If trust fund taxes (e.g. income, social security, and Medicare taxes) are not withheld and/or deposits of withheld funds are not properly remitted, those persons found responsible may be assessed a penalty up to the full amount of the unpaid trust fund taxes.
A person may be held liable for trust fund taxes if he or she is determined to be responsible for payment of trust fund taxes and willfully failed to do so. As a result, in order for the government to pursue an individual for trust fund taxes they must first prove that individual was a “responsible person” that “willfully” failed to withhold and/or remit withheld funds. These two terms have precise legal definitions, but the terms can be hard to apply to actual business environments.
A “responsible person” can include an officer or employee of a corporation, a partner or employee of a partnership, an accountant or controller, a volunteer director/trustee, or the employee of a sole proprietorship.
In this context “willfully” means acting or not acting voluntarily, consciously, and intentionally. A responsible person may be deemed to be acting willfully if he or she intentionally decides not to deposit payroll taxes and/or intentionally uses the funds for other purposes such as paying outstanding debts.
If the Internal Revenue Service (IRS) has contacted you about trust fund taxes contact Hone Maxwell LLP today.