Payroll Tax Penalty

 

IRS Definition

To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, the IRS can charge a TFRP. These taxes are called trust fund taxes because you actually hold the employee’s money in trust until you make a federal tax deposit in that amount. The TFRP may apply to you personally if these unpaid trust fund taxes cannot be immediately collected from the business. The business does not have to have stopped operating for the TFRP to be assessed.

More from H&R Block

If you withhold taxes from your employees’ pay checks, you are required to deposit the amount withheld plus any applicable employer portion on the deposit schedule determined for your business by the IRS. In addition to the failure to deposit and failure to pay penalties, the IRS can also charge you a trust fund recovery penalty (TFRP) personally, if you are a responsible individual. To avoid potential personal liability, be sure all federal tax deposits are made on the dates required.

Discover ways to deal with an IRS penalty.

Get help from an IRS expert

H&R Block’s experts can solve any IRS problem, no matter how complex.

Make an appointment

Or call 855-536-6504

Related Information

Private: What To Do If You Can’t Pay Your Business Taxes

Learn how to request an IRS payment option, like an extension to pay or an IRS installment agreement, when your business owes taxes and can't pay.

Power of Attorney: It’s How Your Tax Pro Deals with the IRS For You

Learn the three main benefits of engaging a power of attorney to research your IRS account and resolve your tax problems. Get the facts from the experts at H&R Block.

Private: How to Address IRS Business Tax Penalties

Understand the most common types of IRS business tax penalties for filing and paying late, and your possible options for requesting IRS penalty relief.