Trust Fund Recovery Penalty: Who is at Risk?

The TFRP applies to “any person” that is required to withhold and pay over any tax.  See IRC § 6672.  In a Corporation a “person” includes any officer or employee of the corporation as well as its directors and shareholders.  In a partnership or LLC, any member or employee can be a responsible person.  The key is, that the responsible person has the duty to collect, account for and pay withheld trust fund taxes.  See § 6671(b).  This definition has been expanded to include employees such as controllers, office managers and general managers.  Although Courts look to the facts of each situation to determine who was responsible to withhold and pay over taxes, every officer, director, member, shareholder and key employee of a business should be aware of their potential responsibility.  In most instances, numerous parties can be held responsible for a TFRP.  If you have questions about your status, or the status of your business, please do not hesitate to contact me.