Archive for Trust Fund Penalty

Resolving Trust Fund Recovery Penalty Disputes

Venar Ayar - Trust Fund Penalty Dispute

What are Trust Fund Taxes?

Trust fund taxes include the Social Security, Medicare, and federal income tax a business withholds from its employees’ wages. These amounts are held in trust by the business until they are transferred to the IRS.

In other words, these taxes are effectively being paid by the employee to the IRS. The employer is just an intermediary responsible for facilitating the transaction.

When the employer fails to remit these amounts to the IRS, bad things can happen. First, the employer can face the failure to deposit penalty for unpaid payroll taxes if the payments are even one day late.

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Double Trouble! Employment Taxes & The Trust Fund Recovery Penalty

Lord, hou schulde God approve that you robbe Petur and gif is robbere to Poule in ye name of Crist?”

John Wycliffe, Selected English Works, c. 1380

In medieval England, the Christian Peter and Paul were two peas in a pod. They were both apostles and both martyred in Rome. They even shared the same feast day (June 29). So, the idea behind the phrase “robbing Peter to pay Paul” is that the victim and payee are similar in wisdom and stature (to borrow a phrase). The modern-day equivalent is taking a cash advance from one credit card to make the minimum payment on another one, assuming that they both have a similar interest rate. Read More

Written by | Posted in 2016 Tax Changes • 2016 Tax update • Income Tax • TPR Compliance • TRP Compliance • Trust Extensions • Trust Fund Penalty

Are You at Risk for a Trust Fund Penalty?

When an employer withholds Social Security and income taxes from an employee, those funds are the property of the government, and the employer must hold those funds in “trust” until the funds are turned over to the government. Failure to do so could lead to the so-called trust fund penalty, which is equal to 100% of the withholding from the employees’ wages. The penalty applies to any willful failure to collect, account for and pay over Social Security and income taxes required to be withheld from employee wages.

A recent report issued by the Treasury Inspector General for Tax Administration has made recommendations to the IRS for timely assessing and collecting the responsible person penalty, and the IRS is adopting the recommendations. The government has always been very aggressive about collecting trust fund Read More

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