In a "trust fund penalty" case under section 6672, unpaid employment tax assessments against the president and vice-president of two health care companies were reduced to judgment. The individuals were responsible persons because they had the authority to sign checks, hire and fire employees, determine corporate financial policy, and authorize the payment of bills. Further, their decision not to pay the payroll taxes was willful because they knew about the companies' unpaid payroll taxes, but they paid employees, including themselves, and other creditors in preference to the IRS.



United States of America, Plaintiff v. Joyce A. Rineer and Rose Washington, Defendants, U.S. District Court, No. Dist. Tex., Dallas Div.; Civ. 3:07-CV-1454-BF (L), January 5, 2009.


This is a consent case before the United States Magistrate Judge. The Motion for Summary Judgment of Plaintiff United States of America ("United States" or "Plaintiff"), filed September 30, 2008, is before the Court for consideration. The Court has considered the motion; Defendant Rose Washington's ("Washington") Memorandum in Response, filed October 19, 2008; Plaintiff's Reply, filed November 3, 2008; Defendant Joyce A. Rineer's ("Rineer") Response, filed November 7, 2008; and Plaintiff's Reply, filed November 20, 2008.

This case involves two Internal Revenue Service assessments made pursuant to 26 U.S.C. § 6672. 1 One assessment, involving the last two quarters of 1997 and all four quarters of 1998, was entered against Washington and Rineer in the amount of $492,980.84. The other assessment, involving the third and fourth quarters of 1997, was entered against Washington and Rineer in the amount of $89,347.71. Thus, the total assessed against Washington and Rineer was $582,328.55. Rineer has made payments to the Internal Revenue Service in the amount of $759.00. (Pl.'s Compl. at ¶ 11. These assessments were made by the Commissioner of Internal Revenue because payroll taxes which were withheld from the wages of the employees of Washington's and Rineer's two companies, Specialty Care Inc. ("Inc.") and Specialty Care Enterprises ("Enterprises"), were not paid over to the United States. Plaintiff seeks judgment against Washington and Rineer, contending they are liable to the United States as a matter of law for the unpaid employee withholding taxes, plus interest and other statutory additions.


Summary judgment is appropriate if the pleadings and summary judgment evidence show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); see Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). "The moving party bears the initial burden of identifying those portions of the pleadings and discovery in the record that it believes demonstrate the absence of a genuine issue of material fact, but is not required to negate elements of the nonmoving party's case." Lynch Prop., Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 625 (5th Cir. 1998) (citing Celotex, 477 U.S. at 322-25).

The moving party may meet its initial burden "by 'showing' --that is, pointing out to the district court --that there is an absence of evidence to support the non-moving party's case." Celotex, 477 U.S. at 325. If the movant fails to meet its initial burden, the motion must be denied, irrespective of the non-movant's response. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). A party opposing summary judgment may not rest on mere conclusory allegations or denials in its pleadings that are unsupported by specific facts presented in affidavits opposing the motion for summary judgment. See FED. R. CIV. P. 56(e); Lujan, 497 U.S. at 888; Hightower v. Texas Hosp. Ass'n, 65 F.3d 443, 447 (5th Cir. 1995). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment ...." Anderson, 477 U.S. at 247.


Undisputed Material Facts


Neither Washington nor Rineer has disputed the following material facts:

Rose Washington and Joyce Rineer (formerly Joyce McClaine), both longtime registered Nurses, decided to go into business together and started. Inc. in 1988 to place nurses at hospitals. (Washington Deposition ("W.") App. 6 & 15, Rineer Deposition ("R.") App. 72.) 2 Washington and Rineer started their second company, Enterprises, in 1994 to provide nurses, physical therapists, social workers, etc. for home health care. (W. App. 7, 29 & 30.) The companies used the same offices and in many ways operated as one company. (W. App. 11.) After the companies ran into financial difficulties, including not paying their payroll taxes, Washington and Rineer jointly decided to close the companies. (R. App. 61, 62 & 77; W. App. 12.)

Washington and Rineer each owned 50% of the stock of both companies. (W. App. 12 & 15; R. App. 65, 67, 71 and 85; Heggins Deposition ("Heg.") App. 108 & 109). Rineer was the president of Inc. and the vice-president of Enterprises, while Washington was the president of Enterprises and the vice-president of Inc. (R. App. 74.) They were the only two members of the boards of directors for the companies (R. App. 78.) and the only individuals who could negotiate contracts for the companies (Heg. App. 111).

Both Inc. and Enterprises eventually encountered severe financial difficulties. In fact, as early as 1994, Inc. experienced payroll tax problems. (R. App. 62.) While those taxes were eventually paid, starting in 1997 both Inc. and Enterprises incurred payroll tax liabilities that were never paid. Inc. had unpaid payroll taxes for the last two quarters of 1997 and all four quarters of 1998. As a result, pursuant to § 6672, both Washington and Rineer were assessed for Inc.'s unpaid trust fund taxes for those six quarters in the amount of $492,980.84. Enterprises had unpaid payroll taxes for the last two quarters of 1997. Washington and Rineer were assessed, pursuant to § 6672, for Enterprises' unpaid trust fund taxes for those two quarters in the amount of $89,347.71. Thus, the total assessed against Washington and Rineer was $582,328.55.

