Updated July 2025
What to Expect If the IRS Thinks You’re Liable for Unpaid Payroll Taxes
If the IRS thinks that you may be responsible for a business’s unpaid payroll taxes, they will request a Form 4180 interview. The purpose of this interview is to identify responsible parties so that the IRS can assess a Trust Fund Recovery Penalty (“TFRP”) against them.
When a business doesn’t pay payroll taxes, the IRS can hold individuals responsible for the amount of taxes withheld from employees’ paychecks but not remitted. These penalties can be extremely high and very serious. They can’t even be discharged in bankruptcy after being assessed.
That’s why you need to take 4180 interview requests very seriously. To get help now, contact us at Wiggam Law today.
Key takeaways
- Form 4180 interview – The IRS uses these interviews to identify responsible persons for unpaid payroll taxes.
- What to expect – A revenue officer will ask about your role in the company’s finances and payroll tax payments.
- Consequences – If the IRS decides you’re responsible, they’ll assess a TFRP against you.
- Options – Once you receive the proposed assessment, you have the right to appeal.
- Collection actions – If you don’t pay the penalty, the IRS can seize your personal wages and assets.
When You Might Face the Trust Fund Recovery Penalty
If a business doesn’t pay its trust fund taxes and the IRS thinks you’re responsible, you may face the Trust Fund Recovery Penalty. This penalty is always assessed against individuals, never against the company. It can be assessed against owners, employees, or even third parties.
To determine who’s liable for the penalty, the IRS conducts a TFRP investigation, which often includes having the business complete Form 4181 and having individuals undergo Form 4180 interviews.
What are IRS Form 4180 Interviews?
A Form 4180 interview is a process the IRS uses to uncover who was responsible for issues within a business that led to the unpaid payroll taxes. The agency wants to know who completes paperwork, who is in charge, and who knows about any noncompliance issues.
The full name of Form 4180 is Report of Interview with Individual Relative to Trust Fund Recovery Penalty or Personal Liability for Excise Taxes.
You do not complete this form. Rather, a revenue officer holds a meeting with you, asks questions, and completes the form based on your answers. They may also collect affidavits from other people involved with the company to learn more.
The IRS states that this penalty could apply to anyone who:
- Is responsible for collecting or paying employment taxes
- Fails to collect or pay these taxes and does so willfully
Who Could Be a Responsible Person in a 4180 Interview? | ||
|---|---|---|
| Role | Can be held liable? | Actions |
| Owner/funder | ✅ | Check signing or fund control |
| CFO/controller | ✅ | Oversees finances or payroll |
| Accountant/bookkeeper | ✅ | Processes returns and payments |
| Non-finance employee | ❌ | Not involved in financial decisions |
| Payroll company | ✅ | Contractually responsible for payments |
What is a responsible person for the TFRP?
“Responsible” parties are those who must perform tax-related duties for the business, whether a company leader, employee, shareholder, or other person with the authority to control or disburse funds. The responsible party could also be a payroll service provider or a professional employer organization.
The IRS defines responsibility as “whether an individual exercised independent judgment with respect to the financial affairs of the business.” The purpose of the Form 4180 interview is to determine who has this responsibility and who should be held accountable by paying the trust fund recovery penalty.
What does willfully mean in relation to unpaid payroll taxes?
The IRS defines “willfully” as someone who is aware of unpaid payroll taxes and chooses to disregard them intentionally or is plainly indifferent to them (e.g., paying other creditors ahead of the IRS).
Who Could Face the Trust Fund Recovery Penalty?
Many different people involved in a business may be subject to the penalty. The IRS attempts to find the responsible party with Form 4180 interviews, which could include these parties:
- Business leaders and owners, such as CEOs or founders
- Other business executives and directors
- Bookkeepers and accountants for the business
- Payroll companies
- Employees of the business
- Anyone else who knows taxes aren’t being paid and has check-signing authority.
Unfortunately, any person found responsible for withholding and paying taxes could be penalized. The IRS often assesses this penalty against multiple people it deems responsible.
If you have questions about Form 4180 interviews and employment taxes, reach out to a tax expert or attorney who can advise you on how to move forward. You never want to make your situation worse if you’re involved in or aware of unpaid employment taxes.
How to Calculate the Trust Fund Recovery Penalty
This penalty is pretty simple to calculate. It’s 100% of the taxes that were withheld from employees’ paychecks and not paid. For example, if the business withholds $12,600 in Social Security, $2,900 in Medicare, and $10,000 in income tax, the withholding is $25,500. By extension, the penalty is also $25,500.
Note that the TFRP doesn’t erase the tax bill. The business still owes the tax, while any responsible individuals owe the penalty.
Preparing for the Form 4180 Interview
You may be worried you’ll be hit with a hefty penalty if you’re facing an interview related to the Form 4180. Being prepared is the best thing you can do at this stage, so here are a few strategies to equip yourself and the business:
Have the Right Information Ready
During the interview, the IRS will ask for basic information, including your name, address, Social Security number, and other identifying details. Also, be prepared to answer questions about how you’re connected with the business and your professional title.
