An IRS penalty equal to 100% of unpaid trust fund taxes, assessed personally against any responsible party who willfully failed to collect or pay over withheld payroll taxes. Personal assets are not protected from this penalty.
Why Trust Fund Recovery Penalty matters for employers
The TFRP is assessed against any person who is both responsible (has authority over payroll tax decisions) and willful (knew the taxes were due and deliberately chose not to pay). The IRS can assess the TFRP against multiple individuals simultaneously, and each responsible party is jointly and severally liable for the full amount. Paying once eliminates the collective liability, but the IRS can pursue any or all responsible parties for the full amount.
Common targets include the CEO, CFO, controller, payroll manager, bookkeeper, and any outside advisor who directed payments away from payroll taxes. Defending against a TFRP assessment requires demonstrating that the person either lacked authority or lacked knowledge -- a difficult burden once the IRS has established the assessment.
How BEG handles Trust Fund Recovery Penalty for clients
BEG Managed Payroll handles Trust Fund Recovery Penalty as part of a fully managed payroll service at $25-$45 per employee per month. Clients do not need to track compliance rules, filing deadlines, or calculation methods related to Trust Fund Recovery Penalty on their own. Everything is included. Learn about BEG Managed Payroll.
Frequently asked questions
Do employers have to manage Trust Fund Recovery Penalty themselves?
No. A managed payroll provider handles Trust Fund Recovery Penalty as part of full-service payroll. BEG manages this for clients at $25-$45 PEPM with no system migration required.
What happens if Trust Fund Recovery Penalty is handled incorrectly?
Errors related to Trust Fund Recovery Penalty can trigger IRS penalties, state agency assessments, or employee disputes. Catching and correcting errors before filing is far less costly than after-the-fact corrections.
How does BEG handle Trust Fund Recovery Penalty for managed payroll clients?
BEG tracks, calculates, and remits everything related to Trust Fund Recovery Penalty as part of fully managed payroll. Clients do not need to monitor compliance -- that is included in the service at $25-$45 PEPM.
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About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
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