Employment Tax Penalty
To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, the IRS can impose employment tax penalties, including the Trust Fund Recovery Penalty (TFRP). These taxes are called trust fund taxes because you actually hold the employee’s money in trust until you make a federal tax deposit in that amount. The TFRP may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business. The business does not have to have stopped operating for the TFRP to be assessed.
More from H&R Block
If you withhold taxes from your employees’ pay checks, you are required to deposit the amount withheld plus any applicable employer portion on the deposit schedule determined for your business by the IRS. In addition to the failure to deposit and failure to pay penalties, the IRS can also charge you a trust fund recovery penalty (TFRP) personally, if you are a responsible individual. To avoid potential personal liability, be sure all federal tax deposits are made on the dates required.
Get help from an IRS expert
H&R Block’s experts can solve any IRS problem, no matter how complex.
Learn about the different options when you can't pay or still owe money from a past return from the tax experts at H&R Block.
Liens and levies are tools the IRS uses to collect back taxes. Learn more about each one -- and how to avoid tax liens and levies by working with the IRS.
Learn how to request an IRS payment option, like an extension to pay or an IRS installment agreement, when your business owes taxes and can't pay.
Get the facts from H&R Block about IRS payment options when you can't pay your tax bill, including short-term extensions, monthly payment plans, and more.
Learn the three main benefits of engaging a power of attorney to research your IRS account and resolve your tax problems. Get the facts from the experts at H&R Block.