trust fund taxes

Trust fund taxes (also known as payroll taxes ) are FICA taxes paid by an employer on employee wages which include the Social Security and Medicare taxes . The employer is required to keep their share and the employee share of FICA taxes in a trust , and later the employer must periodically pay the taxes from the trust to the IRS , usually quarterly. If a corporation or individual uses this income instead of it remaining in the trust, the IRS will give them a trust fund recovery penalty which is equal to the taxes withheld. For example, if XYZ Co. misused $10,000 of withheld taxes, the company would have to pay back the $10,000 plus a $10,000 penalty.

For more information, see payroll taxes .

[Last reviewed in September of 2021 by the Wex Definitions Team ]

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