our podcast covering the Tax Court in Brief, download here or check out other episodes of The Freeman Law Project.Tax Litigation: The Week of February 28, 2022, through March 4, 2022Estate of Levine v. Comm’r, 158 T.C. No. 2 | February 28, 2022 | Holmes, J. | Dkt. No. 13370-13Shaddix v. Comm’r | TC Memo. 2022-11 | February 28, 2022 | Lauber, J. | Dkt No. 12683-20LEstate of Kazmi v. Comm’r, T.C. Memo. 2022-13| March 1, 2022 | Paris, E. | Dkt. No. 5013-18LOpinionShort Summary: In this collection due process (CDP) case, the Tax Court sustained a notice of determination approving a notice of federal tax lien (NFTL) filed with respect to trust fund recovery penalties (TFRPs) assessed against petitioner Mohammad Kazmi. In his request for a CDP hearing and in his petition seeking review of the notice of determination, Kazmi made only one claim: that he was not liable for the TFRPs at issue because he was not a responsible person who willfully failed to pay over withholding taxes pursuant to IRC § 6672. Applying IRC § 6330(c)(2)(B), the appeals settlement officer determined that Kazmi was precluded from raising this liability issue during the CDP hearing because Kazmi received a properly mailed Letter 1153 providing him with a pre-assessment opportunity to dispute the merits of the proposed TFRPs at an Appeals conference.

A recent 9th Circuit Court of Appeals decision emphasizes again the potential exposure “responsible persons” have to personal liability for payroll taxes under the Trust Fund Recovery Penalty (TFRP) provisions of Section 6672 of the Internal Revenue Code (IRC § 6672). You may be a responsible person and not know it. Moreover, the failure of other personnel in a company to pay over to the IRS withheld employment taxes, even if you are unaware of such failure, can result in personal liability for you.Employers are required to withhold from an employee’s wages income taxes (Federal and State) and the employee’s share of FICA (Federal Insurance Contributions Act) taxes. The Internal Revenue Code makes the employer a fiduciary of the United States with respect to these payroll taxes. When an employee’s income taxes and share of FICA taxes are withheld from the employee’s wages by the employer, the employee is treated as having paid those amounts to the IRS, whether the employer actually pays over such amounts to the IRS. This protects employees if the employer never pays over such amounts. (The employee’s withheld income taxes and withheld share of FICA taxes are referred to herein as “payroll taxes.”)Employers experiencing cash flow probl

Also Referred to as Internal Revenue Code Section 6672; I.R.C. § 6672; Section 6672; Trust Fund Recovery PenaltyBackground. In certain instances, the Internal Revenue Code (the “Code”) requires persons to withhold certain taxes (e.g., excise or employment) on the government’s behalf and then remit those same taxes to the government.

on they went into business in the first place – the services they provide or the product they manufacture.Under these circumstances, it is necessary that various administrative duties be delegated to others.That said, it is imperative that the owner familiarize themselves with the tax obligations imposed upon their business, that they periodically check in with (and upon) those to whom they have assigned the task of satisfying these obligations, and that they immediately address any apparent errors or inconsistencies, as well as any suspicions.The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the Firm.Taylor v. Comm’r, T.C. Memo. 2024-33. IRC Sec. 3101, 3102(a), (b), 3402, 3403. In some cases, sooner; for example, nonqualified deferred compensation may be included in income for certain withholding tax purposes when the employee becomes vested in the benefit, even though payment may not occur until a later year. IRC Sec. 7501. IRC Sec. 6672(a). IRC Sec. 6671(b). The Court didn’t elaborate on this and, frankly, my initial response was to doubt Taxpayer’s veracity. However, it turns out there are various learning disabilities that involve one’s ability to do math; for example, dyscalculia. It’s also possible that CPA was on a Big Mac Large Fries Chocolate Shake diet. No, this isn’t about me. I prefer vanilla. A “nearly deathbed” confession. You know where this is going. A taxpayer who challenges an underlying liability in cases such as this one bears the burden of proof regarding the correct tax liability. TC Rule 142(a). IRC Sec. 6672(a) IRC Sec. 6672(a) and Sec. 6671(b). It’s a wonder that as many folks go into business for themselves as they do.

