Trust Fund Penalty – Technical Question

[James]

Everyone,

I have a husband-wife team who had a failed restaurant and were assessed TFRP on both. The question I have is about interest. I know the penalty is assessed against both in the full amount so payment by one offsets the amount owed by the other. Does this also apply with the interest assessed against both of them?

So if one party was able to get payment of the trust fund taxes and interest on their share, would that resolve the other taxpayer’s total liability or will the other spouse still be liable on the accrued interest?

Also any suggestions on treatises/books solely dedicated to resolving trust fund taxes would be very very welcome.

Jim Wade

[Eric Green]

Jim, yes it should. The interest runs on the balance, so the interest is also joint and several.

[James Wade]

Eric,

Thank you for the quick reply! Very helpful.

Interesting sidenote. This case was previously a Chapter 13 and interestingly the IRS argued that both debtors were liable for their share separately so instead of allowing (in this case) 100k TFRP and 22k interest (assessed against both of them separately) to be paid 100% through the plan, the IRS objected and required the debtors to treat the debt in the plan as if each owed a separate debt (so doubling it up to 200k priority claim plus interest at 44k). Just goes to show the IRS can’t get this straight all the time either.

Sincerely,

Jim Wade

[Author]

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