What Is IRS Letter 947 and How Do You Respond?
Learn how to navigate IRS Letter 947, which proposes a Trust Fund Recovery Penalty. Understand the criteria and procedures for formally protesting the assessment.
IRS Letter 1153, formally known as the “Proposed Assessment of Trust Fund Recovery Penalty,” is a formal proposal from the IRS, not a final determination or a bill for taxes owed. It signifies that the agency believes you may be personally liable for a business’s unpaid employment taxes. The letter initiates a 60-day timeframe from the date on the notice for you to formally respond and dispute the proposed penalty before any final assessment is made.
Understanding the Proposed Penalty
The penalty proposed in Letter 1153 is the Trust Fund Recovery Penalty (TFRP). This civil penalty applies to certain taxes that employers are required to collect from their employees’ wages and hold “in trust” before paying them to the government. These trust fund taxes primarily consist of withheld federal income tax, along with the employee’s share of Social Security and Medicare taxes. When a business fails to remit these collected funds, the IRS can seek to recover the unpaid amount directly from the individuals it deems responsible.
To hold someone personally liable for the TFRP, the IRS must satisfy two criteria: responsibility and willfulness. A “responsible person” is anyone the IRS determines had significant control over the business’s finances. This is not limited to owners or officers; it can include directors, certain employees, or anyone with the authority to decide which bills the company would pay.
The second criterion is “willfulness.” The IRS considers a failure to pay to be willful if a responsible person knew the taxes were due but intentionally disregarded the law or was plainly indifferent to the requirement. This does not require a bad motive or an intent to defraud. An action as common as knowingly using available funds to pay other business creditors, like suppliers or landlords, instead of the IRS can be sufficient to establish willfulness.
Information and Documents for Your Response
Upon receiving Letter 1153, you have two main paths. If you agree that you are responsible and owe the penalty, you can sign and return Form 2751, Agreement to Assessment and Collection of Trust Fund Recovery Penalty. This form allows the IRS to assess the penalty against you without further appeal. If you disagree with the proposed penalty, you must file a formal written protest to the IRS office that sent the letter.
Preparing a protest requires gathering documentation to build your case. Your formal protest letter must explain why you do not meet the criteria of a responsible person or why your actions were not willful. Your letter must include:
- Your name and address
- A statement that you are protesting the proposed penalty
- A copy of the Letter 1153 you received
- The tax periods involved
- A detailed statement of the facts supporting your position
Your factual claims must be supported by evidence. Relevant documents can include corporate bylaws or meeting minutes that outline your specific duties, bank signature cards that show who had authority to sign checks, and sworn affidavits from colleagues or business partners that attest to your lack of control over financial decisions.
Submitting Your Formal Protest
The protest should be mailed to the address specified in Letter 1153. It is highly recommended to send your protest using a method that provides proof of mailing and delivery, such as USPS Certified Mail with a return receipt. This creates a verifiable record that you submitted your response within the required timeframe.
After your protest is received, the IRS will send an acknowledgment and inform you that your case is being transferred. The case is then forwarded to the IRS Independent Office of Appeals, a separate division within the IRS tasked with resolving tax disputes. An Appeals Officer will be assigned to your case to review your protest and the information gathered by the initial investigator.