IRS Letter 1153

Key Takeaways:

• IRS Letter 1153 – IRS plans to assess a TFRP against you.
• The TFRP – assessed against individuals responsible for a business’s unpaid payroll tax.
• Responsible person – you may be held responsible even if you don’t own the company.
• Options – you can appeal or pay in full.
• Consequences – the IRS can assess the tax and seize your personal assets.
• Contact a professional for guidance and to avoid serious action by the IRS.

What Is IRS Letter 1153?

Letter 1153 is a formal notice from the IRS informing you that they plan to assess a Trust Fund Recovery Penalty (TFRP) against you. This penalty isn’t just a slap on the wrist. It effectively makes you personally liable for certain unpaid business taxes, even if you aren’t the business owner.

Understanding the Trust Fund Recovery Penalty (TFRP)

The TFRP exists to ensure that employers properly collect and pay taxes withheld from their employees’ paychecks. These include:

• Federal income tax withholding
• Social Security taxes
• Medicare taxes

These are “trust fund” taxes because the money technically belongs to the employee. Employers are just holding it in trust until it’s handed over to Uncle Sam. When a business fails to forward these funds to the IRS, the government sees it as a serious offense. That’s where TFRP comes in.

Imagine an employee had $200 withheld from her paycheck — $124 for Social Security, $29 for Medicare, and $47 for income tax. The employer must also match the Social Security and Medicare contributions and send a total of $353 to the IRS. Since the funds aren’t paid immediately to the government, the employer will hold on to it “in trust” and pay when the funds are due.

If they don’t pay, the IRS will assess failure to deposit penalties, and attempt to collect the amount from the company. If the company doesn’t figure out a way to pay the bill, the IRS may decide to move forward with a TFRP. This penalty is 100% of the withheld tax — so in this case, that’s $200. The IRS may assess this penalty against any individual who may have been responsible for the unpaid payroll taxes. 

Who Gets Targeted by Letter 1153?

You don’t have to be the CEO or owner to be considered liable. The IRS goes after “responsible persons” — that can be anyone who had authority over financial decisions, payroll, or tax payments and willfully failed to ensure the taxes were paid.

That might be:

• A corporate officer
• A payroll manager
• A bookkeeper
• Another person with authority and control over funds to direct their disbursement
• Another corporation or third-party payer
• Payroll Service Providers (PSP) or responsible parties within a PSP
• Professional Employer Organizations (PEO) or responsible parties within a PEO
• Responsible parties within the common law employer (client of PSP/PEO)
• Even a board member or partner, in certain cases

“Willfully” doesn’t necessarily mean you acted out of malice. Even knowing that the taxes weren’t paid and choosing to pay vendors or other bills instead can be enough to constitute willfulness.

For the purposes of the TFRP, the IRS can “pierce the corporate veil” to go after any individual who knowingly failed to pay the government the withheld funds. That means any of the aforementioned responsible persons can be targeted to pay the IRS back.

How Does the IRS Determine Who’s Responsible?

To identify responsible people in the business and to determine if they acted willfully, the IRS does a TFRP investigation. They use Form 4180 interviews to learn more about the roles various people play in the company. 

If you go through a Form 4180 interview, the IRS revenue officer will generally let you know that they see you as a responsible person, and after that happens, you’re very likely to receive this letter. 

What to Do if You Get IRS Letter 1153

Don’t ignore it. The letter starts the clock ticking. You have 60 days from the date on the letter to respond (75 days if it’s addressed outside the U.S.). If you don’t respond in this window, you lose your appeal rights, and the IRS will assess the penalty. 

Here’s what you should do:

1. Read the letter carefully. It should include Form 2751 (Proposed Assessment), which outlines the amount of the penalty and the reasoning for assessing it against you.
2. Consult a tax professional or attorney immediately. This is a serious situation. You may want to consult a professional before giving any information to the IRS.
3. If you agree, contact the IRS to make payment arrangements or to pay in full.
4. If you disagree, gather documentation to support your side of the story. Anything that shows you didn’t have authority or were not willfully negligent can help.
5. Request an appeal. Your response must go to the IRS Office of Appeals. If you miss the deadline, you lose your right to appeal.

If you disagree with the proposed TFRP assessment, you can ask your revenue officer to review your case within 10 days. You also have the right to request fast-track mediation (FTM), but the revenue officer must agree. FTM gives you and the revenue officer a chance to sit down with a mediator to see if you can come to a different conclusion. 

However, if you choose this option, you still need to pay attention to the clock. If you think that you’re not going to be happy with the results of mediation, enter your appeal before the deadline, or you’ll lose the chance. 

If you decide to appeal, you have two options. If you owe less than $25,000, you can use small case appeals, which is a relatively casual process. Otherwise, if you owe more than that or prefer a more formal appeals process, you should write a formal protest letter.

What Happens if You Ignore It?

