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Payroll Tax: The Most Dangerous IRS Debt

Unpaid payroll taxes create personal liability for business owners. The Trust Fund Recovery Penalty can follow you forever. Here is what you need to know.

Why It Is Different

Payroll taxes are held in trust. When you withhold from employees and do not remit, the IRS treats it as theft of government money. The Trust Fund Recovery Penalty under IRC 6672 lets the IRS assess 100% of the trust fund portion against you personally, separate from the business.

Who Gets Hit

Anyone with authority to decide which creditors get paid. Officers, owners, bookkeepers with check-signing authority. Multiple people can be responsible. The personal assessment follows you regardless of what happens to the business.

Payroll tax is the one IRS debt that can destroy your personal finances even after the business is gone.

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