Penalties and interest may result from any of the following acts.
Failure to register.
The penalty for failure to register if you are required to register, unless due to reasonable cause, is $10,000 for
the initial failure, and then $1,000 each day thereafter you fail to register.
There are criminal penalties for false or fraudulent claims. In addition, any person who files a refund claim, discussed
earlier, for an excessive amount (without reasonable cause) may have to pay a penalty. An excessive amount is the amount claimed
that is more than the allowable amount. The penalty is the greater of two times the excessive amount or $10.
Trust fund recovery penalty.
If you provide taxable communications, air transportation services, or indoor tanning services, you have to collect
excise taxes (as discussed earlier) from those persons who pay you for those services. You must pay over these taxes to the
If you willfully fail to collect or pay over these taxes, or if you evade or defeat them in any way, the trust fund
recovery penalty may apply. Willfully means voluntarily, consciously, and intentionally. The trust fund recovery penalty equals
100% of the taxes not collected or not paid over to the U.S. Government.
The trust fund recovery penalty may be imposed on any person responsible for collecting, accounting for, and paying
over these taxes. If this person knows that these required actions are not taking place for whatever reason, the person is
acting willfully. Paying other expenses of the business instead of paying the taxes is willful behavior.
A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, or any
other person who had responsibility for certain aspects of the business and financial affairs of the employer (or business).
This may include accountants, trustees in bankruptcy, members of a board, banks, insurance companies, or sureties. The responsible
person could even be another corporation—in other words, anyone who has the duty and the ability to direct, account for, or
pay over the money. Having signature power on the business checking account could be a significant factor in determining responsibility.