Bad news: if you don’t respond, the IRS will move forward with the assessment and make it official. Once the penalty is assessed, the IRS can move forward with liens and levies, which includes:

• Garnishing your wages
• Levying your bank account
• Filing a federal tax lien
• Seizing your personal assets

That’s right — even your personal finances can be at risk, even if the taxes were originally a business obligation. This can destroy your personal credit and cause years of financial stress.

How to Avoid TFRP Trouble in the First Place

The best defense is a good offense. Here’s how you (and your business) can stay on the IRS’s good side:

• Pay trust fund taxes on time. Don’t mess around with payroll taxes. If you can’t afford to pay the full payroll tax liability, you may want to send what you can and mark that it’s for the trust fund portion of the liability. That will reduce the risk of individuals facing a TFRP. 
• Review payroll regularly. Make sure someone responsible is double-checking that taxes are being withheld and paid. If you own the company, keep an eye on everything. The IRS expects business owners to be aware of what’s happening, and if you claim you didn’t know, they may assert that it was willful blindness. 
• Don’t delegate blindly. Owners need to be careful about delegating payroll tax payments. Even if someone else “handles the books,” you’re generally accountable if you’re involved in the business’s finances and have access to its bank accounts.
• Don’t accept delegation without question. In most cases, someone who just writes checks under the boss’s orders isn’t liable for the TFRP. But in cases where you should have known that you were doing something wrong (for instance, you’re a licensed tax pro), the IRS may consider you liable even if you were just “following orders”.
• Document everything. Keep records that show you raised concerns or lacked authority over tax decisions.

Common Mistakes to Avoid

Here’s where people often trip up:

• Assuming they aren’t responsible. Just because you didn’t “own” the business doesn’t mean you’re off the hook. The IRS has a lot of latitude with this penalty assessment.
• Delaying a response. Once that 60-day window closes, your appeal rights vanish. Never ignore Letter 1153.
• Filing an incomplete protest. You need solid facts and documents to support your case — not just an angry letter saying, “This isn’t fair!” A tax attorney can help you strike the right tone.

What is a responsible person for the TFRP?

To help you understand how the IRS defines a responsible person, look at this example. 

Let’s say Jane is the office manager at a small construction company. She doesn’t have ownership, but she signed checks, managed payroll, and when the budget was tight, she decided to pay other bills instead of payroll taxes. 

She received IRS Letter 1153 and figured, “They’ll go after the owner.” Wrong. The IRS held Jane personally responsible for over $60,000 in unpaid trust fund taxes. She didn’t respond in time, and within months, the IRS began garnishing her wages and threatening to go after your physical assets. They’ll probably go after the owner too, but they don’t have to choose just one responsible person, and often pursue TFRP against several people to increase their collection rate.

Lesson learned: responsibility and willfulness aren’t just about job titles.

Frequently Asked Questions

How is Letter 1153 different from other IRS letters?

It’s specifically tied to the TFRP and is the IRS’s official notice of intent to assess the penalty.

Can I negotiate a lower amount?

Yes, in some cases, you can settle through an Offer in Compromise or set up a payment plan — but the penalty must first be assessed. However, the IRS often assesses this penalty against multiple people, and if you get an offer in compromise, they will go after the remaining amount from one of the other responsible people on the list.

What if I pay more than my share of the TFRP?

If you pay the full TFRP or more than your portion, you can go after a portion of the penalty from the other people the IRS assessed this penalty against. Once the penalty is assessed, the IRS must release the other names to you. If you pay in full, you can sue them for their portion of the penalty. That will be a civil matter between you and the other responsible people, though, the IRS is not involved.

How long does the IRS have to assess the penalty?

The IRS has 3 years from April 15th, the year after the returns were filed. For example, payroll returns for 2025 are due on April 30, 2025, July 31, 2025, October 31, 2025, and January 31, 2026. Then, the assessment clock runs until April 15, 2029. 

What documents help defend me?

Employment contracts, internal emails, payroll records, and company bylaws can help prove your lack of authority or willfulness.

Where to Find Help With Letter 1153

If you’re staring down Letter 1153, don’t go it alone. Tax professionals who specialize in payroll tax issues or IRS disputes can make a world of difference. Look for:

• Tax attorneys
• Enrolled agents (EAs)

In select cases, you can also get help from:

• IRS Taxpayer Advocate Service
• Low-Income Taxpayer Clinics (LITCs)
• State bar association referral services

Final Thoughts: Act Now, Not Later

IRS Letter 1153 isn’t just another piece of government mail. Receiving the letter is a serious warning that you could be personally liable for thousands (or more) in unpaid taxes. But it’s also a chance to push back before the IRS makes it official.

Take it seriously. Respond quickly. And get help. Your financial future — and peace of mind — depend on it. McLaud Law P.C. has the local and professional experience to protect your interests and guide you through the legal process. Contact the professionals at McLaud Law P.C. today or call us at 585-397-7785.

This communication is Attorney Advertising. It is presented for informational purposes only and does not constitute legal advice. Every legal situation is different, and prior results do not guarantee a similar outcome. This communication does not create an attorney-client relationship between McLaud Law P.C. and the recipient.