What is the trust fund recovery penalty?

The trust fund recovery penalty is a personal liability the IRS can assess against individuals responsible for collecting and paying withheld payroll taxes, but who willfully fail to do so. The penalty equals 100% of the unpaid trust fund taxes, including employee income tax withholding and the employee portion of Social Security and Medicare. It transfers business tax debt to personal debt.

whom the IRS holds responsible

Anyone with the authority to direct payment of creditors can be held liable. That includes owners, officers, directors, and sometimes bookkeepers or accountants with check-signing authority. The IRS looks at who had control and who knew taxes were not being paid. Multiple people can be held jointly and severally liable for the same debt.

Willfulness does not require intent to evade.

Willful means you knew about the taxes and chose to pay other creditors instead. Paying rent or vendors while payroll taxes go unpaid qualifies. The IRS does not need to prove you intended to defraud the government. Conscious choice to prioritize other payments is enough. Claiming you did not know is rarely a successful defense if you signed checks.