Short answer
Withheld employee income tax and FICA are held in trust for the United States under 26 U.S.C. § 7501. When a business fails to pay them over, the IRS can assess the Trust Fund Recovery Penalty under § 6672 personally against any responsible person who acted willfully, equal to the unpaid trust-fund tax.
Why payroll tax is a different class of problem
Income tax a business owes on its profit is the business’s debt. Payroll withholding is different: it is employees’ money, collected from their checks and held in trust (26 U.S.C. § 7501). The IRS can therefore look past the business entity to the people who decided which bills got paid. The business does not have to close first.
| Piece | Trust-fund (personal TFRP exposure)? |
|---|---|
| Federal income tax withheld from employees | Yes |
| Employees’ share of Social Security and Medicare | Yes |
| Employer’s matching Social Security and Medicare | No — owed by the business |
| Penalties and interest on the business account | No — owed by the business |
| Ohio and municipal (e.g., City of Canton) withholding | Separate collectors with their own rules — not part of the federal TFRP |
The three-layer version for employers
A Stark County shop that withholds from employees can owe the IRS, the State of Ohio and the municipality where employees work. Ohio Revised Code Chapter 718 sets the statewide frame for municipal withholding. Each collector sends its own notices, and none of them coordinates with the others. Canton city tax basics.
Five moves for a behind-on-941 business
- Stop the bleeding. Make the current period’s federal tax deposit before paying anything else. New quarters stacking up make every option harder.
- List every open quarter. Form 941 quarters, Form 940, and any Ohio or municipal withholding returns not filed or not paid.
- Do not sit for a Form 4180 interview alone. The interview decides who is a responsible person. A representative can attend or reschedule (§ 7521).
- Mark the 60-day appeal date. If a proposed TFRP letter arrives, the appeal window is 60 days from its date.
- Plan business and personal together. The business balance, any personal TFRP, and the owner’s own IRS, Ohio and Canton taxes all need to fit one cash-flow plan.
Sole proprietors without employees face a different problem: self-employment tax and missed estimates, covered in the 1099 tax-debt guide. For how a business balance fits alongside personal, Ohio and city balances, start with an overview of Canton tax problems.
Employer with unpaid deposits? Say so in the first minute of the call — triage for payroll tax is different.
Call (330) 457-6198Questions people in Canton ask
Can the IRS come after me personally for my company’s payroll taxes?
Yes, for the trust-fund portion. The Trust Fund Recovery Penalty (26 U.S.C. § 6672) can be assessed against any responsible person who willfully failed to collect or pay over withheld income tax and the employee share of Social Security and Medicare tax. An LLC or corporation does not shield that portion.
Who counts as a “responsible person”?
Anyone with the duty and the power to direct which bills get paid — owners, officers, partners, directors, shareholders, or others with authority over the business’s money, and even payroll providers. An employee who only paid bills as directed by a superior is not a responsible person.
What does “willful” mean here? I never meant to cheat anyone.
No bad motive is required. Willfulness means the person knew or should have known about the unpaid taxes and intentionally disregarded the law or was plainly indifferent to it. The IRS treats paying other creditors — rent, suppliers, wages — while payroll tax went unpaid as an indication of willfulness.
How much is the penalty?
It equals the unpaid trust-fund tax: the income tax withheld from employees plus the employees’ share of FICA. The employer’s matching share of FICA is not part of the penalty, though the business still owes it.
Is there a deadline to fight a proposed TFRP?
Yes. When the IRS proposes the penalty by letter, there are 60 days from the letter date to appeal. Interviews are typically done with Form 4180, and the right to have a representative present applies (26 U.S.C. § 7521).
Back to the start: see the full Canton tax-help picture.
Sources
Every fact on this page comes from these official pages, read on the date shown. Tax-law facts are re-checked at least every 90 days and local office facts every 180 days.
- Employment taxes and the Trust Fund Recovery Penalty (TFRP) — IRS. Accessed October 10, 2026.
- 26 U.S.C. § 6672 Failure to collect and pay over tax — Cornell LII. Accessed October 10, 2026.
- 26 U.S.C. § 7501 Liability for taxes withheld or collected — Cornell LII. Accessed October 10, 2026.
- IRM 5.7.4 Investigation and Recommendation of the TFRP — IRS. Accessed October 10, 2026.
- 26 U.S.C. § 7521 Procedures involving taxpayer interviews — Cornell LII. Accessed October 10, 2026.
- ORC Chapter 718 — Municipal Income Taxes — Ohio Revised Code (LSC). Accessed October 10, 2026.
- Payment plans (installment agreements) — IRS. Accessed October 10, 2026.