Employment Taxes & the Trust Fund Recovery Penalty Part 4

In medieval England, the Christian Peter and Paul were two peas in a pod. They were both apostles and both martyred in Rome. They even shared the same feast day (June 29). So, the idea behind the phrase “robbing Peter to pay Paul” is that the victim and payee are similar in wisdom and stature (to borrow a phrase). The modern-day equivalent is taking a cash advance from one credit card to make the minimum payment on another one, assuming that they both have a similar interest rate. In this presentation, I will cover the basics of Form 941 taxes. Form 941 taxes represent the amount of money that an employer must withhold from his or her employees’ wages for remittance to the IRS. This includes social security, Medicare, and income taxes. We'll then discuss the Trust Fund Recovery Penalty. To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the Trust Fund Recovery Penalty (TFRP). Sec. 6672(a) imposes a penalty on any person who is “responsible” for paying payroll taxes and “willfully” fails to do so. We'll delve into the situations in which the TFRP arises, cover the procedures surrounding it, the defenses, how easy it is for the IRS to prove a case, what happens if your client loses, how the IRS applies TFRP payments, and "tattle tailing" on others.