Businesses with employees must file federal Form 941 or 944 tax returns along with federal Form 940 tax returns. Form 940 tax returns are filed in respect of Federal Unemployment Tax and this tax is a non-Trust Fund tax liability. The 941 or 944 tax returns report the wages paid to one’s employees and details the related tax liability. A 941 or 944 tax return lists all of the income tax withheld from the employees, the FICA and Medicare tax withheld from the employees and the employer’s share of the FICA and Medicare tax. The Trust Fund Portion of the liability listed on a 941 or 944 tax return consists of all of the income tax withheld from the employees and one-half of the FICA and Medicare taxes. Approximately .70 cents of every dollar listed on a 941 or 944 tax return is considered to be Trust Fund liability. The remaining .30 cents, along with penalties and interest, is considered to be non-Trust Fund liability.
If a corporation cannot pay its 941 or 944 liability within a short period of time or if the business fails, the IRS typically takes steps to assert the Trust Fund Recovery Penalty against the owners, officers, shareholders or other responsible individuals who run the corporation. If you are a sole proprietorship, the IRS can pursue the 941, 944 and 940 liability, plus penalties and interest, against the owner of the business personally and does not have to separately take steps to assert the Trust Fund Recovery Penalty against the sole proprietor.
Do you have unfiled 941, 944 or 940 tax returns or unpaid tax liability? Call us, we can help. Call Us Before the IRS Calls You!®