Payroll 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 charge a 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 personally 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 expert
Your local H&R Block tax pro can look into your issue and deal with the IRS for you.Schedule a Free Consultation
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.
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.
Understand the most common types of IRS business tax penalties for filing and paying late, and your possible options for requesting IRS penalty relief.