IRS Trust Fund Recovery Penalty (TFRP) Letter 1153 Defense

The situation

Marcus, 47, was the co-owner and CFO of a restaurant group that closed in 2023 after COVID-era debt caught up with the business. The company had missed payroll tax deposits for three quarters in 2022 (Q2, Q3, Q4), totaling $89,000 in unpaid trust fund taxes (employee federal income tax withholding + employee FICA). The business filed for Chapter 7 bankruptcy in early 2023 and was dissolved.

In November 2025, Marcus received IRS Letter 1153, a proposed Trust Fund Recovery Penalty of $89,000 assessed against him personally as a responsible person who willfully failed to remit payroll trust fund taxes. The letter states he has 60 days to protest.

(a) This liability cannot be discharged in bankruptcy. Unlike the restaurant company's vendor debts, lease obligations, and SBA loan (all wiped in the Chapter 7), personal TFRP liability under IRC § 6672 survives bankruptcy. If Marcus doesn't protest effectively, IRS can levy his personal bank accounts, garnish his wages from his new job, and put a federal tax lien on his home.

(b) The "responsible person" and "willful" elements are both contestable. Marcus was the CFO who signed payroll checks, but the restaurant group also had a CEO who controlled all cash flow decisions and instructed Marcus not to remit IRS deposits while paying suppliers and rent. IRS must prove Marcus was BOTH a responsible person AND that his failure was willful (not merely negligent or cash-flow-forced). The "cascading creditor priority" defense, that Marcus paid other creditors not because he wanted to avoid the IRS but because the CEO directed all payments, is a documented IRS Appeals-accepted argument under IRM 5.7.

(c) The Fast-Track Settlement option is available. Because his TFRP amount is >$25k, Marcus needs a formal written protest. But he can also simultaneously request Fast-Track Settlement through IRS Appeals, a 30–40 day mediated resolution process that resolves most TFRP cases before a formal Appeals hearing.

(d) A tax attorney quoted Marcus $12,000 for TFRP protest preparation and Appeals representation.

Who receives this

Business officers, co-owners, CFOs, bookkeepers, and "check signers" at failed small businesses who received IRS Letter 1153 proposing personal TFRP assessments for unpaid payroll trust fund taxes, especially those from businesses that closed during 2020–2024 (COVID wave + post-pandemic business failures).

Why the agency will not advise you

The IRS cannot advise TFRP respondents how to build a non-responsible-person or non-willful defense against its own proposed assessment. IRS Taxpayer Advocate Service handles systemic issues, not TFRP protest strategy. Full-service tax resolution firms (irstrustfundtax.com, Optima Tax Relief) charge $5,000–$20,000. The personal, non-dischargeable nature of TFRP liability creates extreme urgency: unlike most tax disputes, losing here means permanent personal financial exposure.

Key facts, with sources

• The IRS Trust Fund Recovery Penalty (TFRP) under IRC § 6672 makes any 'responsible person' who 'willfully' failed to collect and/or remit employee payroll trust fund taxes (employee share of FICA + federal income tax withholding) personally liable for the full unpaid trust fund amount, regardless of the business entity's liability protection. The IRS initiates TFRP proceedings by issuing Letter 1153 (the proposed TFRP assessment), which the recipient has 60 days from the mailing date to protest. The protest options are: (1) Small Case Request (Form 12203) for TFRP amounts ≤$25,000; (2) Formal written protest (must include statement of facts, declaration under penalties of perjury, and argument) for amounts >$25,000; (3) Fast-Track Settlement or Fast-Track Mediation (available before the Appeals case is assigned, typically 30–40 days). The TFRP is not dischargeable in bankruptcy, unlike most business debts, personal TFRP liability follows the individual even through Chapter 7 or Chapter 13 bankruptcy. IRS Internal Revenue Manual § 5.7 governs TFRP investigation and assessment procedures. Source: IRC § 6672 — Trust Fund Recovery Penalty — IRS · IRS Publication 1 — Your Rights as a Taxpayer · IRM 5.7 — Trust Fund Compliance — IRS Internal Revenue Manual
• The 2025 IRS reforms included two significant changes relevant to TFRP respondents: (1) digital submission of TFRP protests and supporting documentation (previously paper-only) was expanded to allow electronic submission through IRS.gov secure messaging, shortening the response cycle and eliminating postal deadline risk; (2) the IRS expanded availability of First-Time Abatement (FTA) for TFRP assessments where the responsible person had no prior TFRP history and the failure was non-willful (cash flow crisis rather than deliberate disregard), IRS Appeals began accepting FTA arguments more consistently in 2025 under updated Appeals guidance. The attorney market for TFRP defense is well-established: irstrustfundtax.com is a dedicated TFRP attorney site; taxcure.com provides informational content on TFRP but is not a self-serve navigator; Fortress Tax Relief, Optima Tax Relief, and Community Tax are full-service tax resolution firms offering TFRP representation at $5,000–$20,000. No self-serve TFRP Letter 1153 protest navigator exists. Source: Trust Fund Recovery Penalty — IRS.gov · Fast Track Settlement — IRS Appeals · First Time Penalty Abatement — IRS.gov

When to bring in a professional

Self-serve responses fit routine cases: clear facts, amounts a business can absorb, and a deadline still ahead of you. Bring in a licensed professional when the amount at stake is large relative to their fee, the facts are genuinely disputed, criminal exposure is possible, or the deadline has already passed. A short paid consultation to sanity-check your plan is often worth it even when you handle the filing yourself.

All sources for this guide

1. IRC § 6672 — Trust Fund Recovery Penalty — IRS
2. IRS Publication 1 — Your Rights as a Taxpayer
3. IRM 5.7 — Trust Fund Compliance — IRS Internal Revenue Manual
4. Trust Fund Recovery Penalty — IRS.gov
5. Fast Track Settlement — IRS Appeals
6. First Time Penalty Abatement — IRS.gov