Payroll Taxes and the Trust Fund Recovery Penalty

Trust Fund Recovery Penalty. If a corporation or separate legal entity fails to pay its payroll taxes, an individual responsible party who willfully fails to pay those payroll taxes can be held individually liable for the trust fund portion of those taxes. State corporate laws protecting individual shareholders from corporate liability do not protect individual assessment based upon federal trust fund laws. A responsible party may be an officer, director, shareholder, bookkeeper, payroll department personnel, human resource director and any other employee who exercises the decision making authority over which creditors get paid. Specific factors include authority to sign checks, day-to-day management, hiring and firing of employees, authority to sign and file tax returns.

Defenses to the trust fund recovered penalty that have been successful include proving the individual lacked willfulness or knowledge of the unpaid taxes, lack of sufficient authority , timely resignation, delegation of authority, received direction from supervisors, reasonable cause, statute of limitations, alcoholism, drug addiction, physical illness and offenses where the government's own conduct prevented collection of the trust fund taxes from the corporate entity. All of these defenses must be supported with testimony from employees, supervisors, and others intimately involved in the business, corporate records, bylaws, articles of incorporation, minutes, and bookkeeping evidence on tax returns and other documentary evidence.

Trust fund taxes are the money businesses withhold from an employee's paycheck, which includes federal income tax and the employees' share of FICA and Medicare. These trust fund taxes are held in trust until it is paid to the Internal Revenue Service.

Trust Fund Recovery Penalty

When it comes to trust fund taxes, there are several questions the IRS considers before attempting to impose a trust fund recovery penalty on you. Main ly, when it comes to a trust fund recovery penalty, the IRS wants to determine the responsible party utilizing the following criteria:

• Are you the "responsible" part of the business?
• Did you "willfully" fail to collect or overpay trust fund taxes?
• Did you have complete knowledge that trust fund taxes were not paid?
• Did you have the authority to control said payments?
• Did you prepare or sign the 941 returns?

Who is a responsible person? It may be the person who has the authority to direct the collection of trust fund taxes, the power to pay trust fund taxes and other creditors, or authority to determine which entity gets paid first. Specific factors include authority to sign checks, day-to-day management, hiring and firing of employees, authority to sign and file tax returns

What happens if I am Ordered to Pay a Trust Fund Recovery Penalty?

If a corporation or separate legal entity fails to pay its payroll taxes, an individual responsible party who willfully fails to pay those payroll taxes can be held individually liable for the trust fund portion of those taxes. State corporate laws protecting individual shareholders from corporate liability do not protect individual assessment based upon federal trust fund laws.

Why you need an Attorney Specializing in Trust Fund Taxes

Successful defenses to a trust fund recovery penalty include proving the responsible individual lacked willfulness or knowledge of the unpaid taxes, lacked sufficient authority , resigned from the company in a timely fashion, delegated authority properly, received direction from supervisors, and reasonable cause, among others.. All of these stances must be supported with testimony from employees, supervisors, and others closely involved in the business.

We are Aggressive Advocates of your Rights!

When you work with a tax attorney from our firm, you'll be getting the best representation of your rights as a taxpayer. We understand tax law aggressively fight to solve your IRS issues. In addition to trust fund taxes, trust fund recovery penalty and related issues, we provide legal counsel to clients in a variety of other practice areas, including:

• General Business Counsel
• Income & Payroll Tax Audit
• Tax Appeals and Litigation
• Foreign Tax Audits
• Tax Crimes
• Tax Col lections
• Discharging Taxes in Bankruptcy
• Trust Fund Recovery Penalty & Payroll Taxes

The Best Defense for your Tax Case is US.

For over two decades, the attorneys at TaxLawFirm.net have provided able and experienced legal counsel to both individuals and businesses going through tax matters including trust fund taxes. In addition to helping our clients with negotiation and representation, our tax attorneys are there to fight for your rights.

The tax debt attorneys at TaxLawFirm.net have successfully assisted clients with trust fund taxes and other related matters, often earning acquittals or getting their charges dropped altogether.