What is a Trust Fund Recovery Penalty?

Education & Training with Hallmark Accounting & Tax Solutions, LLC

Elizabethtown, KY - Our firm has been in business for a little over two years now, and we have helped several businesses who have been in trouble with the IRS, Commonwealth of KY, and local taxing authorities for unpaid payroll taxes. It doesn't take long for the bill to add up when you fail to pay your payroll taxes.

The IRS considers the monies withheld from your employee's pay as "trust funds" because the employee is trusting that the funds you withhold for taxes from their paycheck will be remitted to the U.S. Government on their behalf. 

The 'trust funds' are 

  • Federal income tax withheld
  • 6.2% Social Security withheld from employees
  • 1.45% Medicare withheld from employees

When you, the employer, or even an individual whom the IRS deems to be responsible, does not submit the funds to the IRS, you will be charged with the TFRP. The TFRP stands for Trust Fund Recovery Penalty, and it now has mandatory enforcement. The penalty is 100% of the employee's portion of the taxes that were due. Did you see that??? 100% penalty! The 'trust funds' do not include the employer's match of the Social Security and Medcare taxes, nor the Federal unemployment. 

The IRS has become much more agressive in pursuing these types of cases. It is ALWAYS advised to file and pay these taxes ontime, but if you can't, you need to start by filing the return and  make arrangements to get the taxes paid. Even if you have to borrow the money to pay the payroll taxes, it will seriously be cheaper to do that than to pay all of the penalties and interest that can result from not filing and paying. 

If you find yourself behind and struggeling with how to work with the IRS or other taxing agencies to get your business in compliance, give us a call. We can help. 

Michelle R Brown, EA

Hallmark Accounting & Tax Solutions, LLC

P.O. Box 209

Rineyville, KY  40162

PH. 270-506-3935 or 270-634-HELP




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Michelle Brown

Enrolled Agent / Tax Resolution Professional
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