“TRUST FUNDTAXES”---A MUST KNOW

What in the world are TFTs?  For this discussion, “Trust Fund Taxes” are those taxes an employer withholds from an employee’s paycheck; specifically,  income tax and Social Security tax including Medicare withholding.  These withheld taxes are kept in “trust” by the employer to be remitted at a later date to the IRS and your-state Department of Revenue.

Failure to send these withheld funds to the proper government entity in a timely way can result in a “Trust Fund Recovery Penalty” (TFRP) levied against the employer and any employees responsible for remittance.  IRS guidelines state that any responsible person who “willfully fails to collect…or evade any such tax…” may be held liable for the TFRP.  “Willfully” does not mean intentionally avoiding collection from employees or payment to the government; rather it refers to a person who knew or should have known payroll taxes were not collected, or if collected, not paid.  In dental practice, this person most often is the dentist, the ultimate authority who should have known.

Suggestion:  clarify with your CPA or practice bookkeeper that these withheld taxes are properly collected and paid on time as required by the IRS and your-state Department of Revenue.