Once the IRS finalizes a Trust Fund Recovery Penalty (TFRP) assessment, the debt becomes personally enforceable— meaning the IRS can collect directly from your income, bank accounts, or assets. But that doesn’t mean you’re out of options. You need the right strategy and legal representation.
What Happens After TFRP Assessment?
Once the penalty is assessed, the IRS can take aggressive collection actions against your personal assets. You’ll receive a Notice and Demand for Payment. From that point:
- The IRS can file a lien under your name.
- Begin wage or bank levies.
- Seize personal or jointly held property.
- Apply your future tax refunds to the debt.
💡 Key Insight: TFRP debt is non-dischargeable in bankruptcy — it must be resolved directly with the IRS.
Ways to Reduce a Finalized TFRP
Verify the Assessment
Before negotiating payment or abatement, confirm:
- The assessment amount (from your IRS Account Transcript)
- The related business tax periods
A tax attorney can obtain these records directly from the IRS and identify procedural defects or overassessments.
📘 Reference: Get Transcript — IRS
Negotiate a Payment Plan (Installment Agreement)
For most taxpayers, the simplest resolution is an Installment Agreement, which spreads payments over time. The IRS can set up an installment agreement for you to pay the debt over time.
💡 Tip: An attorney can request a collection hold during negotiation to stop levies and liens while your plan is reviewed.
📘 Reference: IRS Payment Plans
Offer in Compromise (OIC)
If you cannot afford to pay the assessed amount, the IRS may accept less than you owe through an Offer in Compromise. Eligibility depends on:
- Income and asset equity
- Necessary living expenses
- Future earning potential
💡 Pro Tip: The IRS only accepts OICs when it believes it cannot collect more through other means. Strong documentation and legal representation are critical.
📘 Reference: Offer in Compromise – IRS
Currently Not Collectible (CNC) Status
If your financial situation prevents any payment, your attorney can request CNC status — temporarily pausing collection. While penalties and interest continue to accrue, the IRS will not enforce liens or levies during CNC. The IRS will periodically review your financial situation to see if your circumstances have changed.
📘 Reference: Currently Not Collectible — IRS
Why Legal Representation Matters for a Finalized Trust Fund Recovery Penalty?
Once the IRS assesses the Trust Fund Recovery Penalty (TFRP), it becomes your personal debt — collectible just like unpaid income taxes. From this point, the IRS can seize wages, freeze bank accounts, and place liens against your property without further court action. While you technically have the right to negotiate directly with the IRS, doing so without representation can expose you to costly mistakes, missed deadlines, and lost settlement opportunities.
Unlike accountants or enrolled agents, attorney-client privilege protects your confidential communications. This means you can discuss facts, strategy, and liability exposure without fear that the IRS will compel disclosure later.
💡 Critical Insight: In complex or high-dollar TFRP cases, this legal privilege is often the difference between strategic defense and self-incrimination.
Facing a finalized Trust Fund Recovery Penalty is one of the most serious financial challenges a business owner or officer can face. The IRS assumes full enforcement power — but with legal representation, you can regain control, protect your property, and negotiate a sustainable resolution.
Need help with a similar issue? Contact our firm today for a consultation.
A finalized Trust Fund Recovery Penalty can be financially devastating — but it’s not the end of the road. With the right strategy, you can negotiate, reduce, or even settle the debt while protecting your assets.
If you’ve received a Notice and Demand for Payment or your wages are being levied, don’t wait. Contact Pelham PLLC today to have our tax attorneys negotiate directly with the IRS, stop collection activity, and pursue the best resolution available under federal law.
FAQs
Can I negotiate the Trust Fund Recovery Penalty?
Yes. Through installment plans, penalty abatement, or an Offer in Compromise.
Can I include TFRP debt in bankruptcy?
No. It’s treated as a trust fund obligation and cannot be discharged.
Should I handle this on my own?
No — TFRP cases are highly technical. Legal representation protects you from enforcement and ensures fair negotiation.
