How it works
When a business fails to pay over withheld employment taxes, Section 6672 lets the IRS assess the unpaid trust fund portion (employee withholding plus the employee share of Social Security and Medicare) personally against any responsible person who willfully failed to pay it. Responsible means having the duty and authority to pay; willful means knowing the taxes were unpaid and paying other creditors instead. The IRS interviews candidates using Form 4180 and can assess several people for the same debt. The penalty survives bankruptcy.
Why it matters
Owners, officers, and sometimes bookkeepers become personally liable for a company’s payroll taxes, and most of them create the record against themselves in the Form 4180 interview without counsel.
Example
A restaurant falls behind on 941 deposits and pays vendors and rent instead. The owner and the general manager with check-signing authority are each assessed the 120,000 dollar trust fund portion personally.
Related: Form 4180, Form 941, Section 6672.
