Trust Fund Recovery Penalty – Greensboro, NC
To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the Trust Fund Recover Penalty (TFRP). These taxes are referred to as trust fund taxes because the employer holds the employee’s money in trust until a federal tax deposit is made in that amount. The Trust Fund Recovery Penalty (TFRP) can be assessed against a business if unpaid trust fund taxes cannot be collected immediately. The business need not have ceased operation for the TFRP to be imposed.
Who Is Responsible for the TFRP?
The TFRP may be assessed against any person who:
Is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and
Willfully fails to collect or pay them.
A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:
An officer or an employee of a corporation,
A member or employee of a partnership,
A corporate director or shareholder,
A member of a board of trustees of a nonprofit organization,
Another person with authority and control over funds to direct their disbursement,
Another corporation or third party payer,
Payroll Service Providers (PSP) or responsible parties within a PSP
Professional Employer Organizations (PEO) or responsible parties within a PEO, or
Responsible parties within the common law employer (client of PSP/PEO).
For willfulness to exist, the responsible person:
Must have been, or should have been, aware of the outstanding taxes and
Either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).