Section 6672 of the Internal Revenue Code allows the IRS to hold “willful and responsible” individuals within a business organization personally liable for the business entity’s unpaid trust taxes. Trust taxes include some federal excise taxes (most businesses are not subject to pay federal excise taxes). By far the
most common type of trust taxes that lead to the personal assessment of a Trust Fund Recovery Penalty is Form 941 employer withholding taxes. In the context of employer withholding taxes, the “trust tax” portion of the tax liability is the amount actually withheld from the employees’ paychecks, and not turned over to the IRS. The employer matching portion of the 941 tax is not part of the trust taxes.
For more information, refer to our article on Personal Liability for Unpaid Employer Withholding Taxes.