5.7.5. Collectibility Determination

(1) The Trust Fund Recovery Penalty (TFRP) is based on IRC 6672 and facilitates the collection of tax and enhances voluntary compliance. The TFRP serves as an alternative means of collecting unpaid trust fund taxes when taxes are not fully collectible from the company/business that failed to pay the withheld taxes. Internal Revenue Manual (IRM) 5.7.5, Collectibility Determinations, provides procedures and guidance for employees tasked with making a collectibility determination during a TFRP investigation.

(1) IRC 6103, Confidentiality And Disclosure Of Returns And Return Information.

(2) IRC 6323, Validity And Priority Against Certain Persons.

(3) IRC 6672, Failure To Collect And Pay Over Tax, Or Attempt To Evade Or Defeat Tax.

(4) IRC 7521, Procedures Involving Taxpayer Interviews.

(5) IRC 7602, Examination Of Books And Witnesses.

(6) IRC 7609, Special Procedures For Third-Party Summonses.

(1) The Director, Collection Policy, is the executive responsible for the policies and procedures utilized by Collection personnel.

(2) Field Collection group managers and ROs are responsible for ensuring compliance with the guidance and procedures described in this IRM.

(3) Group managers have the authority to review and approve TFRP recommendations, including the recommendation to nonassert the TFRP based on collectibility.

(4) ROs are responsible for making collectibility and/or nonassertion determinations during a TFRP investigation.

(5) Field Collection is responsible for ensuring taxpayers are informed of their rights in accordance with the Taxpayer Bill of Rights (TBOR) adopted in June of 2014.

(1) Program Reports: The Automated Trust Fund Recovery (ATFR) program is used for group controls of imminent assessment statutes and timely TFRP case actions. ATFR pulls data from the Integrated Collection System (ICS) and the Integrated Data Retrieval System (IDRS). ATFR is also supplemented by the ENTITY Case Management System (ENTITY). The following reports assist GMs and ROs to monitor the progress of TFRP investigations, to identify potential issues on cases with imminent Assessment Statute Expiration Dates (ASEDs), and to take the appropriate actions to protect the statute:ATFR Reports

(2) Program Effectiveness: Embedded Quality (EQ) reviews conducted by GMs assess the timeliness of TFRP case actions. Collection Automation Support and Security (CASS) provides monthly ATFR timeliness reports that measure TFRP program timeliness goals. These reports provide the information necessary to allow ROs the opportunity to make timely and appropriate TFRP recommendations and assessment actions. Collection Policy does periodic program reviews to identify trends and opportunities to improve timely and effective TFRP case actions.

(1) ATFR tracks and records TFRP assessment actions and history. Field Collection employees are generally the primary users of ATFR, based on the employees’ duties and responsibilities.

(2) Field Collection employees use ICS for inventory control and history documentation.

(3) Managers approve TFRP determinations, assessment, and/or nonassertion recommendations.

(4) Territory Managers (TM) and Area Directors (AD) include TFRP timeliness trends in operational reviews.

(5) Managers are required to follow program management procedures and controls addressed in IRM 1.4.50, Collection Group Manager, Territory Manager and Area Director Operational Aid.

(1) This table lists commonly used acronyms and their definitions:

(2) Additional acceptable acronyms and abbreviations are found in the ReferenceNet Acronym Database, which may be viewed at: Acronyms Database.

(1) IRM resources

(2) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution Of Duties In Accord With Taxpayer Rights. For additional information about TBOR see: Taxpayer Bill of Rights. and IRM 1.2.1.2.36, Policy Statement 1-236, Fairness and Integrity in Enforcement Selection.

(1) If there is no present or future collection potential after reviewing and verifying the financial information, do not recommend assertion of the TFRP.

(2) Using ATFR, prepare Form 9327 based on collectibility:

1. Include all recommendations of nonassertion based on collectibility.

2. Provide a narrative as to why the penalty should not be assessed.

3. Submit the form for approval by the GM for all dollar amounts above IRM 5.7.4.2 criterion along with all appropriate supporting documentation (CIS, income/expense/asset verification). See IRM 5.7.5.2(3), if the aggregate trust fund balance is below "IRM 5.7.4 criteria."

(3) Include one copy of Form 9327 with the TFRP file. Include a copy of Form 9327 with a copy of the approved Form 4183 in the balance due case file.

(4) Nonassertion of the penalty should be recommended if a responsible person cannot be located, nor can any assets or income sources be located.

(5) Assertion of the penalty should be recommended if the responsible person cannot be located but assets or income sources can be located.

(6) If the TIN of the responsible person is unknown but assertion of the TFRP is still being recommended, contact the Entity Control unit at the appropriate Campus to have an Internal Revenue Service Number (IRSN) assigned (See IRM 3.13.5.23, Internal Revenue Service Number (IRSN) Format). In order to establish the account you will need to provide the initiator's name, address, and phone number, the purpose for which the number is needed (TFRP assessment), and the following information on the responsible person:

• Name

• Address

• Filing Status

• First period for which assessment is anticipated

  Note: After the IRSN is assigned, the account will be established on IDRS in approximately three weeks. Once it is established on IDRS, the account can be worked on ATFR using normal assessment procedures.

(7) Associate the case files for TFRP nonassertions based on collectibility with the balance due case file after GM’s approval.

(8) TFRP case file submission to CPM is not necessary.

(1) If the present collection potential is minimal but future collection potential exists:

1. Recommend assertion of the TFRP for GM approval.

2. Advise the responsible person that one notice will be sent reflecting the balance due, and a NFTL will be filed, if appropriate.

3. Prepare Form 53, Report of Currently Not Collectible Taxes, for the TFRP (enter a mandatory follow-up date in item 22 if appropriate).

4. Forward the entire package through the GM for Form 53 approval.

5. Document the ICS case history and annotate on Form 2749, Request for Trust Fund Recovery Penalty Assessment(s), that Form 53 was prepared.

6. Process the TFRP assessment per IRM 5.7.6.2, Responsible Person's Response to Letter 1153. Attach part 2 of Form 53 to Form 2749 in the TFRP case file. Process the currently not collectible file per IRM 5.16.1.2, Currently Not Collectible Procedures .

   Note: Please see IRM 5.16.1.4, Requesting Currently Not Collectible Input for Assessed and Pre-assessed Tax Periods.