Trust Fund Recovery Penalties

As an employer, you are required to withhold federal income tax from your employee’s wages and pay a matching amount yourself.  Apart from Social Security and Medicare taxes, an employer pays Federal Unemployment Tax as well. 

Additionally, if you are self-employed, you must also pay self-employment tax, which is social security and medicare tax for self-employed individuals. 

If you fail to properly withhold these taxes, you may be held personally liable and subject to a penalty, which is 100% of the unpaid trust fund tax plus interest.   In order to impose this penalty, the IRS must determine that the person is responsible and willful for failing to collect or pay trust fund taxes to the government.