Rineer learned that there were unpaid payroll taxes again in 1996. (R. App. 66; IRS Form 843, App. 132.) Washington knew of the unpaid payroll taxes in 1996 or 1997, but she continued to receive a salary after that time. (W. App. 11.) In 1998, Rineer was told the companies owed "a million dollars in taxes." (R. App. 65.) Rineer admitted that paying the nurses in her employ took priority over paying the taxes. (R. App. 89.) Inc. and Enterprises went out of business at the same time. (W. App. 12.)

Rineer filled out a Form 4180 "Report of Interview with Individual Relative to 100-Percent Penalty Recommendation" concerning Enterprises. (App. 133 - 140.) At her deposition, she testified that her answers would have been the same for Inc. (R. App. 66 - 67.) During her interview with the IRS and again at her deposition, Rineer admitted she had the authority to: hire, fire and manage employees; direct the payment of bills; deal with major suppliers and customers; negotiate large corporate purchases, contracts, and loans; open and close corporate bank accounts; sign checks and make bank deposits; guarantee corporate bank loans; authorize payroll checks; prepare and sign federal payroll tax returns; authorize federal tax deposits; review federal income tax returns; and determine company financial policy. (R. App. 67, 135 & 136.)

Washington signed Inc.'s Form 941 for the quarter ended September 30, 1997 on October 31, 1997. That return shows that no tax deposits were made and reflects a balance due of $210,634.25. (W. App 13.) Washington admitted that the taxes shown as due on that return were not paid. (W. App. 13 & 18.) Therefore, at the absolute latest, she knew of the unpaid taxes by October 31, 1997. (App. 141 - 146.) Washington admitted she knew of the unpaid taxes before being contacted by the IRS. (W. Dep. 51.) Washington authorized one of her employees to sign her name to Inc.'s Form 941 for the period ended December 31, 1997. Again, no tax deposits were made during that quarter. That return reflects a balance due of $146,899.89. (W. App. 13 & 142.) Washington also signed Inc.'s Form 941s for all four quarters in 1998. Each of those returns reflected a balance due. The amounts due ranged from $55,475.62 to $228,382.57. (W. App. 14 & 143 - 146.) Washington listed her title on some of these returns as vice-president. (W. App. 14.) She also admitted she was the vice-president at an interview with the IRS and on other documents she signed. (W. App. 15 & 19.)

Washington signed Enterprises' Form 941 for the quarter ended December 31, 1997. (A copy of this return is attached as App. 147.) That return reflects a balance due of $72,674.76. (W. App. 14 & 147.) Washington also signed Enterprises' and Inc.'s Forms 1120, Income Tax Returns. (W. App. 21 - 22.) (These returns are attached as App. 148 - 154).

Washington and Rineer supervised the companies' in-house controller, Janie Heggins. (W. App. 34.) Washington had hired Ms. Heggins originally and later fired her. (Heg. App. 106 - 107.) Ms. Heggins was employed by the companies for all the periods at issue in this case. (Heg. App. 106.) She testified that she considered Washington to be the companies' ultimate decision maker, with Rineer being number two in the chain of command. (Heg. App. 116.)

Notwithstanding the companies' failure to pay their payroll taxes, Washington and Rineer paid themselves a salary from Inc. in 1997 of $104,000 each. (The 1997 Form 1120 for Inc. is attached as App. 155 - 160). Washington and Rineer admitted that employees (including themselves) and other creditors were paid after they knew of the unpaid payroll taxes. (W. App. 17, 23 & 24; R. App. 79.) Rineer admitted that she was paid her salary for 1997 after learning of the unpaid payroll taxes. (R. App. 68.) While she strongly contended at her deposition that she did not receive ("one penny") of salary in 1998 (R. App. 68, 69, & 84), her 1998 income tax return reveals that she received a salary of $80,000 from Inc. (A copy of the relevant portions of her 1998 Form 1040, including the Form W-2 from Inc. is attached as App. 161 - 163). Washington and Rineer both had the authority to hire and fire employees. (W. App. 15 & 26; R. App. 79.) Washington and Rineer could both decide which creditors to pay. (W. App. 15, R. App. 80, Heg. App. 123 - 125.) They were the only two authorized check-signers. (R. App. 76.) They signed the payroll checks and made the tax deposits, when they were made. (Heg. App. 109 - 110.) Rineer conceded that paying employees was more important to her than paying taxes. (R. App. 74 - 75.) Rineer and Washington jointly decided how much to pay themselves. (R. App. 75.) They always received the same salary and were the two highest-paid employees. (R. App. 75.) Both Washington and Rineer were timely and properly assessed, on April 7, 1999, for both companies and each quarter at issue. (Certified Certificates of Assessments, Payments, and Other Specified Matters showing the assessments for both Washington and Rineer for each company are attached as App. 164 - 184). 3 As stated previously, they were each assessed $582,328.55. On March 31, 1999, Rineer signed IRS Forms 2751 (App. 186 & 187) agreeing to the assessment and collection of the § 6672 assessments.


