Trust Fund Recovery Penalty

The Trust Fund Recovery Penalty (TFRP) is a financial penalty levied by the IRS on individuals responsible for withholding and paying payroll taxes but who fail to do so. These taxes, known as "trust fund taxes," include income and Social Security taxes that employers collect from employees. When the IRS identifies non-compliance, it can impose the TFRP, which holds responsible parties accountable, potentially resulting in personal liability for unpaid taxes. Essentially, it aims to ensure that those in charge fulfill their tax obligations to protect government revenue.