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Articles · Case note · Trust Fund Recovery Penalty

Crawford v. Commissioner, T.C. Memo. 2026-3

Letter 1153 is the taxpayer's chance to contest a Trust Fund Recovery Penalty. Let it pass, and the liability cannot be challenged later in a collection hearing.

By Tongzhou Li, Attorney & CPA, former IRS Appeals Officer · November 2026

The case in brief

  • Citation: Todd A. Crawford v. Commissioner, T.C. Memo. 2026-3 (filed January 7, 2026), Docket No. 8081-23L, Judge Landy.
  • Type of case: Collection Due Process (CDP) review of a notice of federal tax lien filed to collect a Trust Fund Recovery Penalty (TFRP) under IRC § 6672.
  • Result: Summary judgment for the IRS. The court found no abuse of discretion in Appeals' decision to sustain the lien and reject the taxpayer's offer in compromise.

The facts

  • Mr. Crawford was the sole owner and officer of a Michigan pile-driving company. The company filed its third-quarter 2018 Form 941 late and did not fully pay the employment tax it reported.
  • The revenue officer concluded he was a responsible person based on his signature authority on the company's bank accounts, his signature on the state annual report, the company's collection information statement and its returns. Mr. Crawford did not attend the scheduled trust fund interview.
  • The IRS mailed Letter 1153 by certified mail in November 2020, and the return receipt showed delivery. He did not protest or request an Appeals hearing. The TFRP was assessed in March 2021.
  • After the IRS filed a notice of federal tax lien, he requested a CDP hearing and offered $100 as an offer in compromise based on doubt as to collectibility. The remaining TFRP liability for the period at issue was about $29,000.
  • The IRS first computed his reasonable collection potential at about $1 million. After he argued that he had reinvested much of his reported wages in the company, Appeals recalculated it at about $568,000 — still far above $100.

What the court held

  • No second chance to contest the liability. A properly mailed and received Letter 1153 is a "prior opportunity" to dispute the TFRP. Because he did not protest it, he could not challenge whether he owed the penalty at the CDP hearing or in court. A late, unsupported claim that he never received the letter failed against the certified mail and return receipt records.
  • Supervisory approval was verified. TFRPs require written supervisory approval under § 6751(b). The court had earlier sent the case back to Appeals to confirm that approval; on remand, Appeals confirmed the manager's signed approval and the mailing of Letter 1153.
  • The offer was properly rejected. Appeals may reject an offer that is far below the taxpayer's reasonable collection potential. He had several chances to document a lower figure but submitted incomplete records, including bank statements for only 11 of 12 months and no proof of the claimed reinvestment.
  • No installment agreement was ever proposed. Checking the installment agreement box on the hearing request was not enough. Appeals cannot abuse its discretion by failing to consider an alternative the taxpayer never actually proposed.
  • New arguments came too late. Issues raised for the first time in opposing summary judgment, such as his health, were treated as conceded.

Practical takeaways

  • Treat Letter 1153 as the main event. The protest deadline is generally 60 days from the date of the letter. That protest is usually the best — and often the only — chance to argue that you were not a responsible person or did not act willfully.
  • Do not skip the trust fund interview. Without your account of who actually controlled payments, the revenue officer will rely on bank signature cards and corporate filings.
  • In a collection hearing, document everything. Offers and payment plans succeed or fail on complete, verifiable financial records. Gaps are read against the taxpayer.
  • Propose the alternative you want, in writing. If an installment agreement would work, make a specific proposal. Do not rely on a checked box.
  • Raise every issue at the hearing. Arguments not raised before Appeals generally cannot be added later.

Sources

  • Crawford v. Commissioner, T.C. Memo. 2026-3
  • IRC §§ 6320, 6330, 6672, 6751(b), 7122
  • Mason v. Commissioner, 132 T.C. 301 (2009); Chadwick v. Commissioner, 154 T.C. 84 (2020); Chavis v. Commissioner, 158 T.C. 175 (2022)

General information only. This note is not legal or tax advice and does not create an attorney-client relationship. Facing a proposed Trust Fund Recovery Penalty? See how I help or request a consultation.