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Payroll Taxes: Who’s Responsible?

August 16, 2023 by Jim Flauaus

The IRS may levy a penalty, known as the trust fund recovery penalty, on individuals classified as “responsible persons.” The penalty is equal to 100% of the unpaid federal income and FICA taxes withheld from employees’ pay.

What this means to you….

You become personally liable for the payroll tax debt. It becomes a part of your individual 1040 tax account!

And here’s the scary part: You may only be an employee of the company, with no ownership whatsoever.

Who’s a Responsible Person?

Any person who is responsible for collecting, accounting for, and paying over withheld taxes and who willfully fails to remit those taxes to the IRS is a responsible person who can be liable for the trust fund recovery penalty. A company’s officers and employees in charge of accounting functions could fall into this category. However, the IRS will take the facts and circumstances of each individual case into consideration.

The IRS states that a responsible person may be:

  • An officer or an employee of a corporation
  • A member or employee of a partnership
  • A corporate director or shareholder
  • Another person with authority and control over funds to direct their disbursement
  • Another corporation or third-party payer
  • Payroll service providers

The IRS will target any person who has significant influence over whether certain bills or creditors should be paid or is responsible for day-to-day financial management.

Working With the IRS

If your responsibilities make you a “responsible person,” then you must make certain that all payroll taxes are being correctly withheld and remitted in a timely manner.

If you need help dealing with the IRS on payroll tax debt, click the link to schedule a consultation. It really is possible to put your IRS problem behind you: https://www.anchortaxrelief.com/consultation.htm

Filed Under: Tax Problem Resolution Tagged With: tax debt

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