3. RESPONSIBILITY AND WILLFULNESS

§ 5:5 In general

When a corporation fails to pay taxes, the IRS may proceed against the persons responsible for the nonpayment. IRC § 6672 provides statutory authority for imposing a Trust Fund Recovery Penalty on “any person ‘required to collect, truthfully account for, and pay over collected taxes” Who willfully fails to collect such tax or willfully attempts in any manner to evade or defeat such tax or payment thereof. The Supreme Court has held that a responsible person did not have to be responsible for all three duties listed in the statue because such an interpretation would allow easy avoidance of the penalty by changing officers’ duties prior to the expiration of any quarter.

Generally, two conditions must be met in order to assess and collect the Trust Fund Recovery Penalty tax:

(1) The taxpayer must be a responsible person, and

(2) The taxpayer’s conduct must be willful

IRC § 6671 defines a “person” as anyone with a duty to perform. IRC § 6671(b) defines the term “person” to include “an officer or employee of the corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.”

§ 5:6 No Need To Be Persons Other Than Corporate Officers

The cases have established that this definition encompasses anyone who has all or any part of the decision as to which liabilities will be paid and which will not or as to when such liabilities will be paid. The courts have, therefore, allowed the penalty to be asserted against persons other than corporate officers and employees. In the case of United States v. Jones the Ninth Circuit, however, relieved a landlord and a consultant to a hotel and casino from liability for payment of withheld taxes. Neither the landlord nor the consultant was an officer/shareholder of the business, and neither one exercised significant influence over the management decisions of the corporation, including the allocation of funds among creditors. The individuals did not have the requisite status, duty or authority to pay withholding taxes on behalf of the corporation.