Trust Fund Penalties
When a business has not paid its payroll taxes, the IRS frequently attempts to collect the liability by making one or more responsible persons associated with the business personally liable for the bulk of the amount due. This effort is done by assessing such responsible persons the so-called “Trust Fund Penalty” for unpaid income tax withholding and the employee portion of FICA and Medicare taxes (which are often referred to as “Trust Fund Taxes”).
Generally the IRS has 10 years to collect the Trust Fund Penalty from the responsible party once it has been assessed. In addition, interest accrues on this amount once it has been assessed. Trust Fund Penalties are not dischargeable in bankruptcy.
Individuals associated with a business who the IRS might consider a responsible party are literally playing with dynamite when it comes to unpaid payroll taxes.
If it appears that the business might be unable to pay all of the outstanding payroll tax liabilities, there might be certain strategies that may be employed to minimize the exposure of responsible parties to Trust Fund Penalties. We can help you in this situation. It is important to contact us as early in the process as possible in order to maximize such minimization techniques.