Failure to Pay Your 941: All the Penalties You Might Face

As an employer, you’re required to withhold payroll taxes from your workers’ paychecks. More importantly, you must pass on these funds (often referred to as trust fund taxes) to the IRS. Failure to file Form 941 or pay associated taxes could lead to harsh consequences, as outlined below:


If you willfully fail to pay trust fund taxes, you may face a fine equaling the total amount of taxes due. Additionally, you’ll still be required to pay owed taxes in full. If your business is incorporated, don’t think you can get away with nonpayment; Sec. 6672(a) allows the IRS to pierce the corporate veil and collect from those responsible for a company’s failure to pay necessary taxes.

Criminal Charges

Should you refuse to pay the fine assessed for the previous avoidance of trust fund taxes, you could face severe criminal charges. Sec. 7202, refers to the failure to pay as a felony crime, punishable by up to five years in prison, a $10,000 fine, or both. Typically, however, criminal charges are reserved for the most egregious cases, in which the responsible person willfully diverted taxes from employees for his or her own use. The IRS tends to be a bit more lenient with cases involving business owners in financial duress, especially if said business owners used incorrectly derived funds to keep the company afloat.

No matter the severity of your Form 941 and trust fund tax situation, you can count on the Highland Tax Group for assistance. Call 720-398-6088 to learn more.