IRS Letter 1153: Trust Fund Recovery Penalty — What It Means for You Personally
Letter 1153 means the IRS wants to make you personally responsible for payroll taxes a business didn't pay. You have 60 days to challenge it.
Have a CPA review my Letter 1153Letter 1153 proposes a Trust Fund Recovery Penalty (TFRP) against you as an individual. It covers the withheld income tax and the employee share of Social Security and Medicare that a business collected from paychecks but didn't send to the IRS.
The IRS can assess it against anyone it considers "responsible" and "willful," such as owners, officers, or people who sign checks. Once assessed, it's your personal debt, collectible from your personal assets.
Where this notice falls in the IRS process
- Business falls behind on payroll taxes
- Revenue officer interview (Form 4180)
- Letter 1153 — proposed penalty — you are here
- 60 days to protest
- Penalty assessed against you personally
What the IRS can do now
- Assess the penalty against you personally after 60 days if you don't protest.
- Collect from your personal assets once assessed, including liens and levies.
- Assess the same penalty against more than one responsible person, though it only collects the total once.
What the IRS generally can't do yet
- Assess the penalty during the 60-day window if you file a timely protest, until Appeals decides.
- Include the employer's share of payroll taxes. The penalty covers only the trust fund portion.
Your options
File a protest
Explain in writing, within 60 days, why you weren't responsible or weren't willful. This gets you an independent Appeals review.
Challenge responsibility
If you didn't have authority over which bills got paid, the penalty may not apply to you.
Challenge the amount
Check that payments were applied correctly. Designated payments can reduce the trust fund balance.
Agree and resolve
If the penalty is right, you can sign Form 2751 and set up a payment plan or other resolution.
Fix the business side
If the business is still operating, it must stay current on new payroll taxes to avoid more exposure.
What not to do
- Let the 60 days pass. It's your main chance to dispute personal liability.
- Sign Form 2751 without understanding it. Signing agrees to the penalty.
- Assume closing the business makes it go away. The penalty is personal.
- Keep paying other bills ahead of payroll taxes.
Got a Letter 1153? Protect your personal assets.
Tiffany V., CPA can review whether the penalty should apply to you, prepare your protest, and work out a resolution for both you and the business.
Book my CPA reviewFrequently asked questions
What is the Trust Fund Recovery Penalty?
A penalty equal to the payroll taxes a business withheld from employees' paychecks but didn't pay to the IRS. It's assessed against individuals personally.
How long do I have to respond to Letter 1153?
60 days from the date on the letter, or 75 days if it's addressed to you outside the U.S.
Who can be held responsible?
Anyone with the duty and authority to pay the taxes who willfully didn't, often owners, officers, and people with check-signing authority. Job titles alone don't decide it.
Can I set up a payment plan for the penalty?
Yes. Once assessed, it can be resolved like other personal tax debts, through a payment plan, an Offer in Compromise, or hardship status.
Written by Tiffany V., CPA, founder of Cents Savvy LLC. Last reviewed October 2026. This page is general information, not tax or legal advice for your situation. Cents Savvy LLC is a private CPA firm and is not affiliated with the IRS. Always follow the dates printed on your own notice.