Trust Fund Taxes

If income, social security, and Medicare taxes are not withheld and/or deposits of withheld funds are not submittted to the IRS, responsible persons may be assessed penalties. Penalties include the unpaid trust fund taxes.

The IRS may charge any persons determined to be responsible for payment of trust fund taxes if they acted willfully.

Essentially the government must first prove two main points: “responsible person” and “willful” to pursue an individual for these payroll taxes. These two terms have specific legal definitions but are often difficult to apply to everyday business environment.

RESPONSIBLE PERSON can be an individual who is an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship.

WILLFULLY means acting or not acting voluntarily, consciously, and intentionally. A responsible person may be deemed to be acting willfully if he intentionally decides not to deposit payroll taxes as directed by the owner of the company.