| There is a host of civil penalties for negligent or | | | | establishing who is a responsible person. Once this is |
| inadvertent failure to make proper or timely payments | | | | done, the burden shifts to that person to establish that |
| and deposits of employment taxes. For any willful | | | | the failure to collect or remit employment taxes was |
| failure to withhold or pay employment taxes, both civil | | | | not "willful". "Willful" does not mean that the responsible |
| penalties and criminal sanctions may apply. | | | | person acted with actual intent to defraud the |
| Perhaps the most commonly encountered civil penalty | | | | government, but only that that person knowingly failed |
| is the Trust Fund Recovery Penalty. This penalty is | | | | to comply with statutory requirements. Thus, if you are |
| really a collection device, in that it is equal to 100% of | | | | found to be a responsible person and you knowingly |
| trust fund taxes that have not been remitted to the | | | | used trust fund taxes to pay other creditors, you most |
| Internal Revenue Service. Under this penalty, a | | | | likely will have acted willfully. Will I be given notice of the |
| "responsible person" can be held fully responsible for | | | | IRS's intent to assess the penalty? To impose the |
| any willful failure to collect and pay trust fund taxes. | | | | Trust Fund Recovery Penalty, the IRS must provide a |
| - Who is a "responsible person" liable for the tax? | | | | 60-day notice to the person against whom it plans to |
| - Will I be given notice of the IRS's intent to assess the | | | | assert the penalty. The person receiving the notice can |
| penalty? | | | | file an administrative protest against application of the |
| - If I failed to pay the tax, what are my options? Who | | | | penalty during this period. If I failed to pay the tax, what |
| is a "responsible person" liable for the tax? Briefly, a | | | | are my options? If you have failed to collect or to pay |
| "responsible person" is any person who has the duty | | | | trust fund or other employment taxes you do have a |
| to account for, collect, and remit trust fund taxes. | | | | few options: 1. Pay in full. Assuming there is no criminal |
| Generally, "responsible persons" are the officers or | | | | prosecution, you can, of course, pay all outstanding |
| employees of the company obligated to remit withheld | | | | taxes, penalties and interest in full. The IRS generally |
| taxes. The corporate veil of liability protection will not | | | | just wants the money. It also might be possible to |
| protect any responsible person - the IRS has the | | | | abate the penalties for "reasonable cause." Copyright |
| statutory power to pierce the corporate veil and | | | | © GotTrouble.com, Inc. All rights reserved. |
| assess personal liability. The IRS has the burden of | | | | |