IRS Letter 1153: proposed Trust Fund Recovery Penalty

When a business doesn't pay over the taxes it withheld from employees' paychecks, Internal Revenue Code section 6672 lets the IRS assess the unpaid "trust fund" portion against any person who was responsible for paying it and acted willfully. That can include owners, officers, bookkeepers or others with authority over which bills got paid. Letter 1153 is the formal proposal, usually after a revenue officer investigation. The penalty equals the unpaid trust fund taxes, not the employer's share.

Letter 1153 is a business-collection notice. It typically arrives after a business has fallen behind on payroll taxes — often after a revenue officer interview (Form 4180) — and before the IRS formally assesses the Trust Fund Recovery Penalty against individuals personally. Once assessed, the penalty is collected like any personal tax debt.

Scam letters copy IRS formatting, so confirm a Letter 1153 before acting on it. Log in to your IRS Online Account — most notices, balances and payment history appear there — or request an account transcript. A genuine notice shows a notice or letter number (usually in the top or bottom right corner), the tax year, and explains your rights. If you call, use a number you find on IRS.gov, not a number printed only on a letter you're unsure about. The IRS doesn't demand payment by gift card, prepaid debit card, cryptocurrency or wire to an individual, and it doesn't threaten immediate arrest.

60 days from the date of the letter (75 days if addressed outside the U.S.) to file a protest and request Appeals.

You have 60 days from the date of Letter 1153 (75 days if it's addressed to you outside the U.S.) to send a written protest asking for an Appeals conference, following the instructions in the letter and Publication 5. A strong protest focuses on the two legal tests: whether you were a "responsible person" (authority over which bills got paid) and whether you acted "willfully" (knew the taxes were unpaid and paid other creditors instead).

If you don't appeal, the penalty is assessed against you personally and collected like any other individual tax debt — including liens and levies on personal assets. See payroll tax debt.

If you owe and can't pay in full, you have options:

• Pay in full online through IRS Direct Pay or your Online Account to stop further interest and penalties.
• Short-term plan of up to 180 days, with no setup fee.
• **Installment agreement** — individuals who owe $50,000 or less in combined tax, penalties and interest can usually apply online. Larger balances generally need a financial statement (Form 433-F or 433-A).
• **Currently Not Collectible** status if paying would prevent you from covering basic living expenses.
• **Offer in Compromise** only if you can't realistically pay the full amount before the collection statute expires — most applicants don't qualify.
• **Penalty relief**, including first-time abatement, which can remove failure-to-file and failure-to-pay penalties.

Interest (currently 7% a year, set quarterly) continues on any unpaid balance.

You don't need to pay anyone to respond to a Letter 1153. The Taxpayer Advocate Service, an independent organization inside the IRS, helps people whose problems aren't being resolved through normal channels or who face significant hardship. Low Income Taxpayer Clinics offer free or low-cost representation to eligible taxpayers, including in disputes with the IRS. Volunteer programs such as VITA can help prepare missing returns. If you do hire paid help, choose a credentialed professional — a CPA, enrolled agent or attorney — who can represent you before the IRS with Form 2848, and be wary of anyone who guarantees an outcome, demands large upfront fees, or tells you to stop communicating with the IRS. See red flags to watch for.

1. Read the whole notice and note the date, tax year and any deadline.
2. Verify it in your IRS Online Account or with a transcript.
3. Gather records — the return, payment proof and any documents the notice mentions.
4. Decide: agree and pay/verify, dispute with documentation, or request the hearing or appeal the notice describes.
5. Respond in writing or by the method shown, before the deadline, and keep copies and proof of mailing.
6. Get help if needed. You can authorize a CPA, enrolled agent or attorney with Form 2848, and the Taxpayer Advocate Service or a Low Income Taxpayer Clinic may help for free.

Want to see which relief options fit your situation? The free calculator on this page takes about a minute. It's an educational estimate, not a guarantee.