FTM takes place before a formal protest is filed and must occur within the 60 or 75 day TBOR2 appeal period. It can be initiated by either the taxpayer or Collection, but both must mutually agree to FTM.

A TBOR2 protest (whether perfected or not) is timely if it is delivered, faxed, properly postmarked or mailed by certified or registered mail, on or before the 60th day (75th day if the letter was addressed outside of the United States) after the date Letter 1153 (DO) was mailed or personally delivered.

Per IRC 7503, if the 60th day (75th day if the letter was addressed outside of the United States) after the date Letter 1153 (DO) was mailed or personally delivered falls on a Saturday, Sunday, or a legal holiday, the TBOR2 protest is considered timely if it is delivered, faxed, properly postmarked or mailed by certified or registered mail on the next succeeding day which is not a Saturday, Sunday, or a legal holiday. .

A private postage meter stamp is not evidence of when a request for appeal was mailed; it merely establishes when the request was stamped.

ROs are directed to date stamp Letter 1153 (DO) with the date of service and document in the Integrated Collection System (ICS) case history for the employers' case, the method of delivery and any discussions with the responsible party related to receipt of Letter 1153 (DO). ATFR program will be updated when Letter 1153 (DO) is personally delivered.

The ASED is not suspended by TBOR2 if the protest is not timely. If the protest was received late, take the following actions:

Field Collection is responsible for determining whether a taxpayer’s TFRP protest was timely received. Prior to forwarding a TFRP case file to Appeals, Advisory CPM no longer reviews the case file for timeliness of a protest. See IRM 5.7.6.1.9, Transmittal of Case to Appeals, and IRM 5.7.10.5, Appeals Case Processing. IRM 5.7.6.1.6, Receipt of Protest, paragraph (1) requires the RO to retain the protest mailing envelope (or original faxed document), stamp the protest with the date it was received, and document receipt of the protest in the ICS case history. If the TFRP case contains no evidence of the date the protest was mailed or received:

IRC 7508 and IRC 7508A postpone certain time-sensitive acts when a person is serving in the armed forces in a combat zone, or there is a presidentially declared disaster. Rev. Proc. 2007-56 includes the 60 day period for appealing the proposed assessment of a trust fund recovery penalty.

For an administrative review of a jeopardy assessment, the taxpayer must file a written proposal with the Area Director within 30 days from the date of the notice of jeopardy assessment letter.

If administrative review was requested timely, the taxpayer can have the action reviewed by a federal district court. For this, a suit must be filed within 90 days after the earlier of :

There are several different kinds of TFRP claims with different time requirements.

IRC 6511(a) administrative claims for refund must be filed within two years of the payment to be refunded. For judicial review, the taxpayer must petition the court within 2 years of the date of the Notice of Claim Disallowance.

IRC 6511(h) provides for exceptions to the two-year statute of limitations for refunds by suspending the statute during the time a taxpayer is unable to handle his or her financial affairs for either of the following reasons:

Under Rev. Proc. 99-21, 1999-1-C.B. 960, there are two written statements that must be submitted with a claim for credit or refund of tax to claim financial disability under IRC 6511(h) . The first required statement is written by a physician (as defined in section 1861(r)(1) of the Social Security Act, 42 U.S.C. 395x(r)), qualified to make the determination, that sets forth:

The second required statement is written by the person signing the claim for credit or refund certifying that no person, including the taxpayer's spouse, was authorized to act on behalf of the taxpayer in financial matters during the period described in paragraph (d) above. Alternatively, if a person was authorized to act on behalf of the taxpayer in financial matters during any part of the period described in paragraph (d), the beginning and ending dates of the period of time the person was so authorized.

Specific to TFRP, IRC 6672(c) prohibits collection by levy or proceeding in court and suspends the CSED if the taxpayer files a claim for refund, pays the portion of the TFRP required to commence a proceeding in court, and furnishes the required bond within 30 days after notice and demand. If the claim for refund is disallowed and the taxpayer files suit for refund within 30 days, the prohibition on collection and suspension of the CSED continue until final resolution of the proceeding.

If time or payment requirements are not met, but the taxpayer submits a request for a post-assessment appeal, it can be worked as an informal claim for abatement.

In general, taxpayers have 30 days after a Notice of Claim Disallowance to request Reconsideration by Appeals. The time required for Reconsideration does not extend the time the taxpayer has to request judicial review.

