Most businesses that fall behind on payroll taxes have more than one person with a hand on the money. Co-owners. A president and a CFO. An owner and a general manager. When the Revenue Officer finishes the trust fund investigation, it is common for more than one of them to receive Letter 1153 for the same quarters.
That raises obvious questions. Does each person owe a share? Does each owe the whole thing? What happens when one of them pays?
More Than One Person Can Be Responsible for the Same Quarter
IRM 5.17.7.2.2, the IRS's legal reference guide on the penalty, says one or more persons may be responsible persons within the meaning of IRC 6672 for the same quarter. When more than one person is liable, the Revenue Officer may recommend individual assessments of the penalty against each.
The penalty amount itself comes from section 6672(a): a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. The statute does not divide that amount among people. Each person found responsible and willful for a period can be assessed for the trust fund amount of that period.
That said, the IRS is not supposed to assess people indiscriminately. IRM 5.7.4.5 tells Revenue Officers not to routinely target all of the principals in a business, and to explain the reasons for assertion or non-assertion for each person considered. Each person's liability has to stand on its own facts.
The IRS Collects Only Once
Here is the protective rule. IRM 5.17.7.2 states that the IRS may collect trust fund taxes only once, whether from the business, from one or more of its responsible persons, or from the business and one or more responsible persons. IRM 5.17.7.2.9 repeats it as IRS policy, citing Policy Statement 5-14.
The same section explains what happens when the math changes:
- If, after the TFRP is asserted, the corporation pays the delinquent tax, the TFRP assessment will be abated.
- If the amount collected from the responsible persons exceeds the amount the corporation failed to pay, the excess may be refunded, within the applicable statutory period, to the person or persons who caused the excess payment.
So multiple assessments are a collection tool, not a multiplier. The total the government keeps is capped by the unpaid trust fund tax.
How Payments Get Cross-Referenced
When there are several assessments for the same underlying tax, every payment has to be reflected in several accounts. IRM 5.7.7.4 explains that after the TFRP is assessed, payments and credits may be applied to the underlying trust fund liability as well as to the TFRP assessments, and that the IRS's Campus Collection Operation is responsible for cross-referencing payments and credits among related business and TFRP accounts.
IRM 5.7.7.6.1 describes the transaction codes. A payment by any responsible person posts on the other responsible persons' accounts with one credit reference number. A payment by the business posts on the responsible persons' accounts with another. Payments by responsible persons are reflected on the business account with a separate transaction code.
Two practical warnings come out of that section:
- The IRM says most credits are cross-referenced systemically and tells employees not to request adjustments for credits applied for less than 60 days. Give the system time, then check.
- It also warns that responsible persons are not always assessed the same amount for the same quarters. Your balance and your partner's balance may differ legitimately.
Interest Does Not Cross Over So Neatly
IRM 5.7.7.4 adds an important caveat: unless the underlying business also fully paid interest, the TFRP taxpayer will still be liable for interest on the TFRP assessment. IRM 5.7.4.2.4 tells Revenue Officers to advise responsible persons that interest accrues on the TFRP from the date of assessment.
That means two people can pay off the same trust fund amount in different ways and end up with different interest balances. When negotiating who pays what, include interest in the conversation.
Partial Responsibility
Not everyone is responsible for every quarter. IRM 5.7.4.5 requires the Revenue Officer to indicate whether each individual is fully responsible for all periods or partially responsible for some, and, for partial responsibility within a quarter, to explain how much of the liability should be cross-referenced when the partially responsible officer pays.
If you joined late or left early, your assessment should reflect that. Our guide on new and departing officers explains how timing arguments work.
What You Can Learn About the Others
Tax information is confidential, but Congress made a specific exception for this situation. IRM 5.7.7.4.1 explains that the Taxpayer Bill of Rights 2 added IRC 6103(e)(9), which allows disclosure to each person assessed the TFRP of certain limited information about other persons assessed the penalty for the same underlying tax. The IRM points to IRM 5.1.22.5 for what can and cannot be disclosed and how.
That information matters for two reasons. It helps you confirm your own balance is being credited correctly. And it is the starting point for a contribution claim against the others.
Contribution Among Responsible Persons
If you pay more than your share, section 6672(d) lets you recover from the others. Each person who paid the penalty is entitled to recover from other liable persons the excess of what they paid over their proportionate share. The claim has to be brought in a separate proceeding, not joined with the government's collection suit. Our guide to TFRP contribution claims covers the details.
Before Assessment: One Payment Can Protect Everyone
The cleanest outcome for multiple responsible persons happens before anyone is assessed. IRM 5.7.4.4 says that when collection from the employer has been unsuccessful, the Revenue Officer should advise responsible persons that they can either pay the withheld tax liability on behalf of the business or have the penalty assessed against them. The payment is the full trust fund balance, not a portion.
If one of you pays it, with the written designation the IRM describes, the trust fund portion for those periods is satisfied. Nobody needs to be assessed for it. The others benefit too, which is exactly why the person who pays may want a written agreement from the others first, setting out how the cost will be shared. That agreement is a private contract, separate from the statutory contribution right discussed below.
Strategy When There Are Several of You
- Do not assume a united front. In a TFRP investigation, each person's best defense is often that someone else made the payment decisions. Interests can diverge quickly. Separate counsel may be appropriate.
- Coordinate where interests align. If everyone agrees the business can pay the trust fund portion through a designated payment, that may end everyone's exposure. See our guide to designating payments.
- Track every payment. Keep proof of what you paid, when, and with what designation.
- Check credits after 60 days. Pull your account transcript and confirm payments by the business and the others are reflected.
- Watch the refund window. If the total collected exceeds the unpaid trust fund amount, the excess may be refundable only within the applicable statutory period. IRM 5.7.7.5 notes that only payments made within two years of filing Form 843 may be considered for refund under IRC 6511(a).
Spouses Are a Separate Question
People often ask whether a spouse is on the hook because the other spouse was assessed. The TFRP is assessed against individuals. IRM 5.7.7.6.1 notes that joint name lines do not apply to TFRP accounts. Our guide on spouses and the TFRP explains the details.
For more on how the firm handles payroll tax and trust fund matters, see the main site's payroll tax page.
Multiple assessments feel like the IRS is piling on. Legally, it is spreading its bets. Make sure every dollar paid by anyone gets counted for you. Call (813) 229-7100. Let's talk.
Frequently Asked Questions
If three officers are assessed, does each owe one third?
No. Each person found responsible and willful can be assessed the full trust fund amount for the periods involved. The IRS's policy, however, is to collect the trust fund taxes only once in total.
What happens if the business pays the taxes after I am assessed?
IRS guidance says that if the corporation pays the delinquent tax after the TFRP is asserted, the TFRP assessment will be abated.
Will a payment by my co-owner reduce my balance?
Yes. Payments by any responsible person are cross-referenced to the other related TFRP accounts. The IRS manual notes most credits post systemically and adjustments should not be requested for credits less than 60 days old.
Why do I still owe interest if the trust fund amount was paid?
IRS guidance states that unless the underlying business also fully paid interest, a TFRP taxpayer remains liable for interest on the TFRP assessment, which accrues from the date of assessment.
Can I find out who else was assessed?
IRC 6103(e)(9) permits limited disclosure to each person assessed the TFRP about other persons assessed the penalty for the same underlying tax.
This guide is general information, not legal advice, and reading it does not create an attorney-client relationship. Payroll tax cases turn on their own facts and deadlines.