What is a Trust Fund Recovery Penalty?

Have you received notices from the IRS stating thatWho is responsible for paying a Trust Fund Recovery
you have not turned in your 941 payroll tax return? OrPenalty? This would be the person who has the
maybe they have not received them? Are youpower to make the payroll deductions, but who fails to
repaying an outstanding penalty or not able to makemake the required payment. This may be one person
payments on your payroll taxes? Did you forget to fileor a group of people as a collective. This person may
a return? Are you having financial difficulties? Are yoube the company CEO (Chief Executive Officer), a
being threatened with a garnishment or levy againstcorporate employee, a corporation director or primary
your bank account? Or are you possibly facing ashareholder, a board of trustee member of a nonprofit
Trust Fund Recovery Penalty because of begingroup or any other person who has the authority over
personally responsible for the debt? If the answer tothe disbursement of payroll funds.
any of these questions is yes, then you most definitelyThe IRS can levy a Trust Fund Recovery Penalty
need the assistance of a tax attorney.against anyone. However, the IRS will determine
Trust Fund Recovery Penaltyaccording to their guidelines that are most financially
As with any problem you encounter, no amount ofresponsible and go after them. They have outlined
sidestepping or creative avoidance is going to alleviaterules governing who they determine who is
the situation. Avoiding it altogether is not an option andresponsible: this person must have had knowledge
will only result in the situation growing more and moreabout the unpaid taxes, have misused the funds to
out of control. The IRS is very adept at debt collectionkeep the business afloat or disbursed the funds to
and they will get their money due, one way or another.other creditors, and there are other standards in
That one way could be through a Trust Fundaddition to these. A tax attorney is going to know
Recovery Penalty. They look for who holdseverything about how to handle this situation and will
responsibility for the tax debt and then begin theprovide you with proper guidance in the event you are
collection process immediately. They issue fines andfined.
penalties that grow daily with interest fees.What can you do to prove your innocence?
Internal Revenue Code 6672If you are on the receiving end of a Trust Fund
As part of the debt collection process the IRS will putRecovery Penalty, there are many questions you will
levies against any and all assets you have personally,have. Such as do you know what your rights are?
as well as any possible business assets. The IRSAre you the one who is legally responsible for the
Trust Fund Recovery Penalty is outlined in the Internalpenalty or should it be someone else? Do you know if
Revenue Codes Section 6672 (a). It is outlined asthe IRS has assessed the correct amount of "Trust
being a 100% penalty, and is assessed in the eventFunds"? Do you qualify for an Offer of Compromise?
that "trust funds" are not paid. Trust funds areCan you make the payment in full or do you need an
considered as income withholding that an employer isinstallment plan? Will they seize your home, property or
required by law to deduct from employee payrollother assets? All these questions can be answered
checks. These funds include; federal and state taxes,by a qualified tax professional that will look out for your
Social Security and Medicare taxes as well. Thebest interests. We at Instant Tax Solutions can do just
amount is held in trust until it is to be paid to the IRS.that for you!
Who is liable for paying the penalty?