Trust fund taxes

Trust fund taxes are income taxes, social security taxes and Medicare taxes you withhold from the wages of an employee as their employer. As their employer, you have the added responsibility of withholding taxes from their paychecks.

When you pay your employees, you do not pay them all the money they earned. The income tax, employee share of social security tax and the employee share of Medicare tax that you withhold from the pay of your employees are part of their wages you pay to the Treasury instead of to your employees. The taxes are called trust fund taxes because they are held in trust until they are paid to the Treasury and your employees trust that you will pay the withholding to the Treasury by making Federal Tax Deposits (FTD).  For more information see Publication 3151, The ABCs of Federal Tax Deposits PDF and Failure to Deposit Penalty.

Through these trust fund taxes that you withhold from your employees pay, employees pay part of the income taxes they owe on their personal income tax as well as their share of the social security and Medicare tax they owe. You must pay your employees' trust fund taxes along with your matching share of social security and Medicare tax to the Treasury through the Federal Tax Deposit System. For more information, refer to Publication 15, Circular E, Employer's Tax Guide.

Congress has established penalties for delays in turning over your employment taxes to the Treasury. For additional information, refer to Employment Taxes and the Trust Fund Recovery Penalty (TFRP).