IRS Form 2751 (2002): Proposed Assessment of TFRP

What IRS Form 2751 (2002) Is For

IRS Form 2751 (2002), also known as the Proposed Assessment of Trust Fund Recovery Penalty, is issued by the Internal Revenue Service to notify an individual that the agency intends to hold them personally responsible for unpaid trust fund taxes. These taxes include withheld income tax, Social Security tax, and Medicare tax that an employer failed to remit. The form accompanies IRS Letter 1153 and is part of a fund recovery penalty assessment process following a TFRP investigation into a business’s unpaid employment taxes.

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When You’d Use IRS Form 2751 (2002)

You do not file this form yourself; the Internal Revenue Service issues it when enforcing a TFRP case against a responsible person.

• After a TFRP investigation, the IRS conducts an investigation using Form 4180 to determine who was responsible for paying payroll taxes and whether those taxes were paid willfully or not.
  
  
• After identifying responsible persons, the IRS issues the proposed assessment to individuals with the authority to pay employment taxes who have willfully failed to do so.
  
  
• After the issuance of Letter 1153, Form 2751 arrives, which is accompanied by IRS Letter 1153, providing the taxpayer with 60 days to respond or appeal.
  
  
• During enforcement for unpaid trust fund taxes, the form applies when a business fails to pay withheld income, Social Security, or Medicare taxes, creating personal liability for responsible parties.

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Key Rules or Details for 2002

By 2002, the Trust Fund Recovery Penalty process followed stricter procedures established by the Taxpayer Bill of Rights 2 to protect taxpayers’ appeal rights.

• 60-Day Response Period: The taxpayer must respond to Letter 1153 within 60 days (or 75 days if outside the United States) to retain the right to a pre-assessment appeal.
  
  
• Assessment Statute Expiration Date (ASED): The Internal Revenue Service must issue Letter 1153 before the ASED expires; otherwise, the agency loses the legal authority to assess the penalty.
  
  
• Quarterly assessments: The IRS assesses each tax period separately, which means responsible persons may receive multiple Form 2751 notices for different quarters of unpaid trust fund taxes.
  
  
• Joint and several liability: The IRS may assess multiple responsible parties for the same unpaid amount, but the total collection cannot exceed the actual tax liability.
  
  
• Form 2750 waivers: Responsible persons may sign Form 2750 to extend the statute of limitations and allow additional time for the appeals process or further investigation.

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Step-by-Step (High Level)

The process for IRS Form 2751 (2002): Proposed Assessment of Trust Fund Recovery Penalty follows a series of administrative steps from investigation to collection.

1. IRS Investigation: A revenue officer begins a TFRP investigation after identifying a business with unpaid employment taxes and reviews payroll and tax records.
   
   
2. Form 4180 Interview: The officer interviews potentially responsible persons to determine their authority to pay trust fund taxes and their knowledge of the unpaid balances.
   
   
3. Responsibility Determination: The IRS prepares Form 4183, which summarizes findings and recommends whether a proposed TFRP assessment should proceed.
   
   
4. Issuance of Letter 1153 and Form 2751: The IRS issues a formal proposed assessment outlining each tax period’s outstanding taxes and the total penalty amount.
   
   
5. Taxpayer Response: The responsible person can sign Form 2751 to agree, file a written protest to appeal, or take no action within the response period.
   
   
6. Assessment and Appeals: If the responsible person agrees or fails to respond, the IRS assesses the penalty; if protested, the case is transferred to Appeals for review.
   
   
7. Collection Actions: If payment is not made, the IRS uses Form 2749 (Request for Trust Fund Recovery Penalty Assessment) to initiate collection through levies, liens, or installment arrangements.

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Common Mistakes and How to Avoid Them

Taxpayers frequently make preventable errors when responding to a proposed TFRP assessment. Each mistake can result in immediate personal liability or loss of appeal rights.

• Signing Form 2751 Without Advice: Signing this form confirms agreement with the penalty assessment and establishes personal liability; seek professional guidance from a qualified tax professional before signing.
  
  
• Missing the 60-Day Response Period: Failing to reply within the 60-day window results in an automatic assessment. Always send your protest or agreement using certified or registered mail to ensure proof of timely submission.
  
  
• Assuming Only Business Owners Are Liable: The IRS may assess any responsible person with financial control, including managers or bookkeepers; review your role carefully before accepting liability.
  
  
• Submitting Incomplete Appeals: A written protest must include all required information under IRM 5.7.6 to be valid; incomplete protests can be dismissed without review.
  
  
• Paying Other Creditors First: Choosing to pay vendors or employees while neglecting trust fund taxes demonstrates willful failure; always prioritize payroll tax deposits once you are aware of delinquency.

What Happens After You Respond

Once you respond to IRS Form 2751 (2002), the IRS reviews your submission and determines the next course of action. If you agree with the proposed assessment, the agency issues a Notice and Demand for Payment, and the liability is added to your personal tax account. If you protest within 60 days, the case is transferred to the IRS Appeals Office for independent review. If you fail to respond, the IRS will automatically assess the penalty using Form 2749 and initiate collection procedures. 

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FAQs

What is the Fund Recovery Penalty (TFRP)?

The Trust Fund Recovery Penalty (TFRP) is a serious IRS enforcement action that holds a responsible person personally liable for unpaid taxes withheld from employees’ wages. It applies when a business fails to make a proper federal tax deposit for income, Social Security, or Medicare taxes, and those trust fund amounts remain unpaid.

How do employment taxes relate to IRS Form 2751 (2002)?

Employment taxes include the income, Social Security, and Medicare taxes withheld from employee paychecks. Suppose these taxes are not submitted to the IRS. In that case, the agency may issue IRS Form 2751 (2002) to initiate a proposed assessment against the individual responsible for ensuring that the withholding taxes were paid.

What are the collected excise taxes in relation to the TFRP?

Collected excise taxes are specific taxes that a business collects from customers on behalf of the federal government. When a company collects excise taxes but fails to remit them, the IRS may impose a fund recovery penalty, as outlined in Form 2751, to recover the unpaid taxes from responsible parties.

Can the IRS require a responsible person’s signature on Form 2751?

Yes, the responsible person’s signature on Form 2751 confirms agreement with the proposed assessment and authorizes the IRS to proceed with the penalty. Before signing, it is critical to verify the accuracy of the proposed tax periods and outstanding tax liabilities to prevent unnecessary personal liability