Trust Fund Recovery Penalty and Payroll Taxes
Trust Fund Recovery Penalty. If a corporation or separate legal entity fails to pay its payroll taxes, an individual responsible party who willfully fails to pay those payroll taxes can be held individually liable for the trust fund portion of those taxes. State corporate laws protecting individual shareholders from corporate liability do not protect individual assessment based upon federal trust fund laws. A responsible party may be an officer, director, shareholder, bookkeeper, payroll department personnel, human resource director and any other employee who exercises the decision making authority over which creditors get paid. Specific factors include authority to sign checks, day-to-day management, hiring and firing of employees, authority to sign and file 
tax returns. Defenses to the trust fund recovered penalty that have been successful include proving the individual lacked willfulness or knowledge of the unpaid taxes, lack of sufficient authority , timely resignation, delegation of authority, received direction from supervisors, reasonable cause, statute of limitations, alcoholism, drug addiction, physical illness and offenses where the government's own conduct prevented collection of the trust fund taxes from the corporate entity. All of these defenses must be supported with testimony from employees, supervisors, and others intimately involved in the business, corporate records, bylaws, articles of incorporation, minutes, and bookkeeping evidence on tax returns and other documentary evidence.
