Part 5. Collecting Process

Chapter 7. Trust Fund Compliance

Section 8. In-Business Repeater Trust Fund Taxpayers

5.7.8  In-Business Repeater Trust Fund Taxpayers

5.7.8.1 Repeater Trust Fund Taxpayers
5.7.8.2 Identifying Repeater Trust Fund Taxpayers
5.7.8.3 Pyramiding Trust Fund Taxpayers
5.7.8.4 Systemic Identification of "Pyramiding Taxpayers"
5.7.8.5 Working Repeater and Pyramiding Trust Fund Taxpayers

5.7.8.1  (10-06-2006)
Repeater Trust Fund Taxpayers

1. The large number of in-business taxpayers who repeatedly accrue trust fund taxes is a major compliance problem. We need to properly identify these taxpayers and take appropriate action to bring them into compliance with their filing and paying requirements. When determining the appropriate course of action to resolve these accounts, additional weight must be giving to the fact that prior efforts to educate the taxpayer on the importance of maintaining compliance have not resulted in continuous compliance.

5.7.8.2  (10-06-2006)
Identifying Repeater Trust Fund Taxpayers

1. In order to concentrate limited resources on the most flagrant cases, only in-business taxpayers meeting the conditions in (2) below will be considered repeater taxpayers. Review all CFf BMF taxpayers in this category to determine if they meet the criteria of a repeater taxpayer as defined below.

2. Repeater trust fund taxpayers are those that are:

   1. In-business,

   2. Not current with Federal Tax Deposits (FTDs), and

   3. Has repeatedly been assigned to the field with outstanding liabilities.

      Note:

      Taxpayers who begin making timely and adequate Federal Tax Deposits after contact and are in compliance are no longer considered repeaters. Follow procedures in IRM 5.7.4.8 and 5.14.7 when considering an installment agreement for these taxpayers.

5.7.8.3  (10-06-2006)
Pyramiding Trust Fund Taxpayers

1. The large number of in-business taxpayers that are pyramiding trust fund taxes is also a major compliance problem. A pyramiding taxpayer is defined as:

   1. In business

   2. Not current with Federal Tax Deposits (FTDs), and

   3. Has two or more trust fund modules assigned to CFf

2. A taxpayer that is pyramiding taxes is not demonstrating a good faith effort to comply. Early intervention and continuous monitoring of Federal Tax Deposits can prevent in-business taxpayers from pyramiding.

5.7.8.4  (10-06-2006)
Systemic Identification of "Pyramiding Taxpayers"

1. IDRS has been programmed to generate a pyramiding indicator to be displayed on ICS when it is determined that a taxpayer is pyramiding additional liabilities.

2. The taxpayer entity pyramiding indicator will appear on modules with MFTs 01, 03, 04, 09, 11, or 16 if both (a) and (b) apply:

   1. A status 26 module with an assessed balance due per LEM 5.7.3 requirement, or a TDI status 03 module with a previously filed return amount per LEM 5.7.3 requirement exists,

   2. And an additional module is issued, in either status 26 or 03, with a return due date greater than 150 days from the date assigned to CFf.

   3. The indicator representing that the pyramiding occurred while assigned to an RO will use the same criteria listed in both (a) and (b) above, except that the calculation will be based upon the date of RO assignment.

3. The actual indicators that will be displayed on ICS are:

   1. NO941 (no trust fund outstanding)

   2. CFF (pyramided in Collection Field function)

   3. RO (pyramided with Revenue Officer)

4. The above indicators will provide information regarding whether pyramiding took place, after 150 days, either within CFf or after the case had been assigned to the Revenue Officer.

   Note:

   The pyramiding indicator does reset itself when the case is reassigned to another Revenue Officer. The CFf indicator does not reset.

5.7.8.5  (10-06-2006)
Working Repeater and Pyramiding Trust Fund Taxpayers

1. When a taxpayer is identified as a repeater and pyramiding trust fund taxes, attempt initial contact within 30 days from receipt of the case. See IRM 5.1.10 General Handbook, Taxpayer Contacts. Normally arrange to meet the taxpayer and his/her representative at the place of business. If such arrangements are not made, the reason why must be documented in the case history. Such a visit will be more productive and provide an opportunity to view and assess the business operation and its assets in the event a risk analysis determination needs to be completed. The field visitation will also facilitate review of any books and payroll records. In the event the RO is not able to meet the TP at the business location on initial contact, IRM 5.1.10.3(1) requires that a field call be made to the business location to view the assets when practical, but prior to closure of the case.

2. Prepare to conduct a 4180 interview at the time of the initial contact. Consider calculating the potential TFRP based on the current assessment. Use the ATFR system to make a rough calculation of the penalty and be prepared to discuss the process and the potential amount of the penalty during initial contact. See IRM 5.7.3 (TFRP) for additional information.

3. Get the taxpayer current with FTDs from the date of first contact. Document the case history as to what type of depositor the business is (monthly, semi-weekly) and how the deposits are made (FTD coupons, EFTPS, etc.). The Revenue Officer will monitor compliance with FTDs. Also verification that the FTDs being made are accurate based on the amount of the current payroll will be monitored. See IRM 5.1.10, Taxpayer Contacts for more specific requirements regarding what information must be obtained during initial contact.

4. Pyramiding must be stopped immediately. Advise the taxpayer that enforcement action will be taken if acceptable proof of compliance is not provided as required while the delinquent tax problem is being resolved. In the event the taxpayer continues to pyramid, all appropriate remedies will be used to bring the taxpayer into compliance and to immediately stop the pyramiding. If routine case actions have not been an effective way to stop the pyramiding, consider alternative solutions. Consider seizure and sale and/or pursuit of TFRP.

