To protect government revenue derived from payroll taxes withheld from employees,
Congress created Internal Revenue Code (“IRC”) § 6672, which allows the Internal Revenue
Service to recover the withheld portion of an employee’s payroll taxes, referred to as “trust
funds”, from any person or entity deemed to be a “responsible person.”

As small businesses begin to fail due to the recent economic downturn, the withheld
payroll taxes, and the recovery of them from business owners and officers, will take on ever
more importance. This article will review the basic rules of IRC § 6672, IRC § 3505 and case
law that practitioners should be familiar with when advising small businesses and their owners.

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