Analysis


Although both Washington and Rineer contend that material facts are in dispute in this case, they fail to show what those material facts are or how they are disputed. Neither Washington nor Rineer has disputed any of the material facts set forth by the United States with respect to their roles and responsibilities with Inc. and Enterprises. 4 Therefore, the undisputed material facts are conclusively established. See C.F. Dahlberg & Co. v. Chevron U.S.A., Inc., 836 F.2d 915, 920 (5th Cir. 1989). The United States has provided documentation showing the exact amount of the assessments that Washington and Rineer owe. The only change is that the amount of the assessments continue to accrue interest as a matter of law until they are paid.

Washington and Rineer argue that they have not acted willfully because somehow the United States caused their failure to pay the taxes when they were due. They claim Medicare was slow in paying for services that Inc. and Enterprises rendered. Also, they contend that changes in the Medicare reimbursement procedures made by Congress eleven years ago would be a reasonable cause to excuse their liability for the taxes because they did not have enough money to pay the taxes as well as their other obligations, ones that they considered to be more pressing.

The burden of proof is on Washington and Rineer. See Liddon v. United States, 448 F.2d 509, 513-14 (5th Cir. 1971). They fall far short of meeting that burden. The argument they make has never prevailed in the Fifth Circuit Court of Appeals, and the Ninth Circuit Court of Appeals specifically rejected it in a criminal case of willful failure to pay taxes. United States v. Easterday, 539 F.3d 1176, 1181 (9th Cir. 2008)(holding a defendant who tried to blame changes in the medicaid reimbursement policies criminally liable for willfully failing to pay trust fund taxes). In United States v. Tucker, 686 F.2d 230 (5th Cir.1982), a prosecution for willfully failing to pay income taxes, under 26 U.S.C. § 7203, the defendant argued that he could not pay the taxes when they were due because he had no assets to satisfy the debt and that his failure to pay was not willful. The Fifth Circuit stated:
This argument borders on the ridiculous.... [A] financial ability to pay the tax when it comes due is not a prerequisite to criminal liability under § 7203. Otherwise, a recalcitrant taxpayer could simply dissipate his liquid assets at or near the time when his taxes come due and thereby evade criminal liability.

Id. at 233. The same holds true for employee withholding taxes. The "reasonable cause defense to a section 6672 action is exceedingly limited ..." and "may not be asserted by a responsible person who knew that the withholding taxes were due, but who made a conscious decision to use corporate funds to pay creditors other than the government." Logal v. United States, 195 F.3d 229, 233 (5th Cir. 1999) (holding that a responsible party cannot escape liability by shifting the blame to others).

Applying Fifth Circuit law to the undisputed material facts the Court finds and orders as follows:

Joyce Rineer and Rose Washington were responsible persons of Specialty Care, Inc. for each quarter from the third quarter of 1997 through the fourth quarter of 1998 and they both acted willfully in failing to pay over the employment taxes of Specialty Care, Inc.

Joyce Rineer and Rose Washington were responsible persons of Specialty Care Enterprises for the third and fourth quarters of 1997 and both Joyce Rineer and Rose Washington acted willfully in failing to pay over the employment taxes of Specialty Care Enterprises for the third and fourth quarters of 1997.

The Motion for Summary Judgment of the United States of America is GRANTED against both Joyce Rineer and Rose Washington.

IT IS ORDERED that Joyce Rineer is indebted to the United States for $581,359.55 5 plus interest and all statutory additions thereon as provided by law.

IT IS ORDERED that Rose Washington is indebted to the United States for $581,359.55 plus interest and all statutory additions thereon as provided by law.

IT IS ORDERED that the liabilities of Joyce Rineer and Rose Washington to the United States are joint and several.

IT IS FURTHER ORDERED that each side to this action is to bear its own costs, including any attorney fees.

Signed January 5, 2009.

1 26 U.S.C. § 6672 provides:

Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 for any offense to which this section is applicable.

The word "person" is defined in § 6671:

The term "person," as used in this subchapter includes an officer or employee of a 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.

2 App. Refers to Plaintiff's Appendix. A condensed copy of the deposition of the companies' controller, Janie Heggins, taken on July 16, 2008 is attached as App. 103 - 129. All references to her deposition will be "Heg. App."

3 Assessments supported by Form 4340s, such as these, are presumptively valid. United States v. McCallum, 970 F.2d 66, 71 (5th Cir. 1992).

4 The "facts" disingenuously cited by Rineer at pages three and four of her opinion are not facts at all. The Court of Federal Claims made no findings in Rineer v. United States, 79 Fed. Cl. 765 (2007), a case in which Rineer filed a refund claim with the Internal Revenue Service. Rineer voluntarily dismissed that refund claim to allow this case to proceed.

