McMill CPAs and Advisors logo

McMill Building

125 S. 4th Street

Norfolk, NE 68701

 

Phone:     402-371-1160

Toll Free: 800-694-1160

 

Website: www.mcmill.info

October 2024

Don't Even Think About It

Business financing accounting banking concept. Businesswoman hand doing finances and calculate on desk about cost at home office. Woman working on desk with using calculator, finance accounting.

There is zero wiggle room when it comes to handling the federal income taxes and FICA taxes withheld from employees' paychecks. The taxes are government property, which employers hold "in trust" and then remit to the IRS on a set schedule. Employers are not permitted to use this "trust fund" money for other purposes.


SERIOUS PENALTY
The penalty for breaking the rules is harsh. Any person involved in collecting, accounting for, or paying the trust fund taxes — a "responsible person" — who willfully fails to do so may be liable for a penalty equal to 100% of the unpaid taxes. The penalty is aggressively enforced.


RESPONSIBLE PERSONS
Generally, a responsible person is anyone with the power to ensure that the taxes are paid. This might include a corporation's officers, directors, shareholders, employees, and partnership partners. Under certain circumstances, even family members and professional advisors may be subject to the penalty.


It's not uncommon for there to be more than one responsible person. When that's the case, each responsible person could be found liable for the full penalty.


A WORD ABOUT WILLFUL
Failure to pay trust fund taxes can be willful without being an intentional attempt to evade paying the taxes. Temporarily "borrowing" from the trust fund to meet bona fide business expenses in a pinch can qualify as being willful.


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