't be collected from the business. (IRS) |
| 2 | Investigation and interview | The IRS looks at who had the duty and power to collect, account for and pay the taxes, and who acted willfully. (IRS, IRM 5.7.4) |
| 3 | Letter 1153 (proposed assessment) | Delivered with Form 2751 and Publication 1. You have 60 days from the letter date to appeal, or 75 days if it's addressed to you outside the U.S. (IRM 5.7.4.7, IRS) |
| 4 | Assessment and Notice and Demand | If you don't respond, the IRS assesses the penalty and sends a Notice and Demand for Payment. (IRS) |
| 5 | Collection from you personally | After the penalty is assessed, the IRS can file a federal tax lien or take levy or seizure action against your personal assets. (IRS) |
Who counts as a "responsible person"? Someone with the duty and the power to direct collecting, accounting for and paying trust fund taxes. That can be an officer, employee, partner, director, shareholder, or a nonprofit board member. An employee who only paid bills as directed by a superior isn't a responsible person. (IRS)
What does "willful" mean? The person knew, or should have known, about the unpaid taxes and intentionally disregarded the law or was plainly indifferent to it. No bad motive is required. Paying other creditors instead of the IRS is an indication of willfulness. (IRS)
If you disagree that you're a responsible person or that you acted willfully, you can appeal within the 60-day window. Publication 5 explains how to prepare a protest. (IRS · Publication 5)
If the proposed amount is right, you can sign Form 2751 to agree. Interest accrues on the penalty from the date of assessment until it's paid. A payment plan may spread out what's owed. (IRM 5.7.4 · IRS, Payment plans)
Make current deposits and payments on time and file Form 941 each quarter, so the balance stops growing. (IRS · Form 941)
If you can't pay in full, an Offer in Compromise may be an option. For businesses, the IRS requires federal tax deposits for the current quarter and the last two quarters before it will consider an offer. (IRS)
If a levy has started on your wages or bank account, see stop an IRS wage garnishment or bank levy.
More detail: Tax resolution services · IRS Notice 784: Could you be personally liable?
It's a penalty the IRS can assess personally against a responsible person when a business doesn't pay the income tax and employee FICA it withheld. The amount equals the unpaid income tax withheld plus the employee's share of FICA. The business doesn't have to close for the penalty to apply.
Anyone with the duty and power to direct collecting, accounting for and paying trust fund taxes who acted willfully. That can include officers, employees, partners, directors, shareholders, nonprofit board members, and payroll providers. An employee who only paid bills as directed isn't a responsible person.
Letter 1153 tells you the IRS plans to assess the Trust Fund Recovery Penalty against you. It comes with Form 2751, Proposed Assessment of Trust Fund Recovery Penalty. You have 60 days from the letter date, or 75 days if addressed outside the U.S., to appeal.
The IRS assesses the penalty and sends you a Notice and Demand for Payment. After that, it can take collection action against your personal assets, including a federal tax lien, a levy or a seizure.
A payment plan may be available for the assessed balance, and an Offer in Compromise may be an option if you can't pay in full. Interest accrues on the penalty from the date of assessment until it's paid, so keeping the business current on deposits matters too.
See more answers on our tax relief FAQs page.
Know your appeal window and your options before the IRS's proposed assessment becomes final.
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Reviewed by Raman Zoobalan, EA, Co-Founder and Partner · Last updated: October 27, 2026
Tax Resolution Plus Inc. is a private tax resolution firm. We are not affiliated with the IRS or any government agency. This page is general information, not tax advice for your situation. Testimonials and case results reflect the experiences of individual clients. Results vary based on each taxpayer's circumstances.