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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11577
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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A trustee mistakenly did not pay withholding tax

Customer Question

A trustee mistakenly did not pay withholding tax for the beneficiary's employees. She must pay the penalty and interest from her own funds, but does she pay the ACTUAL TAX from the trust funds or from her own personal funds?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

I hold a JD (Juris Doctorate, a doctoral degree in the law), concentration in Tax Law & Corporate law, an MBA (specialization in finance & tax), and BBA from Mercer University's Stetson School of Business and Economics, as well as CFP and CRPS designations.

I can help here

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The actual tax should be paid from the funds withheld from employees (1/2 ) and the trust for the matching, remaining, 1/2

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Then as a responsible person, the penalties and interest are paid from the responsible person's funds

Expert:  Lane replied 1 year ago.

Please let me know if you have questions

Expert:  Lane replied 1 year ago.

IRS, Sec. 6672(a) imposes a penalty on any person who is responsible for paying payroll taxes and willfully fails to do so. This is known as the trust fund recovery penalty (TFRP). Typically, the TFRP equals the amount of money the employer withheld from employees’ wages (e.g., Social Security, Medicare, and income taxes) that was not remitted to the IRS.

Expert:  Lane replied 1 year ago.

So the actual tax must be separated into it's components to understand how things work.

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If monies were NOT withheld then the responsible person will owe that portion (which is the IRC § 6672 penalty) and interest .. but the entity itself should have paid the matching component.

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