The Trust Fund Recovery Penalty is often described as one of the largest penalties in the Tax Code. It applies to employers that fail to withhold federal income, Social Security or railroad retirement, and Medicare taxes from their employees' wages or salaries. These withheld taxes belong to the employees, and are held in trust by the employer until they make a federal tax deposit in that amount. If unpaid trust fund taxes cannot be immediately collected, the TFRP may be assessed against any "responsible person." "The TFRP, under Code Section 6672, imposes as a personal liability an amount equal to the total amount of tax willfully evaded, not collected, or not paid over, on those determined to be responsible for collecting, accounting for and paying over to the IRS the withholding taxes and employee share of payroll taxes held in trust," said Robbin Caruso, partner and co-managing director of the tax controversy practice at Top 100 Firm Prager Metis CPAs.
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