November 14, 2007
What You Have To Know About Trust Fund Recovery Penalty
Money withheld from an employee's check (federal income tax, Medicare, and FICA) are known as trust funds, usually held in trust until the employer does a federal tax deposit. Trust Fund Recovery Penalties are assessed on trust funds that have not been paid.
The individual responsible for trust funds could be an officer, director, or employee of a corporation with the power to account for, collect, and deposit trust funds.
The IRS can impose this penalty against anybody responsible for the collection and deposit of the withheld income and taxes and anyone who knowingly does not do so. To determine who is responsible, an IRS officer may do interviews within the company. He'll be finding out who made economic decisions, who had authorization to sign company checks, who had the ability to pay the company's bills, and did the tax reporting. It might even turn out to be multiple people. The penalty is not divided equally; each individual owes the entire sum until the penalty is paid in full.
Understand your rights if you are somehow involved. It should be determined if you were assessed with the correct amount. The unpaid amount of the trust fund tax and the penalties need to be equal. You might qualify for an installment agreement or Offer in Compromise so find out.
Our office can guide you through settling your Trust Fund Recovery Penalty issue and whatever appeal process might come after.
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