Trust Fund Recovery Penalty

If there’s one thing the IRS is good at, it’s getting what they’re owed. In the case of withheld payroll taxes, Internal Revenue Code §6672 allows the IRS to recovery an employee’s withheld payroll taxes which they call “trust funds”. The exact wording of the rule states that these trust funds can be withheld from “any person required to collect, truthfully account for, and pay over any tax imposed” as well as “who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof.”

In this case, trust funds are the part of Social Security, Medicare and income tax withheld from an employee’s paycheck. Basically the IRS sees the employer as keeping these funds for the government in trust, thus the name “trust funds”. The IRS can collect these funds from anyone deemed a responsible person at the business; owners, partners, bookkeepers, officers, parent companies, creditors, employees etc. The use of the term “responsible partner” is intentionally broad so the IRS can target anyone potentially involved in the company’s payroll.

When the IRS comes to your business looking for withheld payroll taxes, it’s always helpful to get help from a knowledgeable tax attorney like Ross Greenberg at the Greenberg Law Group. Located in Weston but serving all of Palm Beach County, Miami-Dade County and Broward County, the Greenberg Law Group has the experience and expertise to help you escape the penalties that come with unpaid payroll tax trust funds. Give them a call today for more information about the IRS and trust fund recovery penalties.