Legal Question in Tax Law in Louisiana

Re: Point of Law for Responsible Party

You explain that you have been held liable for the unpaid payroll taxes of a corporation for which you worked, and ask about the IRS's statutory authority to do this. The authority is found in sec. 6672 of the Internal Revenue Code, which imposes a penalty equal to 100% of the taxes that were withheld from the wages of employees and not paid over to the IRS. The penalty is imposed on anyone who had the responsibility to withhold, account for and pay over the funds, and who willfully fails to do so.

The definition of each of these words has been litigated extensively, and it is often hard to reconcile the results in different cases because each case turns on its own facts. In general, someone who merely takes orders and has no real authority or ability to make decisions as to which creditor gets paid and which creditor doesn't get paid, should not be held liable.

Your problem now will be establishing that you should not have been held liable. How you do this depends on the procedural status of your case. You may have the opportunity to go to the IRS Appeals Office, or you may have to pay the tax for one employee for one quarter and then file a refund claim.

For more information on the trust fund recovery penalty, see my article on this subject as published by the Maryland Society of Accountants. It is in the articles section of my website at www.bjhaynes.com.

I hope this helps.

B.J. Haynes