Trust Fund Taxes (Payroll & Sales Tax)

Trust Fund Taxes: Payroll and Sales Tax Issues

Is the IRS trying to collect payroll taxes from your business? Our Utah Business Tax Attorneys can help. Payroll and sales taxes are called "trust fund taxes" because you hold those funds in trust for the government — and failing to remit them has severe consequences.

What Are Trust Fund Taxes?

Payroll Trust Fund Taxes include the employee portions of Social Security and Medicare taxes, plus federal income tax withheld from employee wages. As an employer, you collect these amounts from employees and are required to deposit them with the IRS on a strict schedule.

Sales Trust Fund Taxes are collected from customers at the point of sale and held in trust for the state taxing authority until remitted.

Why Payroll Tax Problems Are Especially Serious

Payroll tax problems are treated more severely than almost any other tax issue for several reasons:

• The money belongs to employees — it was withheld from their paychecks
• The IRS prioritizes collection of trust fund taxes above nearly everything else
• The Trust Fund Recovery Penalty (TFRP) can be assessed personally against owners, officers, and other "responsible persons" — making them personally liable for 100% of undeposited taxes even if the business is a corporation or LLC
• Criminal prosecution for willful failure to collect or pay over employment taxes is a real possibility

Common Causes of Payroll Tax Problems

• Cash flow difficulties causing businesses to "borrow" from withheld taxes
• Rapid business growth overwhelming administrative systems
• Bookkeeping errors or inadequate payroll systems
• Misclassification of workers as independent contractors

How We Help

Our attorneys help businesses and business owners resolve payroll tax problems through negotiated payment plans, penalty abatement, and when appropriate, offers in compromise. We also work to minimize or prevent Trust Fund Recovery Penalty assessments against individuals.

Call Michelle Turpin P.C. at (801) 685-0552 immediately if you have received IRS notices about payroll taxes.