Free Tax Guide
What Is a Willful Failure to Collect or Pay Over Tax?
Key Takeaway
Willful failure to collect or pay over tax under IRC §7202 has four elements: (1) duty to collect, account for, or pay over tax (typically payroll taxes); (2) willful failure to do so; (3) the amount was required to be withheld and paid; and (4) the defendant was a “responsible person.” The short version is that §7202 is the criminal counterpart of the civil trust fund recovery penalty. In our experience, small business owners facing payroll problems often face both criminal §7202 exposure and civil TFRP assessment.1
§7202 concern? A 15-minute consultation is free.
Four elements of willful failure to collect or pay over tax.
The Four §7202 Elements
DutyCollect/Pay OverWillfulIntentionalRequiredWithheld AmountResponsiblePerson
| Element | Meaning2 |
|---|---|
| Duty | Collect / account / pay over |
| Willful | Voluntary intentional violation |
| Required Amount | Trust fund portion |
| Responsible Person | Control over payment |
Quick Reference
Jump to: duty, willful, required, or responsible.
1. Duty to Collect / Pay Over
Statutory duty for payroll / excise / certain other taxes.
If this is you: Employer with payroll. Duty to collect federal income tax and FICA from employee wages, match employer FICA, pay over timely.
Duty Strategy
- Identify applicable tax.
- Determine collection requirement.
- Evaluate accounting obligation.
- Assess pay-over timing.
- Document compliance / non-compliance.
2. Willfulness
Voluntary intentional violation of known duty.
If this is you: Knew about obligation. Failed despite knowing. Diverted funds to other uses. Willfulness demonstrated.
3. Required to Withhold / Pay
Trust fund portion (employee’s share) critical.
If this is you: Trust fund = employee income tax withheld + employee FICA. Not employer’s money. Holding in trust for IRS. Conversion = serious violation.
4. Responsible Person
Person with control over payment of taxes.
If this is you: Owner, officer, director, bookkeeper with signature authority. Anyone with effective control. Multiple responsible persons possible.
§7202 charge? Book consultation immediately.
§7202 Document Lookup
| Document | Purpose |
|---|---|
| IRC §7202 | Criminal statute |
| Form 941 | Quarterly payroll return |
| IRC §6672 | Civil TFRP |
| Form 4180 | Responsible person interview |
| Bank signature cards | Authority evidence |
§7202 Statute
- 6-year criminal statute.
- Runs from failure to pay / collect.
- Often pattern over multiple quarters.
§7202 Patterns
| Situation | Outcome |
|---|---|
| Payroll trust fund diversion | §7202 + TFRP |
| Pattern of non-payment | Willfulness established |
| Single quarter oversight | Civil likely, criminal rare |
| Good-faith defense | Cheek-based |
§7202 Escalation
Civil Assessment
Trust fund recovery penalty.
CI Referral
Pattern + willfulness.
Prosecution
Indictment and trial.
First 48 Hours
- Do not speak with CI.
- Preserve records.
- Engage criminal tax counsel.
- Evaluate willfulness defense.
- Coordinate civil TFRP.
★Brotman Law defends §7202 charges. Based in San Diego.
The ROI Question
§7202 felony carries 5-year maximum. Professional defense essential.
Under Criminal Tax Investigation?
If you know or suspect the IRS Criminal Investigation division is looking at you, the time for routine tax advice is over. What you say and do in the early stages matters significantly — and the window for voluntary disclosure closes the moment CI makes contact. If you’re in this situation, get counsel before you respond to anything.
Get Criminal Tax Counsel → Or call: (619) 378-3138
When to Engage
- Payroll trust fund issues.
- Civil TFRP + criminal concerns.
- CI contact on payroll.
- Responsible person determination.
§7202 charge?
15-min consultation free.
Guide Chapters
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Frequently Asked Questions
What is §7202?
Criminal willful failure to collect, account for, or pay over tax. Felony up to 5 years. Primarily applies to payroll tax trust fund.
Is §7202 only payroll?
Primarily yes. Any collection / pay-over tax obligation can trigger. Payroll trust fund most common.
What's a responsible person?
Anyone with effective control over payment of taxes. Owner, officer, bookkeeper with authority. Multiple possible.
What's trust fund tax?
Employee income tax withheld + employee FICA. Money belongs to government from moment withheld. Held in trust by employer.
What's the civil counterpart?
IRC §6672 trust fund recovery penalty. 100% of trust fund tax. Personal to responsible person. Often assessed with criminal case.
Is willfulness required?
Yes. Voluntary intentional violation of known duty. Cheek standard applies.
What's the sentence?
Up to 5 years per count. Guidelines drive actual sentence. Tax loss + enhancements.
Can I plead to civil only?
Prosecution discretion. Negotiation with prosecutor. Cooperation and amounts factor.
Is non-profit responsible?
Entity and responsible person liable. Officers / directors can be personally liable. TFRP applies.
What's the best defense?
Challenge willfulness. Document efforts to pay. Demonstrate financial hardship. Cheek good-faith belief. Responsible person challenge.
Can I resolve without criminal?
Voluntary disclosure pre-CI. Civil resolution through TFRP. Cooperation in investigation.
Does bankruptcy help?
Generally no for trust fund. Not dischargeable. Continuing liability. Pay-over obligation survives.
What about franchise tax?
State trust fund taxes have state analogs. CA EDD, CDTFA responsible person provisions.
Next Steps
§7202 question? 15-min consultation free.
- Criminal: IRC §7202. Civil: IRC §6672 trust fund recovery penalty.
- Willfulness: Cheek v. United States, 498 U.S. 192 (1991).
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