Payroll tax relief

Payroll tax refers to taxes that employers are required to withhold from employees' wages and/or pay on behalf of their employees to federal, state, and sometimes local governments. These taxes help fund government programs like Social Security, Medicare, unemployment insurance, and sometimes state disability insurance or local taxes.

There are two main categories of payroll taxes:

1. Employee Withholding Taxes (deducted from paychecks):

  • Federal income tax

  • State and local income tax (if applicable)

  • Social Security tax (6.2% of wages, up to a wage cap)

  • Medicare tax (1.45% of wages, plus an additional 0.9% for high earners)

2. Employer Payroll Taxes (paid by the employer):

  • Social Security tax (also 6.2%)

  • Medicare tax (also 1.45%)

  • Federal Unemployment Tax (FUTA)

  • State Unemployment Tax (SUTA)

  • Other state-specific employer taxes (like state disability insurance in CA, NJ, NY)

Together, these taxes are reported and paid through payroll tax filings (e.g., IRS Form 941), and failure to withhold or pay them properly can result in significant penalties. The IRS considers unpaid trust fund taxes (the employee portion the employer is required to withhold and submit) as a serious offense.

What Are Trust Fund Taxes?

The portion of an employee’s wages withheld by the employer for income tax, Social Security, and Medicare is considered trust fund taxes because the employee trusts the employer to remit these amounts to the U.S. Treasury on their behalf. These trust fund taxes, along with the employer’s matching share of Social Security and Medicare taxes (the non-trust portion), must be submitted to the Treasury through Federal Tax Deposits (FTDs).

Trust Fund Recovery Penalty

Willful failure to timely collect and deposit trust fund taxes with the IRS may lead to the assessment of the Trust Fund Recovery Penalty (TFRP) against business owners, officers, shareholders, or other individuals responsible for managing the business.

It is important to note that the IRS does not need to separately assess the TFRP for a sole proprietorship. In such cases, the IRS may pursue unpaid liabilities reported on Forms 941, 944, and 940 directly against the sole proprietor personally.


Regardless of whether your business is still operating or has closed, it is critical to address unpaid trust fund taxes and establish a resolution plan with the IRS. We will review all available options and advocate for the most favorable outcome on your behalf.

If you have received notices related to the assessment of the Trust Fund Recovery Penalty (TFRP), or are facing payroll tax issues, it is essential to seek professional help immediately to resolve the matter with the IRS.