Federal Insurance Contributions Act (FICA)

The Trust Fund Penalty – No One Is Safe

Employers are required to withhold federal income and payroll taxes from their employees’ wages for payment of payroll taxes such as federal income taxes and FICA (Federal Insurance Contributions Act) taxes. Such taxes are held in trust by an employer until it makes a federal deposit of the due amounts.

The IRS applies a term, “Trust Fund Recovery Penalty” (TFRP), for the fine related to an employer’s willful failure to pay over necessary federal income and FICA taxes. “Responsible persons” making such payments may be subject to criminal charges for any willful failure to remit these taxes. Most TFRP cases involve corporate officers and companies that are no longer in business, in which case the IRS may only collect TFRP from “responsible persons.”

Fitzpatrick V. Commissioner & The Trust Fund Penalty – The Aggressive IRS Loses A Big Case

How aggressive is the IRS in enforcing and collecting Trust Fund Recovery Penalties? A case from the U.S. Tax Court case illustrates the aggressive nature of the IRS when using the trust fund recovery penalty (TFRP) to collect trust fund taxes. Business enterprises must be careful to ensure that they do not incur Trust Fund Recovery Penalties for any failure to remit federal payroll and trust fund taxes when due.

Who Is Liable For Failure To Pay Over Employment Taxes?

Employers are required to withhold federal income and payroll taxes from their employees’ wages for payment of payroll taxes such as federal income taxes and FICA (Federal Insurance Contributions Act) taxes, which are held in trust until the employer makes a federal deposit of these amounts. The IRS applies a term, “Trust Fund Recovery Penalty” or TFRP, well-known by employers, to describe the fine for employer’s willful failure to pay over these taxes. Persons responsible for making such payments may be subject to criminal charges for any willful failure to do so. Most TFRP cases involve corporate officers.

Fail to Turn Over Payroll Taxes To The IRS? You Could Be Looking At Jail Time

An employer is required to withhold federal income and payroll taxes from its employees’ wages for payment to the IRS. Payroll taxes such as federal income taxes and FICA (Federal Insurance Contributions Act) taxes, both withheld by an employer, are held in trust until the employer makes a federal deposit of these amounts. The IRS applies a term, “Trust Fund Recovery Penalty” or TFRP, well-known by employers, to describe the fine for employer’s willful failure to remit payroll taxes.

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