The IRS claims that businesses have withheld billions of dollars in employment taxes that have never been paid. Congress has recently criticized enforcement efforts and in turn the IRS has made collecting these taxes one of their most important tasks. Since the 2002 tax year revenue agents have nearly doubled their success in collecting against past due business accounts. Businesses shutting their doors or experiencing financial hardship resulted in $30 billion in outstanding payroll liability being classified as not collectible last year.
IRS efforts to speed up collections will be focused on the more timely filing of liens and levies, as well as an expedited process to assess the Trust Fund Recovery Penalty. When a business shuts down, the owners, officers and other responsible parties are assessed a Trust Fund Recovery Penalty. This penalty (commonly known as the 100%) penalty represents the "trust fund" portion of an employees wages withheld from each paycheck. The employees' portion of social security and medicare taxes, plus federal income tax withheld from wages is the "trust fund" portion. When applied, the penalty is assessed personally against the owners, officers and responsible parties of the defunct business.