Bob Jablonsky & Associates Blog

Payroll Taxes and Personal Liability – TFRP

by | Jul 29, 2022

Did you know that when a business hires an employee and becomes responsible for payroll taxes, not only is the business responsible, but the owner(s) and others considered to be “responsible persons”, may be personally liable to the Federal Government for the Trust Fund portion of payroll taxes? The Trust Fund portion are the amounts withheld from employees paychecks, and include the Federal Income Taxes withheld, as well as the social security and Medicare taxes withheld from the employee’s paycheck. All payroll taxes, both the Trust Fund portions as well as the company portions, are owed by the company. However, if the company does not pay the Federal portions to the Federal government, these  Trust Fund Portions will likely be assessed to the “responsible persons”.

This assessment of tax is known as the Trust Fund Recovery Penalty (TFRP).  It will be owed by the responsible person until paid in full by the company and/or responsible person, or the Statute of Limitations expires. The penalty can’t be discharged in bankruptcy, but there are a number of other options for tax relief available including payment plans and an offer in compromise. The TFRP is applicable to Partnerships, C-Corps and S-Corps. If your business is a sole proprietorship, you are personally responsible for 100% of the business payroll taxes, both the Trust Fund Portion as well as the portion paid directly by the company.

On my video at https://youtu.be/CPMI2ME8fUY you can learn more about the Trust Fund Recovery penalty. If you need professional help, call me at 972-821-1991 or set up a 15 minute free consultation on my calendar at https://meetme.so/bobjablonsky

The IRS website has more information on the Trust Fund Recovery penalty at https://www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp

Bob Jablonsky is the founder of Bob Jablonsky & Associates. He has spent his career helping taxpayers resolve tax issues and get back on track with the IRS. In addition to tax resolution his firm also prepares hundreds of tax returns every year for both individuals and small to mid-sized businesses.

Bob is an IRS Enrolled Agent (EA), which is an elite credential issued by the Internal Revenue Service to professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation, and representation matters. An Enrolled Agent license is the highest credential awarded by the IRS and is recognized across all 50 states. Additionally he is a CMA, or Certified Management Accountant, a designation for financial controllers and CFOs (Chief Financial Officers), as well as an Advanced Certified Quickbooks Pro Advisor.

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