is decelerating, pandemic savings are dwindling, and household debt is rising rapidly. Additionally, new student loan repayment requirements will begin to impact many consumers starting in October. Thus, we forecast that overall consumer spending growth will slow towards yearend and then contract in Q1 2024 and Q2 2024.” Sounds familiar? Why would a business engage in such illegal behavior? The reasoning goes something like this: “Revenues were down. We just needed some time to recover – the tax money was going to help us sustain the business until it became profitable once again. At that point, we would have paid the taxes owing.”There are times, however, in which this decision is not adopted as a matter of “company policy” but, rather, is undertaken by only one well-positioned owner or officer of the business, often unbeknownst to the others. The IRS can go after any of these individuals or all of them simultaneously.Taylor v. U.S.,No. 2:17-CV-00410-SAB, Signed July 12, 2023. Under IRC Sec. 6672. Federal Insurance Contributions Act. Old-Age, Survivors, and Disability Insurance taxes. IRC Sec. 3101(b)(1); RC Sec. 3111(b). RC Sec. 3101(a); IRC Sec. 3111(a). IRC Sec. 3101(b)(1). IRC Sec. 3101(b)(1), 3111(b).Effective for tax years beginning after December 31, 2012, employees are also subject to Additional Medicare tax (“AdMT”) imposed at a rate of 0.9% upon wages received by an employee in excess of enumerated dollar thresholds that are dependent upon each employee’s filing status in a calendar year. See IRC Sec. 3101(b)(2). For 2023, the amount of wage income that is subject to the social security tax is capped at $160,200.You may recall that the administration’s ill-fated Build Back Better proposal sought to eliminate the cap entirely. IRC Section 3121(a)(1). As distinguished from the employer’s share of FICA tax. A person who has paid the penalty may seek contribution from other responsible persons who are liable. The government is not a bank, he added. It’s not often that a

tax payments.c. Income taxes, employee share of social security taxes and employee share of Medicare taxes are also “trust fund taxes” (i.e., employers hold the money in trust until they are paid to the Internal Revenue Service (IRS)).i. Employers should not “borrow” withholding taxes to pay other creditors first.ii. Employers that fail to deposit trust fund taxes can be held 100% liable for the amounts, plus interest and penalties.iii. The IRS will likely attempt to collect trust fund taxes from employers first. If an employer is insolvent, the IRS will identify as many “responsible persons” as possible to collect unremitted trust fund taxes. A “responsible person”[1] who willfully[2] fails to withhold and deposit trust fund taxes can be held personally liable for a penalty equal to the full amount of the unpaid trust fund tax (the trust fund recovery penalty, or TFRP). Both the responsible person and willful failure tests must be met for the TFRP to apply. A responsible person under Section 6672 of the Internal Revenue Code (the Code) can also be criminally liable.[3]d. Violation of federal and state wage and hour laws:i. Under the federal Fair Labor Standards Act (the FLSA), failure to pay non-exempt employees minimum wage and/or overtime by the applicable payroll date violates the FLSA and gives rise to claims for liquidated damages even if the amounts are later paid. In California, the rules regarding the applicable payroll date are summarized here.ii. Many states have laws regulating when employees must be paid and impose civil penalties and liquidated damages for failure to timely pay earned wages.iii. Some states’ laws also deem such a failure a violation of criminal law.iv. Under the FLSA and many states’ wage and hour laws, personal liability can be imposed, not just corporate liability.v. Often wage-hour violations give rise to class action claims or, in California, collective actions under the Private Attorneys General Act.3.What if an employer has to make late 401(k) plan salary deferral contr

No? N.Y. Tax Law Sec. 685(g). Under IRC Sec. 6672(a).See what the dissent said about the federal government’s findings, below. Based upon Nasty’s termination of Taxpayer, and the sale of Taxpayer’s shares of stock to Nasty, the Administrative Law Judge.

Documentary evidence of mailing the Letter 1153 to the taxpayer’s last known address is sufficient that a notice of deficiency was properly mailed. See 26 U.S.C. §§ 6672(b)(1), 6212(b).Where a taxpayer alleges that he or she never received a Letter 1153, the Appeals officer must examine underlying documents in addition to the tax transcripts, such as the taxpayer’s return, a copy of the notice of deficiency, and the certified mailing list.When a settlement officer gives a taxpayer an adequate timeframe to submit requested items, it is not an abuse of discretion to move ahead if the taxpayer fails to submit the items within that timeframe. Pough v. Comm’r, 135 T.C. 344, 352 (2010).

Finally, assignment of tax or payment obligations to another individual—such as a bookkeeper or an accountant—does not compromise a taxpayer’s personal responsibility. I.R.C. § 6672(a).Id.; see Slodov v. United States, 436 U.S. 238, 246, n. 7 (1978). I.R.C. § 6672(a).

Moreover, the Tax Court held that IRS Appeals has an independent obligation to determine whether the IRS complied with such penalties in a CDP hearing pursuant to I.R.C. § 6330(c)(1).More on Laidlaw’s Harley Davidson: Penalty Defenses and the Supervisory-Approval Requirement3. Chadwick v. Comm’r, 154 T.C. No. 5 (Jan. 21, 2020)Issue: Whether a trust fund recovery penalty (TFRP) under I.R.C. § 6672 is a “tax” or a “penalty” for purposes of I.R.C. § 6751(b)?Ruling: TFRPs are penalties for purposes of I.R.C. § 6751(b).Significance: In Chadwick, the Tax Court disagreed with a federal district court decision which had held that the TFRP was not a penalty.