5 To date, Rineer has made payments to the Internal Revenue Service in the amount of $759.00. Washington and Rineer are jointly and severally liable for the unpaid taxes. Accordingly, the amount owed by Washington is reduced in accordance with Rineer's payment.

Responsible person determined. --Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax: Responsible Person: Responsible person determined

The treasurer of a bankrupt corporation was personally liable to the government for withheld taxes that were diverted to pay other creditors. The treasurer breached his duty to hold such collected taxes in trust until they are paid over to the government. Although the treasurer could not sign checks in excess of $1,000 without the signature of another officer, such a limitation on his authority did not protect him from liability as the person responsible for payment of taxes. Further, the government was not bound by a hold-harmless agreement executed in favor of the treasurer by the other corporate officers.

E.A. Cella, DC, 80-1 USTC ¶9369.

Taxpayer was not an officer, director or employee of a toy company financed by her father and therefore was not liable for unpaid employment taxes of the company.

S. Philipson, DC, 55-1 USTC ¶9466.

Although the claimant denied that he was a director, officer or shareholder of the corporation, the weight of the evidence showed that he (1) hired and controlled employees of the corporation, (2) controlled the financial and business aspects of the corporation, (3) signed IRS forms, (4) engaged in other activities tending to show his direction and control over corporate funds, and (5) had the corporation formed.

J. Labowitz, DC, 73-1 USTC ¶9155, 352 FSupp 202.

A district court reversed a bankruptcy court's finding that the chairman of the board of two corporations was not a responsible person with respect to the collection and paying over of withholding and social security taxes. Because the taxpayer had, at all times, the power to see that such taxes were paid, the bankruptcy court's decision was clearly erroneous. The bankruptcy court's finding that the taxpayer did not willfully fail or refuse to pay the taxes in question was also clearly erroneous. After she became aware that the taxes had not been paid, she paid other creditors in preference to the government.

T.L. Woodson, DC Mich, 83-1 USTC ¶9258, rev'g BC- DC, 81-2 USTC ¶9791, 15 BR 185.

The determination of the liability (a corporate officer) for the payment of withheld taxes is an issue to be decided on the facts of the case. Thus, the court was compelled to dismiss both the government's and the taxpayer's motions for summary judgment.

B.H. Hoeniger, DC, 76-1 USTC ¶9296.

A corporate officer who paid the corporate liability for FICA taxes under the mistaken assumption that he was personally liable for their payment was entitled to a refund of the taxes and penalties paid.

E.B. David, DC, 83-1 USTC ¶9259.

After he failed to appear at trial, a district court sustained a 100% penalty against a president and treasurer of a photographic equipment business for his failure to pay over or collect employment taxes. However, an individual who had acted as general manager was not jointly liable for the penalty, since there was not sufficient evidence to suggest that he either preferred other creditors over the government or that he had financial responsibility over corporate affairs beyond that of depositing funds in a corporate account. As a result, the court sustained the penalty assessed against the president, but it dismissed the government's claim against the general manager.

R. Sparkman, DC Calif., 84-2 USTC ¶9983.

In reversing the Claims Court, the court of appeals held that a corporation's chairman of the board was not liable for the 100-percent penalty for failure to collect and pay withholding taxes because (1) he was not a responsible person who had a duty to collect, account for, and pay over taxes, since there was no evidence that he had or exercised control over such functions and (2) he did not act willfully in failing to withhold taxes because there was no evidence that he had actual knowledge of the nonpayment of taxes due after the first two quarters of the year until the eve of the corporation's bankruptcy. Since the taxpayer was not a responsible person and did not fail willfully to execute a duty to collect and pay taxes, the part of the judgment relating to the IRS's allocation of certain tax payments was vacated as moot.

D.J. Godfrey, Jr., CA-FC, 84-2 USTC ¶9974, 748 F2d 1568, rev'g ClsCt, 83-2 USTC ¶9635.

For withholding tax purposes, an individual who acquired a company in bleak financial condition and assumed unpaid liabilities had control over such company and was a responsible person. The facts that (1) the list of liabilities assumed did not include reference to unpaid pre-acquisition withholding tax liabilities and (2) such individual subsequently entered into an agreement with a bank to handle receipts and payments were insufficient to relieve such individual of his status as a responsible party. However, a question of material fact existed regarding whether such individual intentionally failed to pay taxes due.

H. Bonnabel, DC N.J., 90-2 USTC ¶50,481.

Mere titular officers of a corporation were not responsible parties and, even if they were, there was no showing that they willfully failed to pay the taxes due.

R.E. Couture, DC, 74-2 USTC ¶9706.

