IRS Form 4180 Interview: What the Revenue Officer Is Deciding About the Trust Fund Recovery Penalty

A Form 4180 interview is the IRS revenue officer’s interview, documented on Form 4180, that gathers the facts used to decide whether you personally were a responsible person who willfully failed to pay over the income, Social Security and Medicare taxes your business withheld from employees’ pay. Your answers can support a penalty equal to those unpaid taxes, collectible from you personally; you can ask to pause and consult a representative, unless the interview was initiated by an administrative summons.

The interview normally happens at the revenue officer’s initial contact. If the IRS then decides you are a responsible person, it sends a letter proposing the penalty.

The interview builds the record for a personal penalty

The IRS calls this the Trust Fund Recovery Penalty (TFRP), imposed by section 6672(a), and computes it from the unpaid withheld income tax plus the employees’ share of Social Security and Medicare taxes. The IRS’s TFRP page adds: “The business does not have to have stopped operating in order for the TFRP to be assessed.”

The Internal Revenue Manual describes Form 4180 as the form for TFRP interviews: “It is intended to be used as a record of a personal interview with a potentially responsible person.” Revenue officers try to secure one from every potentially responsible person.

What the questions are testing

Responsibility is “a matter of status, duty, and authority,” according to IRM 5.7.3.4.1. Revenue officers ask who hires and fires, decides which creditors get paid, signs Form 941, controls payroll and makes tax deposits. A title or stock ownership cannot be the sole basis for a responsibility finding, and exercising check-signing authority does not by itself establish it: “Signatory authority may be merely a convenience.” An employee who only paid bills as a superior directed is not a responsible person, the IRS’s TFRP page says. Delegating the finances generally does not avoid responsibility; the revenue officer asks whether it left you powerless to direct payments.

Willfulness requires no evil intent: the responsible person must have been, or should have been, aware of the unpaid taxes and either intentionally disregarded the law or was plainly indifferent to it, the IRS’s TFRP page says. IRS Notice 784 says: “Paying other business expenses instead of trust fund taxes, including the payment of net payroll, is considered willful behavior.” Expect questions about when you learned of the missed deposits and what the business paid afterward.

How the interview is run

Under IRM 5.7.4.2.3 and 5.7.4.2.4, the revenue officer should:

• give you Publication 1, Your Rights as a Taxpayer, and Notice 784, and explain the penalty;
• show you the penalty calculation (page 4 of Form 4183) and explain it; payroll records showing what each tax deposit covered and that it was timely may lower the figure;
• conduct the interview in person or by phone, without sending you the form in advance;
• record “unknown” where you cannot answer;
• ask you to sign the completed form, sign it too, and give you or your representative a copy when feasible.

The printed questions are a guide, and “supplemental questions may be asked.” A summons may be used to require your attendance.

Your rights during the interview

Section 7521 sets the main safeguards:

• Consultation. If you clearly state that you want to consult an attorney, CPA, enrolled agent or other authorized representative, the IRS employee “shall suspend such interview regardless of whether the taxpayer may have answered one or more questions.” That right does not apply to an interview initiated by an administrative summons.
• Representation. A representative with your written power of attorney may represent you in an in-person interview, and absent an administrative summons issued to you the IRS may not require you to come along.
• Recording. On advance request, you may audio-record an in-person interview at your own expense and with your own equipment.

If you are asked to sign Form 2751

If you agree to the penalty during the interview, the IRM tells the revenue officer to explain your appeal rights and obtain your signature on Form 2751, Proposed Assessment of Trust Fund Recovery Penalty. The manual adds that Letter 1153 should follow as soon as possible and that “A signature on Form 2751 does not extinguish a responsible person’s appeal rights.” Revenue officers are not to treat a signed Form 2751 as a conclusive waiver until the 60- or 75-day restriction period, plus five days, expires, because a person may change their mind. Signing still means agreeing to a personal liability; check the periods and amounts first.

Except in a jeopardy case, section 6672(b) requires written notice, by mail or in person, that you are subject to an assessment of the penalty, at least 60 days before any notice and demand. The IRS’s TFRP page gives 60 days from the letter’s date to appeal, or 75 days if addressed outside the United States; our Letter 1153 guide covers that stage.

Preparing for the interview

The IRM’s core evidence for a recommendation is the Form 4180 interviews, the articles of incorporation, bank signature cards or electronic PIN and password assignments, and a sampling of canceled checks, or bank statements for businesses that mostly bank electronically, showing other creditors paid ahead of the IRS. Our reading: before the interview, use those same records to reconstruct, for each unpaid quarter, who signed checks, who chose which bills to pay and when you first knew deposits were missed. Answer from documents and say “unknown” rather than guess; the signed form becomes evidence in the IRS file.