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Trust Fund Recovery Penalty

Former Partner Who Failed to Timely Contest Proposed Penalties Held Liable for Unpaid Payroll Taxes Incurred After He Left the Organization

In Smith v. Commissioner of Internal Revenue, the Internal Revenue Service issued a notice to a man advising him that it planned to issue proposed trust-fund recovery penalties against him for unremitted payroll taxes collected in 2009 by a company the man previously held a partnership interest in. The Internal Revenue Code requires employers in the United States to withhold Social Security, Medicare, and other taxes from an employee’s paycheck. Those taxes are typically referred to... Read More

Tax Court Holds Payroll Tax Recovery Penalty Collection Action is Time Barred

In Reinhart v. Commissioner of Internal Revenue, a woman provided bookkeeping consulting services to a number of clients. In July 1993, the Internal Revenue Service (“IRS”) assessed a 1992 trust fund recovery penalty against the woman as a result of her role as a signatory on one of her client’s bank accounts. Less than two weeks later, the IRS filed a notice of lien against the woman in Volusia County, Florida. The notice stated it would “constitute a certificate of the release... Read More

Federal Court Deems Business Owner a Responsible Person in Trust Fund Tax Penalty Case

In Shore v. U.S., a retired man opened a farm equipment business on his property with a managing partner. At the time the business was opened, the man verbally agreed to let the managing partner buy his interest in the business at any point in the future as long as the partner paid the man the $150,000 that he initially invested. The managing partner was tasked with all of the day-to-day business operations, including hiring employees, filing tax... Read More

Woman May be Held Personally Liable for Former Employer’s Unpaid Trust Fund Recovery Penalties in Pending Federal Case

In Ransier v. U.S., a woman filed a lawsuit in federal court seeking to recover $3,600 in trust fund recovery penalties that were withheld from the woman’s 2011 federal income tax refund by the U.S. government. The plaintiff also asked the court to rule that she was not a responsible person under 26 U.S.C. Section 6672... Read More

Federal Court Enters $760,000 Judgment Against Couple Who Failed to Pay Trust Fund Taxes More Than Ten Years Ago

In U.S. v. Kraft, a New Jersey couple was assessed a combined trust fund recovery penalty of more than $430,000 in 2001. Federal law states that employers in the U.S. are required to withhold social security, Medicare, and certain other taxes from each worker’s paycheck. Since the employer holds the money in trust on behalf of each employee until the funds are submitted to the Treasury, such taxes are normally referred to as “trust fund taxes... Read More

Business Owner Sentenced to 46 Months in Prison and Ordered to Pay $5 Million in Restitution for Failing to Remit Payroll Taxes to the Treasury

A 57-year-old Pennsylvania man was recently sentenced to 46 months in prison and three years of supervised release, and was ordered to pay over $5 million in trust fund recovery penalties and interest. According to federal authorities, the owner of a Berks County farm collected federal income, social security, and Medicare taxes from the paychecks of his salaried mushroom growing facility employees between 2007 and 2012, but he failed to remit any of the money to the United States Treasury. The... Read More

Trust Fund Recovery Penalty Case is Cautionary Tale for Business Owners in California, Nationwide

In U.S. v. Lambert, a woman’s husband opened a grocery store in the 1970s. He operated the store until the 1990s, when his son took over the business. According to the woman, she contributed some of her personal money to the grocery store and worked at the business part-time without pay. Although her primary duties were in the deli area, the woman stated that she occasionally assisted with office paperwork. She also had the authority to make employment decisions... Read More

Federal Case Reminds San Diego Executives to Closely Monitor Payroll Tax Payments

The Southern District of Florida has dismissed an individual’s case against two business owners who allegedly used payroll taxes to fund their lifestyle. In Goldberg v. United States, a former Chief Executive Officer of a professional services company was ordered to pay a trust fund recovery penalty to the Internal Revenue Service after the Agency determined he was a... Read More

High Penalty in Trust Fund Recovery Case Demonstrates Why California Residents Must Timely Pay Federal Employment Taxes

In Miller v. US, a Virginia-based medical practice allegedly failed to pay employment taxes withheld from workers’ paychecks during each year between 2006 and 2010. As a result, the organization owed the Internal Revenue Service (IRS) about $2.8 million in delinquent taxes. For about 20 years, the practice’s office manager was responsible for the company’s day-to-day administration and bookkeeping. She was also... Read More