SESK: Stuff Everyone Should Know · sesk.info/founder-trust-fund-recovery-penalty
Who may face the Trust Fund Recovery Penalty for willfully unpaid payroll taxes?
A responsible person who willfully failed to pay them.
- Nobody, the company is an LLC
- A responsible person who willfully failed to pay ✔
- Only the employees whose pay it was
Why: The penalty can apply to a person who had the duty and power to handle trust fund taxes and willfully failed to collect or pay them. A title alone does not decide responsibility.
Huh, didn't know that: The penalty equals the unpaid trust fund tax; knowingly paying other creditors instead can indicate willfulness.
I told my boss three companies were after me and I needed a raise. He asked which. I said the electric, gas and water companies.
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References
Answer: A responsible person who willfully failed to pay. The penalty can apply to a person who had the duty and power to handle trust fund taxes and willfully failed to collect or pay them. A title alone does not decide responsibility.
- IRS: Employment taxes and the Trust Fund Recovery Penalty (TFRP) www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp
has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes
Checked 2026-10-11. - IRS: Employment taxes and the Trust Fund Recovery Penalty (TFRP) www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp
called trust fund taxes because you actually hold the employee's money in trust until you make a federal tax deposit
Checked 2026-10-11.
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