We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What are Trust Fund Taxes?

Mary McMahon
By
Updated: May 17, 2024
Views: 7,016
Share

The term “trust fund taxes” can have two different meanings. Generally, speaking, it is a tax associated with using or benefiting from a trust fund. More specifically, in the United States, it can refer to funds employers withhold from paychecks and keep in trust before submitting them to the U.S. Treasury. These funds cover the employee's income taxes, and employees may be entitled to a partial refund at the end of the year if excess money was withheld. Likewise, if tax estimates were incorrect and the employee owes more, the balance will have to made up.

In the sense of taxes associated with a trust fund, trust fund taxes are tax liabilities incurred through use of a trust fund. Such funds are usually set up in a way to avoid as much tax liability as possible, with people only being taxed on funds they use, instead of on the fund as a whole. The precise tax requirements vary, depending on the type of trust and the nation. People who benefit from trust funds should check with accountants or personal finance advisers to get specific advice, as there may be steps available for decreasing the tax burden.

Administrators of trust funds are responsible for maintaining the fund responsibly, making sound investment decisions to grow the fund, and distributing the funds appropriately. They must keep detailed and accurate records and may need to take steps to protect the interests of beneficiaries. Having a knowledge of tax law can be helpful for people concerned about administering a fund fairly, or advice can be sought from an accountant to make sure the fund complies with the law.

In the case of withholding, trust fund taxes are withheld by government mandate. Employers must take some money from each paycheck to cover estimated income taxes along with other government funds. They are required to hold these funds safely until they are due, at which point they are sent to the Treasury. When employees file tax returns, they provide documentation on the amount of money withheld, and this is used to determine if they owe money or deserve a refund.

If an employee does not deposit trust fund taxes after withholding them, this can be grounds for serious legal penalties. Employees concerned about whether their trust fund taxes are actually being paid can request documentation, and this may be advised if a company is in financial trouble. Companies with late payments can be subject to action from the Treasury, including an audit and an immediate demand for payment.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Editors' Picks

Discussion Comments
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
Share
https://www.wisegeek.net/what-are-trust-fund-taxes.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.