The Tax Blotter: Aug. 3, 2018
A collection of strange, useful or just plain interesting tax-related news briefs.
Jul. 31, 2018
Under the trust fund penalty, a “responsible person” can be held personally liable for a willful failure to pay the payroll taxes of a business. Clients must be informed about the potential for a tax catastrophe.
Commander was in charge. In a new case, Mr. Commander was the co-owner of a woodwork installation company. The other owner, who passed away during the trial, handled payroll, but most significant financial transactions could only be made with the consent of both parties. Commander also had the ability to sign checks and pay bills. Ultimately, the Third Circuit Court concluded that he knew or should have should have known about unpaid taxes (Commander, CA-3, No. 17-2443, 4/20/18).
Volunteers aren’t exempt. The trust fund penalty isn’t limited to owners of for-profit entities. Case in point: A volunteer served as treasurer on the board of a private school, a not-for-profit organization. In this capacity, he signed checks and maintained oversight of financial activities. When the organization failed to pay its payroll taxes, the IRS determined that the treasurer’s failure was willful. Now the district court in Ohio has upheld the trust fund penalty (Bibler, DC-OH, Case No. 2:17-cv-124, 4/23/18).
Permission is not needed. Having to obtain permission from another party to pay the payroll taxes that are due may not be enough to get you off the hook. In a new case, the president of a construction firm had authority to write checks, but required the approval of a lender with a security interest to make such payments. Nevertheless, the president made other payments without express approval. As a result, the district court in Colorado branded him a responsible person (Davis, CO Civil Action No. 13-cv-00450-MSK-MJW, 3/6/18).