A request for PAM must be submitted before a case is closed out of Appeals.

Refer to IRM 8.26.9, Alternative Dispute Resolution (ADR) Program, Post-Appeals Mediation Procedures for Collection Cases, for guidance on PAM in TFRP cases.

FTM does not require a formal protest. SB/SE submits Form 13369, Agreement to Mediate, and a brief summary of issues to Appeals. The taxpayer must provide a written position on the issues.

Refer to IRM 8.26.3, Alternative Dispute Resolution (ADR) Program, Fast Track Mediation for Collection Cases, for FTM guidance in TFRP cases.

Letter 1153 (DO) provides instructions that the taxpayer must follow to receive an appeal of the proposed assessment. A Small Case Request is appropriate if the total amount of tax, penalties and interest for each period is $25,000 or less. If more than one tax period is involved and any tax period exceeds the $25,000 threshold, a Formal Written Protest for all periods must be filed.

A written proposal must be filed with the Area Director, requesting redetermination of whether or not:

A formal claim must be filed on a Form 843, Claim for Refund and Abatement of Tax. A taxpayer must pay one employee’s employment tax liability and submit a separate Form 843 for each quarter. A taxpayer can challenge the government’s decision on a formal claim in court.

Advisory and field collection can not reverse an Appeals determination. Therefore, if Appeals made an earlier determination on the TFRP (whether in the form of Letter 1153 protest, claim, doubt as to liability offer in compromise, etc.), the claim is forwarded to Appeals without consideration from Collection Advisory.

If the ATE determines during initial review that the issue is different or new, close the claim as a premature referral. Use the premature referral reason description, "New Issue-Government’s Position Not Established" . Collection Advisory will work the claim. If Advisory partially or fully denies the claim, they issue the Claim Disallowance Letter. This letter notifies the taxpayer that they have 30 days to request reconsideration by Appeals and two years to request consideration by a court.

If the ATE determines during initial review that Appeals has already made a determination on the issue raised, Appeals will work the claim. Follow the guidance in IRM 8.25.2.4.2 (6) and (7) for any new information received.

When Appeals makes a determination, it must issue the appropriate claim closing letter. If a certified Claim Disallowance Letter has never been issued, and the claim is partially or fully denied, Appeals is responsible for issuing the Claim Disallowance Letter that starts the two-year time frame for the taxpayer to have the claim considered by a court.

If the taxpayer has made the required payment, submitted the Form(s) 843, and posted a bond under IRC 6672(c) within 30 days of notice and demand, collection action is stayed and the CSED is suspended until Appeals makes its final determination. If the taxpayer then files a suit for refund within 30 days of denial of the refund claim, the CSED remains suspended until the court reaches its final resolution.

If Appeals has not made a previous determination on the issues raised (through a timely Letter 1153 protest, claim, doubt as to liability offer in compromise, etc.) for the period(s) covered, a formal claim is first worked by Collection Advisory.

If Collection Advisory denies all or part of the taxpayer’s formal claim, it issues a Claim Disallowance Letter, and if the taxpayer indicates that they want an appeal within 30 days, the case is forwarded to Appeals for reconsideration. Appeals can also reconsider claims previously disallowed by Appeals.

Having Appeals reconsider a claim does not extend the time frame for the taxpayer to file suit.

Both pre-assessment (TBOR2) and post-assessment (claim) TFRP cases are eligible for mediation. See IRM 8.26.9.2.2, PAM Eligibility - TFRP.

Rev. Proc. 2014-63, section 7 provides instructions for taxpayers to formally request mediation. The mediation request must be in writing and contain the following information:

Refer to Rev. Proc. 2014-63 and IRM 8.26.9, Alternative Dispute Resolution (ADR) Program, Post-Appeals Mediation Procedures for Collection Cases, for guidance on PAM in TFRP cases.

If the taxpayer's protest is defective:

Questions about a particular protest should be referred to Area Counsel for advice.

Federal tax deposits (FTD) are normally applied in the following order:

In limited situations, an FTD can be applied as a designated payment which can reduce the potential trust fund amount.

If the taxpayer establishes that an FTD credit was in the amount required by Treas. Reg. 31.6302(c)-1 (with allowance for safe haven rule) for a specific payroll, the credit will be considered to be a designated payment and will be applied to the employers' portion of the FICA, the withheld FICA and the withheld income tax for the payroll period covered by the FTD.