The son of the president of a restaurant corporation was not liable for the unpaid employee withholding taxes of the corporation because he was not a responsible person obligated to withhold and pay over taxes. Even though he managed some of the company's restaurants and was authorized to sign checks, he could not disburse funds except in emergency situations, and he did not have authority to pay creditors. In addition, although he held the office of Secretary/Treasurer and technically owned 10 percent of the stock of the corporation, he did not control that interest, had no authority to sell the stock, and was completely accountable to his father. Finally, even if it had been determined that he was a responsible person, he lacked authority to pay the taxes and other debts of the corporation and, therefore, could not be found to have willfully failed to carry out that responsibility.

E.D. Goodick, DC La., 92-1 USTC ¶50,279.

Individual financial backers who loaned money and obtained lines of credit for a corporation were responsible persons and, therefore, were liable for penalties for failure to pay over withheld income taxes. The backers had the ability to decide where corporate funds were spent and, in fact, exerted this control at least once. They had check-writing authority and could pull their financial support at any time their wishes were not fulfilled. Moreover, the backers' failure to pay the taxes was willful because they knew of the corporation's obligation to pay the taxes. In addition, the corporate officer, who operated the company on a day-to-day basis, was also liable for the taxes as a responsible person. Even though the officer intended to pay the taxes in the long run, he preferred to use current cash flows to carry on the corporation's operations and not to pay over the withheld taxes.

C.D. Webster, DC Md., 94-1 USTC ¶50,008.

A corporation in bankruptcy that was in the business of providing security guards to its customers was the employer of these guards because it had control over the guards and the funds used to pay them. It was responsible for the payment of employment taxes regarding these employees, and this obligation could not be avoided by delegating that function to another. However, the government's tax claim for the penalty for the failure to pay over withheld taxes was disallowed with leave to file an amended claim, because it failed to identify a particular person as the responsible person liable for the corporation's FICA and FUTA obligations and did not specify whether the unpaid FICA amounts were attributable to the debtor's portion or the employees' share.

Professional Security Services, Inc., BC-DC Fla., 94-1 USTC ¶50,148.

Summary judgment was denied where material issues of fact existed as to whether a corporate officer should be classified as a responsible person. The corporate officer had authority to sign corporation checks and could be deemed a person responsible for paying withholding taxes. Further, there was evidence that the officer was aware that the corporation was delinquent in paying over withholding to the IRS.

J.P. Ladwig, DC Ill., 94-1 USTC ¶50,192.

Married individuals were not responsible persons during the time that a company's tax delinquency accrued and, therefore, were not required to pay over federal income taxes and social security taxes withheld from employees' wages. They lacked control over the decision-making process by which the corporation allocated funds to other creditors instead of paying its withholding tax obligations.

M.L. Michaud, FedCl, 97-2 USTC ¶50,972, 40 FedCl 1.

The president of a bankrupt company who willfully failed to pay over his company's payroll withholding taxes was a responsible person with respect to the trust fund recovery penalty. The president acknowledged that he was a responsible person under the statute. However, whether two other company officers were responsible persons was questionable. Although one of the officers served as chief financial officer and both had check-writing authority, the president exerted such command over the finances of the company that a reasonable fact-finder could conclude that neither officer had significant control over the company's finances.

R.S. Hudson, DC Pa., 99-2 USTC ¶50,914.

A bankrupt attorney who was the president and sole shareholder of his law corporation was liable for the trust fund recovery penalty in connection with the corporation's failure to collect and pay over employment taxes.

D.A. Smith, DC Hawaii, 99-2 USTC ¶50,998. Aff'g 99-1 USTC ¶50,278.

The president and vice president of a corporation who failed to remit withholding taxes to the IRS were determined to be "responsible persons" liable for the trust fund recovery penalty. In addition to being corporate directors and officers, the individuals owned stock in the corporation, were responsible for daily management operations, hired and fired employees, and had the authority to sign checks and pay the corporation's taxes.

D.C. Stull, DC Tex., 2000-1 USTC ¶50,168. Aff'd, per curium, CA-5 (unpublished opinion), 2001-1 USTC ¶50,333, 252 F3d 436.

A corporate director who lacked control over the company's tax deposits and payments did not qualify as a responsible person liable for the trust fund recovery penalty. Although he made deposits and tax payments at a bank under the direction of the corporate president and was aware of the company's payroll tax delinquencies, he had no decision-making authority regarding the payment of creditors.

M.D. McGlaughlin, DC Md., 2000-1 USTC ¶50,183.

Questions of fact precluded summary judgment on the government's claim for the trust fund recovery penalty against the sole owner of a real estate appraisal business who was on maternity leave during the quarters at issue. Because her level of involvement with company during her maternity leave was in dispute, it could not be determined on summary judgment that she was a responsible party.

P. Ranson, DC Wash., 2001-1 USTC ¶50,161.

A federal district court applied improper legal standards to reach its determination that an individual was not a responsible person. The district court erroneously focused its inquiry on whether the taxpayer had knowledge of the unpaid taxes, the taxpayer's functional responsibility, and the fact that another individual had greater control of corporate affairs. That the taxpayer had significant control over the company's affairs was sufficient for him to qualify as a responsible person.

