| Here is a section of a memo from early this year that addresses Trust Fund Offers in Compromise. They basically don't like them, but there are circumstances where they will be accepted. Usually, they want at least the amount of the raw tax to be paid. The TP must also have 2 quarters of perfect compliance for the offer to even be accepted for processing.
We have submitted many offers for businesses in these circumstances. They are difficult, but not impossible to get accepted.
If you need further information about this, feel free to contact me.
Marty Martelle
www.martellelaw.org
Corporate Trust Fund Procedures1
For offers in compromise involving a corporation, the amount acceptable to compromise
a corporate employment tax liability will represent what can be collected from the
corporation without looking to the responsible person(s). If the Service enters into a
compromise with an employer for a portion of the trust fund tax liability, the remainder of
the trust fund taxes may still be collected from a responsible person by assessing a trust
fund recovery penalty (TFRP) pursuant to Section 6672 of the Internal Revenue Code.
Thus, the corporate reasonable collection potential (RCP) will no longer include the
RCP of the responsible person(s).
For offers involving corporations, the trust fund portion of the tax liabilities must be paid,
the trust fund package forwarded for assessment or the TFRP assessed against all
responsible persons, before the Service will investigate an offer.
If the TFRP has not been assessed against all responsible persons, revenue officers
have two options when they negotiate with the corporate principals:
1. If the corporation wishes to file an offer, all responsible persons must first agree to
the assessment of the TFRP. The revenue officer must secure basic documentary
evidence per LEM 5.7 to support assertion of the TFRP. In addition, generally all
responsible persons must sign Form 2751, Proposed Assessment of Trust Fund
Recovery Penalty.
Note: The signing of the Form 2751 does not preclude the responsible person from
challenging the assessment by paying a divisible portion of the tax2 filing a refund claim
and, if unsuccessful, a refund suit.
If extenuating circumstances are present which prevent the assessment of the TFRP
against all responsible persons, the revenue officer, after consulting with a manager,
may consider processing the OIC without the assessment of all potential responsible
persons. For example, if a potential responsible person cannot be located, the revenue
officer may allow the corporate OIC to be considered if the Government’s interests are
sufficiently protected if the other responsible persons have agreed to the assessment of
the TFRP.
2. Alternatively, the responsible person(s) can personally full pay the trust fund amount
on behalf of the corporation. IRM 5.7.4.4 contains instructions when a responsible
person chooses to pay on behalf of the corporation.
Failure of the responsible persons to satisfy either option will result in a "solely to delay"
determination if the corporation files an offer. See IRM 5.8.3.19.
1 For the purposes of this memo the use of the term corporate or corporation also applies to any
entity in which assertion of the trust fund recovery penalty is applicable
2The responsible person must pay the amount equivalent to the withholding tax of one
employee for one taxable period in order to establish refund suit jurisdiction
2
Offers submitted on corporate accounts in Status 26 before assessment of the TFRP,
but subsequent to the corporate principals being advised that an offer will not be
processed unless the TFRP has been assessed or the trust funds paid, will be returned
as "solely to delay" collection. The assigned revenue officer will retain the balance due
case, and annotate this on Form 657. The offer will be returned by COIC without input
of ST 71 in accordance with the Form 657.
Note: If the liabilities are not currently in status 26 and/or the responsible
individuals had not been previously advised that an offer will not be investigated
unless the TFRP has been assessed or the trust funds paid, the offer specialist
will retain the offer and issue another investigation (OI) to the field.
Only the amount that can be collected from the corporation (including dissipated assets)
will be considered in the RCP calculation of an acceptable corporate offer. The Service
will pursue collection of the TFRP (unless the trust fund portion has been full paid)
assessed against the responsible persons.
A taxpayer may designate TIPRA payments (pre-acceptance) to a specific liability
including trust fund liabilities. Once the offer has been accepted, the taxpayer no longer
has the right to designate payments and post-acceptance payments will be applied in
the government’s best interest. Pre-acceptance payments designated to trust fund
must be posted using designated payment code (DPC) 02.
During initial analysis of an offer received from a corporation involving unpaid trust fund
tax, the Offer Specialist must determine the Assessment Statute Expiration Date
(ASED) of each period and take immediate steps to protect the statute if expiration is
imminent.
3
The following actions should be taken based on the facts of the case:
If… Then the Offer Specialist will … Then the RO will…
The account is in status
26 and the taxpayer has
been previously advised
that an offer will not be
considered until the
trust fund is paid or
assessed
Return the offer as solely to delay
collection
Retain the balance due
case and complete the
trust fund investigation
Trust fund tax is due
and the corporate
account is not assigned
to an RO when the offer
is submitted and the
TFRP has not been
assessed.
Generate an outgoing OI (coded
100) to the appropriate field group
to conduct the TFRP investigation.
Coordinate with the RO to ensure
the TFRP is assessed or trust fund
portion fully paid by the responsible
person(s).
Note: a formal appeal of the
proposed TFRP will result in return
of the offer as “solely to delay”
Complete the TFRP
investigation.
OI should be
completed within 90
days.
The ASED has expired
without any TFRP
assessment
Annotate the expiration in the case
history and continue processing the
offer determining only the
corporation’s RCP. Determine if the
ASED expired after the offer was
received. If the ASED expired after
the offer was received, prepare an
expired statute notification and
submit to your manager for
processing. See 5.7.3.8
When the Service accepts an offer from a corporation to compromise trust fund taxes,
the offer payments may not satisfy the entire trust fund portion of the tax liability due to
the manner in which accepted offer payments are applied. Therefore, any related TFRP
assessments will remain open for collection.
Offer payments (other than partial payments made under TIPRA in conjunction with
proposed offers) are applied in the best interest of the government, and any open trust
fund portions are paid last.
| 
