The LTR 585 is correspondence related to the Trust Fund Recovery Penalty. It may notify you that the TFRP has been assessed, provide details about the computation, or address a prior response you submitted regarding a proposed TFRP assessment. The letter's exact purpose depends on the context and where you are in the TFRP process.
If the TFRP Has Been Assessed
Once the Trust Fund Recovery Penalty is assessed against you personally, it appears on your individual tax account as a separate liability. The assessment is separate from the business's employment tax debt. You're personally liable for 100% of the trust fund portion — all federal income tax withheld from employees plus the employee share of Social Security and Medicare taxes.
The personal assessment has its own 10-year collection statute starting from the assessment date. It cannot be discharged in bankruptcy. It can be collected through levies, liens, and garnishments against your personal assets.
Options After Assessment
You can pay the penalty and move on. You can set up an installment agreement to pay over time. You can submit an Offer in Compromise for the TFRP liability if you can't pay it in full. You can request Currently Not Collectible status if paying would create a hardship.
You can also contest the assessment by paying the trust fund portion for one employee for one quarter and filing a refund claim. If the IRS denies the claim (or doesn't respond within 6 months), you can file a refund suit in federal district court. This is called the "Flora" full payment rule exception for divisible taxes.
Multiple Responsible Persons
The IRS can assess the TFRP against multiple people for the same tax periods. Each responsible person is jointly and severally liable for the full amount. If the IRS collects from one person, the others' liability is reduced. If you believe someone else was the responsible party, document their control over the business's finances.
If you've received an LTR 585, call us at (813) 229-7100. TFRP cases require experienced representation.