When a business willfully fails to comply with payroll and income tax obligations, the IRS generally requires any misused funds to be paid back. It also imposes a trust fund recovery penalty (TFRP) on “responsible” persons. Usually, these are owners, officers, directors and shareholders. In one recent case, a U.S. District Court ruled that an employee who wasn’t officially assigned to pay taxes on an auto repair shop’s behalf wasn’t subject to a TFRP. Even though the worker reported to the business’s founder and was a signatory on a bank account, the court said his duty and authority weren’t sufficient for a TFRP to apply. The TFRP money was refunded to him. (Powell, USDC, WD Pa., 3/29/24)
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