Employers that withhold taxes from employee paychecks but don’t pay them over to the IRS may face a harsh penalty.

The Trust Fund Recovery Penalty (TFRP) equals 100% of the unpaid tax and can be assessed personally against responsible parties. One taxpayer who owned a construction company stated that he also controlled the “entire operations on a daily basis” of a related subcontractor, including signing tax returns. When the subcontractor’s taxes went unpaid, the IRS assessed the TFRP against the taxpayer as the responsible party. He argued that he wasn’t responsible. The 3rd Circuit Court of Appeals said he acted in “reckless disregard of risk.” The TFRP was upheld. (Samango Jr., 10/29/20)