D.M. Chapman, CA-9 (unpublished opinion), 2001-1 USTC ¶50,380, 7 FedAppx 804, rev'g and rem'g and unreported District Court decision.

The former owner of a plumbing business who transferred 80% of the ownership in the business to his children was deemed to be a responsible person for purposes of the trust fund recovery penalty. The individual was still a 20% owner in the business, had check-signing authority, was often asked to co-sign checks for the business and continued to work to determine the bids the company would make. Moreover, he loaned money to the company when it was in financial difficulty and had considerable influence over how his children ran the business.

M.E. Pitts, DC Ariz., 2001-1 USTC ¶50,419.

The president and CEO of two trucking corporations, who was assessed penalties for his failure to turn over withholding taxes, was a responsible person under Code Sec. 6672. The undisputed evidence established that he had the authority to instruct his manager to pay the taxing authorities, had significant control over the finances of the corporations, retained the authority to sign checks on behalf of the corporation, and possessed the authority to hire and discharge employees. The taxpayer's argument that he delegated these duties and did not have day-to-day financial responsibilities was unpersuasive.

R.C. Bolus, Sr., DC Pa., 2001-2 USTC ¶50,644.

An individual who was the sole shareholder of one credit bureau and the president and CEO of a second bureau, both of which failed to pay over withholding taxes, qualified as a responsible person who willfully failed to collect, account for, or remit the funds to the IRS. Thus, he was liable for the assessed trust fund recovery penalties. No triable issues of fact existed as to the individual's liability for the penalties.

W.K. Hankins, DC Ind., 2001-2 USTC ¶50,692.

A third-party defendant's motion for summary judgment in connection with the IRS's assessment of a trust fund recovery penalty against him due to a corporation's failure to pay over employment taxes was denied. He unsuccessfully contended that he was not a responsible person because he was not an employee, officer or shareholder of the corporation. However, he served as corporate counsel and as the entity's chief financial officer. He also directed the president to make payments to various creditors, including tax payments to the IRS, was involved in the preparation and filing of the company's payroll tax returns, prepared corporate tax returns and was responsible for ensuring that the payroll tax deposits were made.

D.K. Scheingold, DC N.J. (unpublished opinion), 2002-2 USTC ¶50,510.

The chairman of a corporation was liable for the trust fund recovery penalty in connection with the corporation's failure to pay over employment taxes. He qualified as a responsible person because he had the authority to sign checks, hire and fire employees, participate in management, determine corporate financial policy, and authorize the payment of bills. He also discussed corporate business with other company officers on a weekly basis and was the corporation's majority shareholder, a member of its board of directors, and a guarantor of corporate loans.

C.S. Perlman, DC Fla., 2002-1 USTC ¶50,346.

The founder and president of a corporation was a responsible person with liability to pay the IRS's assessment of unpaid employment and withholding taxes, plus interest and penalties, for one tax year. He held the position of president of the company and attended its board meetings, he was generally responsible for the operation of the company and possessed the authority to sign checks and approved the check signing of the only other company employee with checking signing authority. Furthermore his decision not to pay over or withhold the employment taxes was willful. He made the decision to pay other creditors in preference to the IRS knowing that taxes were due and he failed to take corrective actions.

G. Sutton,, DC Tex., 2002-2 USTC ¶50,552, 194 FSupp2d 559.

The president of a corporation was considered the responsible person with liability to pay the assessment of unpaid taxes, plus interest and penalties, for two tax years. He was the highest-ranking officer and had substantial authority to direct operations. Moreover, he signed the payroll tax returns and had signature authority on corporate accounts. He paid other creditors in preference to the IRS knowing that taxes were due and failed to take corrective actions. That he resigned from his position of president was meaningless as he exercised control in all relevant areas both before and after the purported resignation.

L.A. Mitchell, DC N.J. (unpublished opinion), 2002-2 USTC ¶50,537. Aff'd, CA-3 (unpublished opinion), 2004-1 USTC ¶50,113, 82 FedAppx 781.

The CFO of a bankrupt airline company was a "responsible person," who willfully failed to file quarterly excise tax returns and pay the accompanying tax to the government. The CFO held a corporate office, possessed control over the financial affairs of the airline company, possessed the authority to disburse corporate funds, and possessed the ability to pay the excise taxes without the approval of the company's Board. There was a material issue of genuine fact, however, as to whether the controller of the company had the requisite corporate decision making authority within the company to be considered a responsible person with regard to the delinquent excise taxes. Although the controller applied for credit on behalf of the company and signed promissory notes that bound the company, he was not in charge of the department that was responsible for tracking the excise taxes and he was not involved in overall day-to-day operations of the company.

D.R. Ferguson, DC Iowa, 2004-1 USTC ¶50,247, 317 FSupp2d 945.

The bankruptcy court erroneously held that the president and sole shareholder was not a responsible person for purposes of the trust fund recovery penalty. Although the taxpayer did not run the day-to-day operations of the corporation, she had sole authority to right checks for the company. The bankruptcy court's conclusion that the taxpayer was not a responsible person was strongly based on the lack of authority or power over daily management of the company. However, the taxpayer's status as president, sole shareholder and her authority to sign checks was sufficient to make her the responsible person.

