Trust fund recovery penalty
In accounting, trust fund recovery penalty means a penalty of 100% of the withheld income tax and employee FICA a business failed to pay over, assessed personally on each responsible person who acted willfully — an officer, or anyone who signs the checks.
Also called TFRP.
Authority: IRS Pub. 15 (2026), §11 (opens in a new tab). Sources
The lessons that teach this
From the free founder back-office course, taught on one company's books, with exercises to work it yourself.
- PayrollPayroll tax depositsNorthwind is a monthly depositor in its first year: September's $2,335.20 is due October 15, 2026, through EFTPS, before anything else is paid.12 min
- PayrollPayroll providers, PEOs and paying foundersA provider works under your EIN and leaves you liable; a certified PEO is treated as the employer for the wages it pays. Founders who work in a corporation and take pay are on payroll.9 min
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
What it is not called
Each of these means something else. Use one here and an accountant reading the product notices.
- late deposit penalty (2% to 15% of the deposit)
Also in Payroll
Defined in Lexicon. This page is generated from that document, so the two can't disagree.