Federal payroll taxes withheld from employee wages -- specifically employee income tax and the employee share of Social Security and Medicare -- that the employer holds in trust for the IRS until the deposit due date.
Why Trust Fund Taxes matters for employers
Trust fund taxes represent the most serious category of payroll tax obligation. Because employees have already had these amounts withheld from their paychecks, the IRS treats them as government funds being held temporarily by the employer. Using trust fund tax deposits for business expenses, payroll, or any other purpose is considered a theft of government funds and subjects responsible parties to the Trust Fund Recovery Penalty.
The IRS monitors trust fund deposit compliance in real time through EFTPS and can identify missed deposits within days of the due date. Repeated failures escalate quickly: from deposit penalties to Notice of Intent to Levy to actual seizure of bank accounts and assets. BEG clients never face trust fund exposure because deposits are made on time as part of the managed payroll service.
How BEG handles Trust Fund Taxes for clients
BEG Managed Payroll handles Trust Fund Taxes 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 Taxes on their own. Everything is included. Learn about BEG Managed Payroll.
Frequently asked questions
Do employers have to manage Trust Fund Taxes themselves?
No. A managed payroll provider handles Trust Fund Taxes 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 Taxes is handled incorrectly?
Errors related to Trust Fund Taxes 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 Taxes for managed payroll clients?
BEG tracks, calculates, and remits everything related to Trust Fund Taxes 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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