What to Do With IRS Form 2624 for Trust Fund Penalties
Understand when to sign IRS Form 2624. Extending the assessment period for a Trust Fund Penalty can provide critical time to address personal liability.
IRS Form 2750 is a formal agreement between an individual and the IRS. Its specific function is to extend the legal timeframe the agency has to assess a penalty related to unpaid business employment taxes. This document is presented during an active investigation by an IRS Revenue Officer.
The Trust Fund Recovery Penalty Context
The Trust Fund Recovery Penalty (TFRP) is a collection tool used by the IRS when a business fails to remit certain taxes. Employers are required to withhold federal income taxes, as well as the employee’s share of Social Security and Medicare taxes, from every paycheck. These withheld funds are considered “trust fund taxes” because the employer holds them in trust for the U.S. government. The TFRP is equal to the amount of the unpaid trust fund taxes.
When a business does not send these collected funds to the IRS, the agency can invoke the TFRP. This allows the IRS to bypass the corporate structure and personally assess the unpaid amount against individuals it determines were responsible for the failure to pay. The personal assets of those individuals can be targeted for collection actions, such as liens or levies, to satisfy the business’s tax debt. The penalty is a mechanism to collect the monetary loss from those in control.
A “responsible person” is defined broadly and is not limited to just the owners or top executives of a company. The IRS may identify any individual who had the duty and authority to ensure the taxes were paid. This can include corporate officers, directors, partners, or employees like bookkeepers or controllers if they had significant control over the company’s finances. Factors involve who had the authority to sign checks, direct payments to creditors, or decide which bills the company would pay.
Purpose of Extending the Assessment Period
The IRS operates under a legal deadline, known as a statute of limitations, for assessing taxes and penalties. For the TFRP, the agency has three years from the date the business’s employment tax return, such as Form 941, was filed to assess the penalty against a responsible person. If the IRS does not make the assessment within this window, it loses the right to do so. Form 2750 is the formal agreement used to push that deadline to a future date.
An IRS Revenue Officer may request this extension when their investigation into who is a responsible person requires more time than the statute of limitations allows. They might need to conduct more interviews, review additional financial records, or analyze business structures. Without an extension, the officer would be forced to make an immediate assessment based on current information to avoid letting the statute expire.
From the taxpayer’s perspective, agreeing to sign Form 2750 can be a strategic decision. Signing the form provides additional time to mount a defense against the proposed penalty. This period can be used to gather evidence, such as bank statements or witness testimony, to prove you do not meet the definition of a responsible person. It also allows time to prepare for an appeal and present your case to an independent IRS office before any assessment is made.
Completing and Submitting Form 2750
Form 2750 is prepared by the IRS Revenue Officer managing the case. The fields on the form will include your name and Social Security Number, the name of the business that owes the trust fund taxes, and the specific tax periods listed by quarter that are under investigation.
An important piece of information on the form is the new date to which the assessment period is being extended. Before signing, you should review all the pre-filled information to ensure it is accurate, particularly the tax periods in question. Your action is to sign and date the form in the designated space to formally agree to the extension.
You submit the signed form directly back to the IRS Revenue Officer who gave it to you. The immediate consequence is that the IRS is legally barred from assessing the TFRP against you until the new, extended deadline arrives. This secures the additional time needed to work with the IRS to resolve the case and potentially avoid the penalty assessment.