What Are Trust Fund Penalties?
Trust Fund Penalties, or Trust Fund Recovery Penalties (TFRP) are generally assessed against an individual for certain business tax liabilities, such as employment and excise taxes.
They are called Trust Fund penalties because the IRS considers the unpaid taxes as being withheld by the employer in trust until they are paid to the federal government.
Businesses are required to withhold various types of taxes from their employees and pay the same over to the IRS. When a business fails to do this, the IRS will assess TFRP against the individuals or entities who are responsible and willful in not paying the taxes.