If you own, or want to own, a business that has employees, you should know about this issue. The Trust Fund relates to the employment taxes that employers withhold from their employees' paychecks. It is a trust fund because the employer simply holds this money in trust for the employees until it is sent to the IRS to pay their taxes. It is not the employer's money. Ever. And because it is held in trust, the employer can be held to fiduciary standards regarding the money.
So, if you are an employer, be sure to get the employment taxes withheld from employees' wages paid out to the IRS every month. This is critical to your continued existence as an employer.
If this does not happen, then the penalty can be applied by the IRS. The tax law gives the IRS the authority to go after any and every "responsible person" in order to collect the unpaid employment taxes that were not paid by the business. If you are a responsible person in your business, you could be held personally liable for these taxes. This is true even if you did not have direct day-to-day control or decision-making authority over the payment of liabilities in the business.
There is no "bright line" definition of who a responsible person is. The IRS will look at various factors like who is active in the day-to-day management of the business, who has knowledge or control of the payment of liabilities, who owns the business, who has check signing authority, and who has knowledge or control of the hiring and firing of staff. Sometimes these functions will be handled by a staff person. Such people can also be held responsible even if they report to the owner or another person in the management team.