You may have heard this question asked on the All Nighter program on 650 am WSM Nashville with Marcia Campbell. Our Founder and President Barry G. Fowler, EA answered this question.
Yes. A payroll tax liability can be assessed against anyone who “willfully” fails to collect or pay the IRS the withholding taxes, under the Trust Fund Recovery Penalty. Being a trust fund tax means that the employer is obliged to collect these taxes and send it to the IRS. The party responsible must have known about the unpaid taxes and have “willfully” failed to pay the IRS. This can be a significant problem for businesses that use the taxes to keep itself afloat.
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