Trust Fund Recovery Penalty: A Hidden Threat to Business Owners
The Trust Fund Recovery Penalty (TFRP) is a little-known but dangerous risk for business owners, particularly those handling payroll taxes. It holds individuals personally liable for failing to remit withheld taxes, such as income and FICA, to the IRS. Even if payroll issues stem from cash flow problems or unintentional mistakes, business owners, bookkeepers, or anyone with control over tax deposits may be personally responsible for these unpaid taxes. If you’re facing this liability, the Law Office of Max Benkel can help you with IRS collections and defend against personal responsibility for trust fund taxes.
What is the Trust Fund Recovery Penalty?
The TFRP allows the IRS to hold certain responsible parties within a business liable for unpaid payroll taxes. This penalty applies when a person, such as a business owner or accountant, willfully fails to collect or pay trust fund taxes. These taxes are essentially funds withheld from employees’ wages to cover their federal income taxes, Social Security, and Medicare. Once withheld, these funds legally belong to the U.S. Treasury—not the business.
The IRS aggressively pursues those responsible for these funds. Penalties can amount to 100% of the unpaid taxes, and the liability extends to personal assets. If you’re facing IRS collections for trust fund taxes, acting quickly is critical to avoid the heavy financial burden that TFRP imposes. If you’re dealing with IRS collections or penalties related to unpaid payroll taxes, it’s essential to understand your options. Learn more about IRS audits and collections on this page.
Avoid TFRP Liability
To avoid this harsh penalty, businesses must ensure that trust fund taxes are properly collected and paid on time. If a payroll issue arises, addressing it quickly with the help of a qualified tax attorney in Georgia can prevent severe consequences. The Law Office of Max Benkel is here to assist with IRS tax controversies, audits, and collections. As a former IRS attorney with over 35 years of experience, Max Benkel understands how to resolve tax issues effectively. Contact us today to protect yourself from personal liability.