While Collection personnel follow guidance that stipulates that the FTD must have been timely in order for Collection to allocate it to both the non-trust fund and trust fund portion of the tax due for that pay period, Appeals must consider the litigating hazards of denying the allocation.

There is case law that supports the allocation regardless of the time the FTD was made, and even some case law that supports allocation of deposits made in the amount of the trust fund portion only, when it can be demonstrated that this was the intent when they were made.

For Appeals, this is an issue of willfulness and the hazards should be based on the most relevant case law in the applicable circuit.

If the taxpayer does not provide documentation of the payroll, FICA and income tax liability for the period, FTD payments will be applied to the non-trust fund portion of the tax for the entire quarter, and then the trust fund portion of the tax.

Protests of TFRP frequently contain charges that payments were designated but Collection failed to honor the designation. In order to meet the requirements for a proper designation, two prerequisites must be met:

This is a factual issue which should be resolved by analysis of the Form 4183, the collection history, Integrated Data Retrieval System (IDRS) transcripts, and other documents in the file.

A Designated Payment Code (DPC) is used to indicate a payment designation on IDRS. See Document 6209, IRS Processing Codes and Information, for a list of Designated Payment Codes.

While under an approved installment agreement, a business may not designate that its monthly installment payment be applied to the trust fund portion of the tax liability.

Voluntary corporate payments will be applied first to non-trust fund taxes and next (after June 18, 2000) in the manner described by paragraph (10) of IRM 1.2.1.6.3, Policy Statement 5-14, unless they are designated payments.

Payments made while a corporate Offer in Compromise is pending may be designated for trust fund if the designation is made in writing at the time of the payment. Payments cannot be designated after an OIC is accepted.

If you find that the "designation" of a payment was clearly made, but the payment was not applied accordingly, you will need to recalculate the TFRP or ask Collection to recalculate the penalty using the ATFR application.

You can use the Form 10467, Appeals Division Feedback Report and Transmittal Memorandum, (ARI) to ask Advisory to re-compute the correct TFRP, taking into account the designated payment.

Specify the period during which the payment was made and the date of the applicable TC 650 (Federal Tax Deposit), or TC 670 (subsequent payment) and provide relevant supporting copies to the originating Collection Advisory CPM unit.

Involuntary payments are applied in the best interest of the Government.

Involuntary payments are those received by the Government as the result of an action other than that of the taxpayer. Typically, this would be distraint action such as a levy by Collection.

Refund offsets are considered involuntary, as are payments made through an approved installment agreement.

The courts have supported the Service in that involuntary payments, procured by Collection, can be applied in the best interests of the Government.

The Service also views monies received as the result of a court order or other legal action to which the Service is a party as involuntary payments. This view is not always supported by the courts.

In J.J. Re-Bar Corp. v. United States (In re J.J. Re-Bar Corp.), 644 F.3d 952, (9th Cir. 2011), the Circuit Court of Appeals determined that Bankruptcy courts don’t have jurisdiction to enjoin the IRS from collecting the TFRP from responsible persons of the debtor (the employer). Even if the debtor/employer files a bankruptcy petition, the service is not prohibited from assessing the TFRP.

Proceeds from an offset or a levy on a contract are applied to the liability incurred during the period of the contract even though the application may not serve the best interests of the government.

In cases where hazards of litigation exist, it is important to determine an appropriate settlement range which fairly and impartially reflects the merits of the case after considering the facts, the law, the Service’s position, and the litigating hazards.

In order to arrive at a settlement range, you need to understand how the court is likely to weigh the facts in the case. For this, you need to understand the burden of proof in the applicable court.

Burden of proof is the obligation assigned to either the government or the taxpayer to persuade the court that they are entitled to relief.

To establish the validity of the assessment, the Government always bears the burden of proof that all legal and procedural requirements pertaining to the assessment of an IRC 6672 penalty were met.

Once validity is established, the burden of disproving the TFRP claim of the IRS always rests with the debtor/taxpayer by preponderance of evidence. This means the taxpayer must provide sufficient evidence proving that it is more likely than not that they are not liable, i.e., not a willful or a responsible person. In re Frank, 322 B.R. 745, (BC MD NC 2005). In re Frank, 322 B.R. 745, (BC MD NC 2005).

When considering hazards for a potential settlement, knowing who carries the burden of proof on an issue helps clarify how specific evidence, or the lack of specific evidence, might influence the outcome should litigation occur.