5. Secure sufficient financial information during the initial contact so that enforcement action can be taken, when appropriate.

6. If it is determined during contact with the taxpayer that the business is actually "Out of Business" or the business is no longer required to file returns, the RO will immediately complete Form 2363, Masterfile ENTITY Change, or Form 4844, Request for Terminal Action, to close out the filing requirements on IDRS. Continue procedures to pursue the TFRP investigation. See IRM 5.7.4.

7. Make a determination of the taxpayer’s ability to pay current and delinquent taxes without delay.

8. Set specific deadlines when requesting information from the taxpayer. The use of Form 9297, Summary of Taxpayer Contact, will be used in face-to-face meetings where deadlines are set. Use of the Form 9297 will ensure the taxpayer has a clear understanding of what has been requested and the specific deadline date the information is required to be submitted. The requirement to make FTDs and the date required to provide verification of FTD can also be listed on the Form 9297.

9. Installment agreements are not appropriate for taxpayers who continue to accrue tax liabilities after contact because they are not in compliance. See lRM 5.14.7 and 5.7.4.8.1, BMF Installment Agreements, for the procedures to follow when considering an installment agreement for BMF taxpayers who begin making FTDs after contact and are no longer considered a repeater.

10. Oftentimes, cases involving repeater and pyramiding taxpayers will require enforcement action. On initial contact, when a deadline is set for a specific action, the L-1058, Notice of Intent to Levy and Notice of Your Right to a Hearing will be issued with all required enclosures. Receipt of L-1058, during initial contact, may prompt the repeater taxpayer to comply. (See IRM 5.11.1.2.2.2)

    1. If contact is made, explain to the taxpayer the L-1058 is being issued to ensure their compliance with filing and paying requirements and failure to comply will result in enforcement action. The Revenue Officer must provide the taxpayer with their CDP rights and clearly explain the CDP process. The right to submit a Collection Due Process appeal will expire 30 days after issuance of the letter. The taxpayer will still have the opportunity for an "equivalent" hearing (See IRM 5.1.9.3.5) and/or to appeal a specific planned or actual collection action under the Collection Appeals Program (CAP) (See IRM 5.1.9.4).

    2. If attempts to contact the taxpayer are unsuccessful, consider issuing L-1058 and immediate enforcement action as the next course of action.

11. Make a lien determination within required time frames. Defer notice of lien filing only if the taxpayer is actively seeking financing to resolve the liability or if there is doubt about the correctness of the current balance due.

12. If levy sources are exhausted and the repeater or pyramiding taxpayer has no assets which can be seized to resolve or offset the liability, consider issuing Letter 903 (DO), see IRM 5.7.2 Monthly Filing and Special Deposit Procedures.

    1. These procedures should be used in the most egregious cases of non-compliance and where the collection procedures have already been unproductive.

    2. Issuance of the Letter 903 (DO) will assist in promoting compliance.

    3. Once the Letter 903 (DO) is issued, subsequent delinquencies by the taxpayer will be accelerated to the field for prompt enforcement action.

13. Inactivity gaps on these cases should be defined as " more than 30 days" with no contact or case movement toward resolution.

14. During a taxpayer contact, when the taxpayer asks to be referred to the Taxpayer Advocate Service (TAS) or the taxpayer meets TAS criteria and the taxpayer's issue cannot be resolved within 24 hours, then prepare and forward Form 911, Application for Taxpayer Assistance Order to the Local Taxpayer Advocate (See IRM 13, Taxpayer Advocate Service).

    Note:

    If the issue cannot be completely resolved within 24 hours but steps are taken to begin resolving the taxpayers issues within 24 hours, do not forward Form 911 unless the taxpayer asks to be referred to TAS.

5.7.8.5.1  (10-06-2006)
Seizure and Sale of Repeater Trust Fund Taxpayers’ Assets

1. The repeater taxpayer’s history of non-compliance is an important factor when seizure of an in-business taxpayer’s assets is contemplated (See Policy Statement P-5-34). However, if additional unpaid trust fund liability accrues after contact with the taxpayer, a seizure should be made if, after conducting a risk analysis (IRM 5.10.1.3.2(3)), the seizure is determined to be the most appropriate action. The Revenue Officer must ensure that there will be expected net proceeds from the sale and that all other IRM and IRC requirements are followed.

   Note:

   Taxpayers who continue to pyramid liabilities after contact are considered "won't pay " taxpayers as indicated in IRM 5.10.1.4(2) and the Revenue Officer must proceed with enforced collection as necessary.

5.7.8.5.2  (10-06-2006)
Trust Fund Recovery Penalty Procedures

1. If the liability cannot be fully paid on initial contact and/or if the taxpayer continues to fail to make FTDs after initial contact, proceed with the Trust Fund Recovery Penalty (TFRP) investigation and assessment. See IRM 5.7.4 for more detailed TFRP information.

2. Make a collectibility determination (See IRM 5.7.5) against those determined to be both responsible and willful under the TFRP.

   Note:

   Taxpayers who begin making appropriate Federal Tax Deposits after contact and are in compliance are no longer considered repeaters. A TFRP determination must still be made. The procedures in IRM 5.7.4.8 and/or 5.14.7 should be followed when considering an installment agreement for these taxpayers.

3. When conducting the TFRP investigation, be sure to consider the potential for additional liabilities from unfiled returns.

5.7.8.5.3  (10-06-2006)
Offers in Compromise

1. In-business taxpayers who submit an offer to compromise on employment taxes must demonstrate compliance by timely filing and making timely Federal Tax Deposits during the course of the investigation or the offer, previously determined processable, will be returned. (See IRM 5.8.7.2.2(3)).