How to Avoid the Trust Fund Recovery Penalty Interview (4180)
If the IRS believes you are responsible for the trust fund taxes, the agency will request an interview with you. The purpose of the interview is to figure out if you are responsible for the unpaid taxes or not.
It is called a 4180 interview because the agent asks questions from Form 4180 (Report of Interview With Individual Relative to Trust Fund Recovery Penalty). The interview can be very stressful, but there are a few ways to avoid it.
How to Avoid the 4180 Interview If You Are Liable
If the IRS requests a 4180 interview, the best way to get out of it is to pay the bill and cancel the interview. You can also admit to liability by signing Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) and then attempt to set up payments or apply for a settlement.
In particular, if the bill is under $25,000, the business can pay it back over a 24-month period. You have to set up a direct debit to qualify for this streamlined arrangement. Once the business sets up payments, you don’t have to worry about your personal assets being at risk.
How to Avoid the 4180 Interview If You Are Not Liable
If you are not responsible for the payment, you may argue your liability. This can be very difficult, and you should get a tax attorney or an experienced lawyer to help you. Don’t just hire any attorney. You need one experienced with this issue in particular. The lawyer needs to prove that you were not responsible for the unpaid tax even if you were involved with the company’s finances.
If you accidentally signed Form 2751 but you aren’t really liable, a lawyer can help as well. That professional can argue that you were intimidated into signing the form. In other cases, a lawyer can argue that the other employees ganged up on you.
How to Avoid the 4180 Interview If You Don’t Have Any Money
The IRS isn’t into chasing rainbows. If the agency believes that you won’t be able to pay the bill, it will look somewhere else for the funds. To prove to the IRS that you don’t have any money, you need to submit Form 433A.
This is the same form you use when you apply for a settlement on personal tax debt. To fill it out, you need all kinds of information about your personal finances. You also need a lot of back up documents (bank statements, mortgages, utility bills, credit cards, etc).
Keep in mind uncollectibility is hard to prove. You may feel broke, but the IRS may disagree. The agency has no problem taking your personal assets or garnishing your wages as needed.
What If You Can’t Avoid the 4180 Interview?
In some cases, you may not be able to get out of the interview. If you have to go to the interview, it’s important to know what to expect.