Trust Fund Recovery Penalty: Florida Business Owners Risk Personal Liability

Florida business owners often assume that payroll tax issues only affect their companies, not them personally. However, the Internal Revenue Service (IRS) sees it differently.

If your business fails to remit withheld employment taxes, the IRS can hold you personally responsible through what’s called the Trust Fund Recovery Penalty (TFRP). This penalty doesn’t just affect large corporations. It can impact small businesses, family-owned companies, and even nonprofits. Our experienced Florida tax-IRS attorney explains what you need to know if you manage payroll or sign checks.

What Is the Trust Fund Recovery Penalty and Who Can Be Held Liable?

The TFRP is one of the most aggressive tools the IRS uses to collect unpaid trust fund taxes, which are the Social Security, Medicare, and federal income taxes withheld from employees’ paychecks. According to IRS guidelines, when a business collects those funds and fails to turn them over to the government, it is considered a serious violation.

The IRS may assess the TFRP against:

• Business owners who control finances and payroll.
• Corporate officers or directors with authority over funds.
• Partners in a partnership who handle tax responsibilities.
• Bookkeepers or payroll managers with decision-making authority.
• Any individual who “willfully” failed to collect or remit the taxes.

Florida’s lack of a state income tax doesn’t shield business owners from federal enforcement. The IRS can still pursue TFRP if trust fund taxes go unpaid.

How the IRS Assesses and Enforces the TFRP in Florida

The IRS conducts a Trust Fund Investigation before assessing the penalty. This includes interviews, bank records, corporate filings, and a close review of who signed tax returns, checks, or payment authorizations. According to federal procedures, the agency must establish that the individual was both responsible and willful in failing to pay.

Florida business owners can expect the following if facing a TFRP investigation:

• IRS Form 4180 interviews to determine your role and authority.
• Requests for financial and employment records.
• Assessment of personal liability equal to the trust fund portion owed.
• Liens and levies against your personal assets, including bank accounts and property.
• Loss of limited liability protections, even if operating under a corporation or LLC.

Once assessed, the TFRP becomes a personal debt rather than just a business issue. The IRS can pursue collection using the same tools that apply to individual taxpayers, including wage garnishment and seizure of personal assets.

Facing Payroll Tax Issues? Contact Florida Tax-IRS Attorney Ronald Cutler

Is the IRS investigating your business for payroll tax issues, or have you received notice of a potential Trust Fund Recovery Penalty? Responding quickly and getting professional representation can help protect you against thousands (or even millions) in tax penalties.

Ronald Cutler is a licensed attorney, Certified Public Accountant, and former FBI Special Agent who investigated tax cases. With over 50 years of experience in state and federal tax matters, he offers legal guidance you can count on when facing payroll tax issues. Representing clients throughout the state, contact our experienced Florida Tax-IRS attorney to request a confidential consultation today.

Sources:

irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp

justice.gov/archives/tax/employment-tax-enforcement-0

irs.gov/irm/part11/irm_11-003-040