If a responsible person willfully fails to pay trust fund taxes (income tax withheld, FICA, RRTA, Medicare) to the IRS, is he personally liable for the trust fund recovery penalty?

The trust fund recovery penalty (TFRP) can be applied to any responsible person who willfully fails to collect or pay trust fund taxes. The penalty amount is equal to the total amount of the tax that was not paid, up to the full amount. This is why it is sometimes known as the 100% penalty. The penalty is separate from the tax and the employer’s liability for such taxes.

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A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, the single member owner of an LLC that is a disregarded entity, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship. A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds.

The IRS can seek the penalty from the responsible person before attempting to seek payment from the business or withholding agent. Moreover, the IRS is not precluded from collecting the penalty after a failed attempt to collect the taxes from the business.
Note: A responsible person who is liable for the trust fund recovery penalty must receive notice from the IRS before the penalty can be imposed.

IRC 6671(b), 6672.

Joseph Datlof (19 AFTR2d 335), Robert W. Monday (25 AFTR2d 70-548), Robert H. Peterson (71 AFTR2d 93-1136), Clinton A. Reph (57 AFTR2d 86-614), Sean P McNamee (488 F.3d 100)

Get professional IRS representation. Our firm represents taxpayers before all administrative levels of the IRS.

Please call us at 1-877-788-2937 or email us to schedule an appointment.

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About Mike Habib, EA NTPI Fellow®:

Mike Habib, EA is an IRS licensed Enrolled Agent who owns and operates a specialized tax services boutique firm serving clients in various metro areas such as Los Angeles, Whittier, Pasadena, Glendale, Burbank, Orange County, Riverside, Palm Springs, San Bernardino, Palmdale, Bakersfield, New York, New Jersey, Chicago, Houston, Phoenix, Philadelphia, San Antonio, San Diego, Dallas, San Jose, Detroit, Jacksonville, Indianapolis, San Francisco, Columbus, Austin, Memphis, Fort Worth, Baltimore, Charlotte, El Paso, Boston, Seattle, Washington DC, Milwaukee, Denver, Louisville, Jefferson, Las Vegas, Reno, Hempstead, Tucson, Nashville, Davidson, Portland, Tucson, Albuquerque, Santa Fe, Anchorage, Atlanta, Long Beach, Fresno, Sacramento, Mesa, Kansas City, Cleveland, Virginia Beach, Omaha, Miami, Oakland, Tulsa, Honolulu, Minneapolis, Pittsburgh, Colorado Springs, Arlington, Wichita, Birmingham, Montgomery

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