Trust Fund Taxes

Accounting Reporting And Turnover

Collected excise sales tax and payroll withholding tax are required by law. Tax amount withheld from wages is authorized via tax withholding certificate. Sales tax rates are set by law. Turnover is required as-you-go during a reporting period. Tax withheld from wages, and sales tax collected, are considered held in trust for a prescribed and limited time.

For failure to make payment as prescribed, irs can open an examination to consider proposing a civil penalty against 3rd parties. Examination focuses on specific tax periods and unpaid amounts. A proposal to assess unpaid amounts is based on payroll summaries, sales tax reports, personal interview and business documents that reflect on duty, authority and responsibility.

An approved proposal to assess unpaid trust amounts against 3rd parties is based on facts that support a determination to account for, report and turnover. Generally, an officer authorized to sign a tax return and authorized to sign a check is accountable and held to be responsible and liable.

Third parties involved in financial affairs and determined to be accountable and responsible are issued due process notice. Unless reversed on appeal, notice of proposal matures to assessment and progresses to recovery of unpaid trust amounts from a responsible 3rd party.

In large dollar cases, approval on settlement agreements such as extended pay plans and compromise require responsible persons to indemnify unpaid trust amounts via form 2751.

Pose a tax question about proposed trust fund civil penalty assessments.

Return From Trust Fund Taxes To TAX TIPS