Acton, CA TFRP: Owner and Bookkeeper Responsibility Facts

In Acton, CA, the Trust Fund Recovery Penalty can apply very differently to an owner and a bookkeeper. The IRS does not decide by title alone. Under IRM 5.7.3, it looks at who had real authority over paying creditors, who knew payroll taxes were unpaid, and whether that person chose other bills anyway. A timeline of duties and decisions usually tells the story better than an org chart.

Start with a decision timeline

Build the file in order, not by label. Note when payroll deposits were missed, when each person learned the taxes were unpaid, who approved payments to vendors, and who had the power to change that decision. That sequence helps show whether one person had significant control over finances or merely processed payments as directed.

In TFRP cases, responsibility is a facts-and-circumstances question. The IRS may interview you to understand the full scope of duties, so the timeline should separate routine bill-paying from independent financial judgment. If the records show an owner made the choices about which creditors to pay, that points one way. If the records show a bookkeeper only followed orders and had to ask which bills could go out, that points another way.

What records matter most

Focus on documents that reveal actual authority. Helpful records include signature cards, bank access logs, payroll instructions, emails about which bills to pay, board or member minutes, job descriptions, and internal messages showing who approved tax deposits or creditor payments. Payroll returns, deposit confirmations, and account statements help connect the dates to the decisions.

The IRS guidance in IRM 5.7.3 explains that a person is not responsible merely because they sign checks or prepare returns. A bookkeeper who performs ministerial acts under supervision is generally not the same as someone with significant control. By contrast, an owner or senior employee who can decide how cash is used may face personal exposure even if someone else handled the mechanics.

Separate responsibility from willfulness

Responsibility and willfulness are different questions. Responsibility asks whether the person had enough control and authority to be treated as a responsible person. Willfulness asks whether the person knew, or should have known, about the unpaid trust fund taxes and still allowed other creditors to be paid first. The IRS states that using available funds for other creditors when the business cannot pay employment taxes is an indication of willfulness.

That means the owner may be responsible even if the bookkeeper merely carried out instructions. It also means a bookkeeper is not automatically protected by a job title if the facts show independent judgment over creditor payments or access to financial decisions. Each recommendation stands on its own merits, so the IRS can reach different conclusions for different people in the same business.

Respond carefully if the IRS sends a proposal

If the IRS concludes a person may be responsible, it sends a letter proposing the TFRP. That letter explains appeal rights, and the recipient has a limited time to respond. Do not assume that a company payroll problem automatically becomes the same personal case for everyone involved. The business tax debt and the personal penalty are separate issues, even though they are related.

A practical next step is to prepare a person-by-person packet before answering. Include the timeline, the records showing who directed payments, and any proof that one person lacked independent authority. For example, in a hypothetical file, a bookkeeper who can only pay bills after the treasurer approves them is different from an owner who chooses to pay suppliers while payroll taxes remain unpaid. That distinction may matter a great deal under IRM 5.7.3.

Questions about An owner and a bookkeeper face different responsibility facts

Sources and related resources

• Internal Revenue Manual 5.7.3
• Employment taxes and the Trust Fund Recovery Penalty (TFRP)

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Top photograph: Lancashire County Council, Dot Boughton, 2007-12-13 16:23:08 · CC BY-SA 2.0.

General educational guidance. Relief and collection protections depend on the actual notices, account history, financial evidence, and applicable law. A consultation does not itself stop enforcement or preserve an appeal deadline.