26 U.S.C. § 6672
Authoritative Statutory Source
Trust Fund Recovery Penalty (TFRP)
Personal 100% penalty assessed against responsible corporate officers for unpaid payroll taxes.
Detailed Definition & Statutory Context
Trust Fund Recovery Penalty (TFRP) is governed by 26 U.S.C. § 6672 standards across corporate payroll administration, statutory tax withholding, and general ledger labor accounting. Rigorous compliance with Trust Fund Recovery Penalty (TFRP) prevents IRS Form 941 deposit penalties and FLSA wage-and-hour litigation.
Statutory Formula & Equation
TFRP Amount = 100% × Unpaid Employee Income & FICA Tax Withholdings
General Ledger / Payroll Journal Entry Standard
Debit: Gross Payroll Expense / Employer Tax Expense
Credit: FICA Taxes Payable / Federal Income Tax Payable / Net Pay Cash
Credit: FICA Taxes Payable / Federal Income Tax Payable / Net Pay Cash
Common Operational Pitfalls
- Excluding non-discretionary bonuses from FLSA overtime regular-rate calculations.
- Failing to cap Social Security tax withholding once employee earnings exceed the $168,600 wage base.
- Misclassifying non-exempt hourly employees as exempt salaried workers.
Used in these Payroll Calculators
Source: https://www.irs.gov/ ↗