The IRS will want to know your role in the payroll and financial operations of the business. Be prepared to answer questions like whether you make decisions about finances for the company, if you’re the person who signs payroll returns, how bills are paid in general, how payroll payments are made, and your knowledge about the unpaid tax balance.
Prepare for Questions About the Business’s Bill Paying Processes
The IRS also asks questions about general billing information for the business. The agency’s goal is to determine if the company could have paid the required trust fund taxes but willfully did not. Questions surrounding billing may include whether you knew about other parties getting paid, such as vendors, utilities, or lenders. The IRS will also want to know which person at the company handles billing.
Be Honest (But Don’t Overshare)
It’s crucial that you’re honest with the IRS about your role in billing and the organization’s finances. One of the agency’s goals with the interviews is to uncover who is responsible for the issue, which means they could get information about you from other interviews.
You never want to be in a situation where you withhold details or even lie to the IRS. Be open and transparent about your role and what you know about the company’s tax practices. But at the same time, you don’t necessarily want to share information that wasn’t requested.
Understand When You Can Say No
Sometimes, the revenue officer may ask you to complete Form 433-A during the interview to learn about your personal assets and your ability to pay the potential TFRP. However, the penalty hasn’t been assessed yet, and generally, that means you don’t have to provide this information.
Consider Bringing Legal Representation
You do not have to go to this interview alone, and you probably shouldn’t. All taxpayers have a right to representation in front of the IRS. Consider bringing a tax professional to the interview with you. Don’t assume that hiring a tax professional will make you look suspicious or guilty — the IRS expects people to have representation in these situations.
If Possible, Pay Off the Payroll Taxes
Once the TFRP has been assessed, paying the underlying payroll tax for the respective periods may reduce the penalty if applied appropriately. However, you may be able to avoid the penalty (and the need for a 4180 interview) if you pay the back taxes now. The IRS offers payment plans for certain businesses that are behind on payroll taxes — the options are a bit more expansive if you’re no longer operating.
What Happens if You Are the “Responsible Person”?
After the interview, the IRS may decide that you should be held responsible for the unpaid taxes. They will then send you Letter 1153 to indicate their intention to assess the trust fund recovery penalty against you.
The date of this letter is important—you have 60 days from the letter’s date to appeal this penalty. You may have 75 days if it’s sent to you outside the U.S.
If you want to appeal the penalty, follow all the instructions in the letter. The IRS should explain the exact steps needed to appeal the proposed assessment on each notice you receive. You can also request a meeting to discuss more details with your revenue officer informally (10-day deadline) or ask for fast-track mediation, which can be faster than appeals if you qualify.
Don’t just ignore this letter. Failing to respond means the IRS will assess the stated penalty against you, and you’ll then receive another document: the Notice and Demand for Payment. Once the penalty is assessed, the IRS can then move forward with any necessary collection actions that include going after your personal assets and property. You want to avoid the IRS filing a federal tax lien or levy to seize your property. The best way to do this is to get help with the Form 4180 interview and appeal if you receive a 1153 letter.
Avoid the Trust Fund Recovery Penalty
The best way to avoid the trust fund recovery penalty is to prevent an issue from the start. You can do this by ensuring all employment taxes are collected and paid and that all deadlines for these payments are met.
When you’re having an issue paying employment taxes or facing a Form 4180 interview, talk to the experts at Wiggam Law. Our team of expert tax attorneys understands the tax laws, how they can affect your business, and how to best resolve business tax issues.
Contact the attorneys at Wiggam Law today to learn more about how we can help with employment tax issues.
FAQs about Form 4180
What is IRS Form 4180?
The IRS uses the Form 4180 to conduct interviews with business leaders or employees involved in payroll and billing. These interviews help the agency determine who to issue the trust fund recovery penalty to because of delinquent employment tax payments.
Who has to do the Form 4180 interview?
If the IRS suspects responsibility for unpaid employment taxes, it may require that you be interviewed using the Form 4180. This interview is meant to uncover who should be held accountable for unpaid taxes before they issue a penalty. If you refuse, you may face a subpoena.
What are trust fund taxes?
Trust fund taxes refer to the employment and income taxes employers withhold from employees’ paychecks, which include Medicare, Social Security, and some income taxes. They’re called trust fund taxes because they’re kept in trust until they’re paid to the government. These taxes don’t include the employer match portion of payroll taxes.
Will the IRS seize my property after a Form 4180 interview?
If the tax balance remains unpaid after the trust fund recovery penalty is issued and other actions are taken, the IRS could file a lien against your property to seize personal assets. Either pay the debt in full or negotiate a plan with the IRS to avoid this from happening.
What questions will the IRS ask me in a Form 4180 interview?
The IRS will ask questions about the billing practices of the business, who is in charge of payroll and billing, who is aware of the unpaid tax balance, and other inquiries to determine responsibility, willfulness, and awareness.
Get Employment Tax Help Today
Do you still have questions regarding trust fund recovery penalties and other business tax issues? Then, you need the experience and dedication of the legal team at Wiggam Law. We have extensive experience helping businesses with unpaid payroll taxes and representing individuals facing the TFRP.
Call us today at (404) 233-9800 or fill out our online consultation form to schedule a meeting with one of our tax attorneys today.
