Statute of Limitations for the Trust Fund Recovery Penalty

A statute of limitations for assessment and collection is clearly defined by the Internal Revenue Code for the Internal Revenue Service (IRS) trust fund recovery penalty.

Trust Fund Taxes

When an employer withholds taxes from its employees, they are held in trust until paid to the government. Sometimes responsible persons--business owners and/or principals--may use this money for other purposes instead of depositing it with the U.S. Treasury.

Assessment Period

The IRS has a limited amount of time in which to assess the trust fund recovery penalty--three years from the filing date of the employment tax returns. The filing of all quarterly employment tax returns that are part of a calendar year, however, are not considered filed until April 15 of the next year.

Collection Period

The IRS has 10 years from the date of assessment of the penalty for its collection activities. It may attempt to collect the penalty from individuals.

The best strategy for employers to adopt is to pay payroll tax obligations timely and accurately.

References

• "IRS Tax Collection Procedures;" Robert S. Schriebman; 2008
• Cornell University Law School: U.S. Code 6501, Limitations on Assessment and Collection

Resources

• IRS Publication 15: (Circular E) Employer's Tax Guide