E.L. Marino, DC Fla., 2004-1 USTC ¶50,262, 311 BR 111, rev'ing BC-DC Fla., 2004-1 USTC ¶50,261.

A president and fifty percent shareholder of an employee leasing company was liable for the trust fund recovery penalty in connection with his company's failure to pay employee withholding taxes. Evidence established that the taxpayer was a responsible person because he had check signing authority, even though he claimed that he did not often exercise such authority, and had the authority to manage and direct the employees of the company. The taxpayer also had the authority to hire and fire all levels of employees, which he displayed when he fired his business partner, who was also a fifty percent shareholder.

S. Farkas, FedCl, 2003-2 USTC ¶50,574.

A debtor who served as vice-president of a general contracting business was a responsible person as a matter of law. He had significant authority over the employees, as well as over the finances of the company during the tax periods in issue. Questions remained regarding whether he willfully failed to pay over the withholding taxes.

V.K. Pugh, BC-DC Nev., 2004-2 USTC ¶50,352, 315 BR 889.

A debtor's objection to the IRS's claim for the trust fund recovery penalty assessed against him was denied because he was determined to be a responsible person who willfully failed to pay over withheld taxes. The debtor stipulated that he was a responsible person and his failure to remit the withheld taxes was willful because he was aware of the company's employment tax deficiency yet chose to pay creditors other than the government. The fact that the debtor was told by the company's owner not to pay the taxes and that he might have been fired had he disobeyed orders did not excuse his liability for nonpayment.

L. Borman, BC-DC Fla., 2005-1 USTC ¶50,109.

An individual was liable for the trust fund recovery penalty, during the time he was no longer president of the corporation. The taxpayer admitted to being the chairman of the board, the sole director, vice president, secretary, and treasurer. Between himself, his spouse and his children, he controlled about 50 percent of all outstanding stock and he has controlling interest in the corporation. At all times, the interim president served at his will. Undoubtedly, the taxpayer was a "responsible person" liable to pay the trust fund taxes.

D.J. Frank, BC-DC N.C., 2005-1 USTC ¶50,222.

The manager of a casino was not a responsible person for purposes of the trust fund recovery penalty since he had no authority over payroll or tax matters. Although he supervised department managers and was otherwise responsible for the day-to-day operations of the casino, the manager did not have significant decision-making authority over the financial affairs of the company to be responsible for payroll taxes. Authority to decide which checks were to be written, and to whom, rested in the sole shareholder, director and corporate officer of the casino.

B.E. Dewing, DC Nev., 2005-1 USTC ¶50,275.

The chief financial officer of a bankrupt company was not a responsible person for purposes of imposition of the trust fund recovery penalty, despite have check-signing authority, because the company president had absolute control over all of the company funds. The company president reviewed the cash flow balance daily, authorized the creditors to be paid and even wired funds to another creditor to prevent the IRS from obtaining the funds after the CFO sent the IRS a check without the president's knowledge.

J.D. Salzillo, FedCl, 2005-1 USTC ¶50,324, 66 FedCl 23.

The sole owner and president of a corporation was a responsible person who willfully failed to pay the corporation's employment tax liabilities for purposes of imposing the trust fund recovery penalty. He signed Form 941 employment tax returns on behalf of the corporation, could independently sign checks on behalf of the corporation and signed a sworn statement that he was solely responsible for all tax debts incurred by the corporation. The taxpayer's failure to pay the taxes was willful because he knew of the tax liabilities, but chose to pay other expenses.

G. Kraljevich, DC Mich., 2005-1 USTC ¶50,372, 364 FSupp2d 655.

An individual was determined to be a responsible person with respect to unpaid employment taxes. The taxpayer, who was involved in the operation of two companies until the time a surety company assumed control, did not present any evidence contradicting that he was a responsible party for tax liability under Code Sec. 6672. Instead, the evidence reflected that the majority of the unpaid employment taxes accrued prior to the time the surety company assumed control. Furthermore, whether the surety was responsible for the unpaid employment taxes had no bearing on whether the taxpayer was a responsible person for purposes of tax liability.

J. Dowdy, DC Tex., 2005-2 USTC ¶50,517.

The IRS was granted summary judgment against the former president of a non-profit corporation for trust fund recovery penalties under Code Sec. 6672. The taxpayer had significant control of the corporation's finances, had check writing authority, and was responsible for ensuring that the company paid its trust fund taxes. Further, once the taxpayer became aware of the deficiency, he failed to ensure its payment before any other creditors were paid. Such a failure is willful and subjects the responsible person to trust fund recovery penalties under Code Sec. 6672.

Reverend R. W. Schlicht, DC Ariz., 2005-2 USTC ¶50,527.

