Unpaid Trust Fund Taxes

Trust fund taxes are that portion of payroll taxes that represent the taxes withheld from the employee’s paychecks. This is in contrast to payroll taxes that are purely the employer’s expense, such as the matching social security tax, or the unemployment insurance.

The IRS considers trust fund taxes in some sense “sacred” because the money was never really the employer’s in the first place. The money rather was withheld in trust from the employees paycheck to pay over quickly to the IRS. When employers instead keep this money for themselves, this money can generate a “trust fund penalty” to certain responsible individuals even if the employer is a corporation, LLC, or other type of business entity that would otherwise protect such individuals from liability.

To determine whether IRS can come after an individual for this money, IRS will conduct a “Trust Fund Recovery Penalty Interview” with certain persons to determine whether that person is a “responsible party” for the unpaid money. If IRS determines that the person is liable, then IRS can bypass the corporation or LLC and come after this person individually.

I have successfully defended millions of dollars of Trust Fund Recovery cases in my career. If you have a Trust Fund Recovery problem, you should call me.

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