Payroll Tax Deposit Schedules & Trust Fund Recovery Penalty — §3111 / §6672
The complete practitioner guide to payroll tax deposit obligations, the Trust Fund Recovery Penalty (TFRP), and resolution strategies for employers with payroll tax delinquencies for 2026.
Payroll Tax Deposit Schedule Overview
Employers are required to deposit federal payroll taxes (FICA and withheld income taxes) on a schedule determined by the employer's lookback period. The lookback period is the 12-month period ending June 30 of the prior year. Employers who deposited $50,000 or less in payroll taxes during the lookback period are monthly depositors; employers who deposited more than $50,000 are semi-weekly depositors. New employers are monthly depositors for the first year.
| Deposit Schedule | Lookback Period Tax | Deposit Due Date |
|---|---|---|
| Monthly | $50,000 or less | 15th of the following month |
| Semi-weekly | More than $50,000 | Wednesday (for Fri/Sat/Sun payroll) or Friday (for Mon–Thu payroll) |
| Next-day rule | $100,000+ in a single day | Next business day |
Trust Fund Recovery Penalty (TFRP)
The Trust Fund Recovery Penalty (TFRP) under §6672 is one of the most severe penalties in the Internal Revenue Code. The TFRP imposes personal liability equal to 100% of the unpaid trust fund taxes on any person who: (1) is responsible for collecting, accounting for, and paying over the trust fund taxes; and (2) willfully fails to do so. Trust fund taxes are the employee's share of FICA and the income taxes withheld from employee wages — the employer holds these amounts in trust for the IRS until they are deposited.
The TFRP is assessed against individuals, not the business entity. This means that the IRS can collect the TFRP from the personal assets of responsible persons even if the business is insolvent or has filed for bankruptcy. The TFRP is not dischargeable in bankruptcy. Multiple responsible persons can be assessed the TFRP for the same unpaid taxes, but the IRS can collect only 100% of the unpaid taxes in total.
Who Is a Responsible Person?
A responsible person is any person who has the authority and duty to ensure that payroll taxes are collected and paid. The IRS applies a broad definition of responsible person that can include: officers and directors; shareholders with significant ownership; employees with check-signing authority; bookkeepers or accountants who manage payroll; and outside payroll service providers who have control over the employer's funds.
| Factor | Indicates Responsible Person |
|---|---|
| Title | Officer, director, president, CFO, treasurer |
| Check-signing authority | Authorized to sign checks or initiate wire transfers |
| Payroll control | Controls payroll processing or bank accounts |
| Knowledge | Knew or should have known of the failure to deposit |
| Willfulness | Paid other creditors instead of the IRS |
TFRP Resolution Strategies
Employers with payroll tax delinquencies have several resolution options: (1) full payment of the delinquency (eliminates TFRP exposure); (2) installment agreement (Form 433-D) to pay the delinquency over time; (3) offer in compromise (Form 656) to settle for less than the full amount; and (4) currently not collectible (CNC) status if the employer cannot pay. Practitioners should advise clients with payroll tax delinquencies to address the issue immediately — the TFRP accrues interest and can quickly become a personal liability that follows the responsible person for life.
For responsible persons who have been assessed the TFRP, the practitioner should: (1) verify the assessment is correct (the IRS must follow specific procedures before assessing the TFRP); (2) identify all responsible persons (the TFRP can be allocated among multiple responsible persons); and (3) consider an installment agreement to pay the TFRP over time.
Frequently Asked Questions
The TFRP under §6672 imposes personal liability equal to 100% of the unpaid trust fund taxes on responsible persons who willfully fail to collect, account for, and pay over payroll taxes. Trust fund taxes are the employee's share of FICA and withheld income taxes. The TFRP is not dischargeable in bankruptcy.
A responsible person is any person with the authority and duty to ensure payroll taxes are paid. This includes officers, directors, shareholders with significant ownership, employees with check-signing authority, and bookkeepers who manage payroll. The IRS applies a broad definition.
New employers are monthly depositors for the first year. After the first year, the deposit schedule is determined by the lookback period (the 12-month period ending June 30 of the prior year). Employers who deposited $50,000 or less are monthly depositors; employers who deposited more than $50,000 are semi-weekly depositors.
The failure-to-deposit penalty under §6656 ranges from 2% (1–5 days late) to 15% (more than 10 days late or after IRS notice). The penalty is assessed on the amount of the underpayment. Interest also accrues on unpaid payroll taxes.
No — the TFRP is not dischargeable in bankruptcy under 11 U.S.C. §523(a)(1). The IRS can continue to collect the TFRP from the responsible person's personal assets even after the business files for bankruptcy.
More Tax Planning FAQs
Ready to Reduce Your Tax Burden?
Our tax advisors specialize in helping professionals and business owners implement these strategies. Book a free strategy call to see how much you could save.
Book A Strategy Call With A Tax AdvisorAccess the Full Practitioner Library
Unlock 200+ tax strategies, IRS form guides, client playbooks, and IRC notice response templates — all at $0/yr.
Explore the Full Library