What is a Civil Trust Fund Penalty?

The easiest way to explain this is fees and fines that are placed upon individuals that don't pay their employees' tax withholdings to the IRS.

Here's some background info...
Those taxes that take a nice bite out of your paycheck (Federal, Social Security, Medicare) are not being taken out by the IRS. Your employer withholds these amounts for you. (Don't get all sentimental. They're required by law to do this.) Then, your employer pays those taxes to the IRS quarterly. These quarterly taxes are called "payroll" taxes, also known as 941's.

Here's where the trouble comes in.
What if your employer does not pay these taxes to the government? Big trouble. Not only does the IRS consider this stealing from them, they also consider this stealing for you, the employee, as well. Even worse is when you file taxes and the IRS pays you money in a refund... money the IRS never received from your employer in the first place. Now, as an employer, you've stolen from two people and put the IRS out of some dough. You better believe they're coming after you.

But who will they come after?
This is where the IRS becomes ruthless. "Who" you ask? Anyone involved in payroll is the answer. And they can assign the Civil Trust Fund Portion (unpaid payroll taxes) and Penalties (fines) onto anyone in any fashion. It does not have to be one person or the big wig. It can be anyone they get their hands on.

My Advice
Act quickly. Find a reputable firm to represent you because these matters get tricky. Research thoroughly who will be doing your bidding and cooperate.

Additional Resources...

Items on the Trust Fund Recovery Penalty

940 or 41...I know it's 9-something

In the world or taxation, it is very easy to get lost among the jargon and numerous forms. Two forms that always seem to get confused with one another are the IRS Forms 940 and 941. Obviously at first glance you might assume these two IRS forms must be similar. I mean, the number 941 does follow 940. But form 940 could not be any more different than form 941.

IRS Form 940- a.k.a. The Annual Unemployment Tax Return. Each business is to report all Federal Unemployment Tax Act (FUTA) tax based on the amount paid to each employee. As far as the federal base is concerned, the tax applies to the first $7,000 paid to each employee in a year after subtracting any exempt payments. Futa tax, along with state unemployment systems, provides payment of unemployment compensation to workers who have lost their jobs.

IRS Form 941- a.k.a. The Employer Quarterly Tax Return. All businesses that withhold wages from their employees are required to file 941s each calendar quarter. Any business that pays more than $2,500 in net taxes is required to make quarterly deposits to authorized financial institutions.

You see. Two very different things. But what gets me is how a business owner will call in looking for help with payroll taxes and not know the difference between these two forms. Seriously, 0nce you know what each is, there should not be any confusion from that point forward. And as a business owner, you are expected to remember which is which and pay both. Maybe that's an indication of why they have the tax problems they do....hmmm.

Cheers!
-Taxus

As always, you can find an array of articles by perusing this site or by checking out my coworkers' individual site:

IRS MIND

And if you need the assistance of a tax resolution firm, seek out the best: Effectur, Inc.