An electrical contractor was liable for penalties under Code Sec. 6672 for failing to pay over federal employment taxes owed by two corporations that he formed. Despite having relinquished his management role to family members, he was a "responsible person" for purposes of Code Sec. 6672 liability because he kept the title of president and retained authority to control the company, even if he did not exercise that authority. Specifically, the taxpayer had full check writing authority, full access to company books and records, and the opportunity to exercise substantial financial control over company affairs.

J.F. Grillo, BC-DC N.J, 2005-2 USTC ¶50,625.

The founder, president and principal stockholder of a company was determined to be a responsible person with respect to unpaid employment taxes. The failure of the taxpayer's accountant and tax specialist to properly designate amounts paid to offset these liabilities did not mean that the IRS should be equitably estopped from collecting under Code Sec. 6672, as the taxpayer mistakenly argued. The trust fund recovery penalty is separate and distinct from the legal obligation imposed on the employer to collect and remit the trust fund taxes. Since the taxpayer did not present any evidence to the contrary, he was found to be a responsible person who willfully failed to pay the owed employment taxes.

J.A. Lencyk, DC Tex., 2005-2 USTC ¶50,630, 384 FSupp2d 1028.

A 100-percent trust fund penalty was reduced to judgment since the taxpayer was the responsible person even though he did not have day-to-day control of the company. Rather his status as CEO, president and sole shareholder gave him sufficient control to be the responsible person for trust fund purposes.

R. Sage, DC N.Y., 2006-1 USTC ¶50,175, 412 FSupp2d 406.

The president of a tax-exempt organization was not entitled to a refund of the federal employment and withholding taxes he paid from his personal funds. As president of the board of directors for almost 20 years, he had check-signing authority and control over the organization's financial affairs. Further, he exhibited a reckless disregard of a known risk that the organization was not making required trust fund payments to the IRS and he made no effort to ascertain the status of the organization's tax payments.

C.E. Jefferson, DC Ill., 2007-1 USTC ¶50,304, 459 FSupp2d 685.

A company's vice president of operations was denied a refund of a trust fund recovery penalty assessed against her for her employer's failure to pay backup withholding taxes. She was a responsible person because her own testimony about her duties and responsibilities and her undisputed check-writing authority established that she could have prevented the company from paying other creditors instead of paying the taxes. She enjoyed exclusive check-writing authority and was responsible for collecting, accounting for, and paying over the withheld taxes. She was in a position to use her ability to prioritize creditors and her check-signing authority to impede the flow of business to the extent necessary to ensure the payment of taxes and nothing in the company's business model prevented her from paying the taxes. In addition, the undisputed evidence clearly established that the willfulness requirement was met.

N.A. Cook, DC Ind., 2007-1 USTC ¶50,333.

A trust fund recovery penalty was correctly assessed against the chief financial officer of a bankrupt airline company because he was a responsible person who willfully failed to pay the company's excise taxes. The individual was authorized to sign checks and disburse corporate funds on behalf of the company and had the authority to pay the company's excise taxes without board or management approval. The board never explicitly instructed him to not pay the excise taxes but he chose not to do so in order to pay other company expenses.

R. Musal, DC Iowa, 2006-1 USTC ¶50,207, 421 FSupp2d 1153. Aff'd sub nom. D.R. Ferguson, CA-8, 2007-1 USTC ¶50,481, 484 F3d 1068.

The CEO and board chairman of a motorcycle company was not entitled to a refund of a portion of the trust fund recovery penalty he paid to the IRS in satisfaction of the company's unpaid payroll withholding taxes. Testimony of the CEO and the company's chief operating officer and financial director established that the CEO was a responsible person who willfully failed to pay the company's taxes. He had overall authority, including raising capital and hiring, was involved in the day-to-day management of the company, had the authority to issue checks, and determined which creditors to pay and when to pay them. Further, he instructed the company's financial director that bills pertaining to utilities were to be paid first; thus, checks were issued to other creditors but not to the government.

R.K. Hagen, DC Md., 2007-1 USTC ¶50,510, 485 FSupp2d 622.

An individual who held no ownership or entrepreneurial stake in debtor corporations was not a responsible person with regard to those corporations' failure to pay over withheld federal taxes. She could not sign checks without the prior authorization of the president and sole shareholder of the corporations and had no power or authority to hire or fire employees. Although she was the secretary of the debtor corporations, the duties that she performed were ministerial and administrative in nature. All of the authority and control over the corporations' administration and finances resided with the president, and the tasks she performed were executed solely upon his instructions.

L.M. Benitez, DC PR, 2006-2 USTC ¶50,598.

The sole corporate officer of a construction company was a responsible person who willfully failed to pay over federal withholding taxes. The officer continued to write checks, sign returns and act on behalf of the corporation after the date he claimed an insurance company took over control under an indemnity agreement. However, the officer's wife was not liable for the unpaid taxes because there was no evidence that she was an officer or director of the construction company. Her involvement was limited to occasional business purchases and as a signatory with her husband on the indemnity agreement.

G. Hartman, BC-DC Pa., 2007-2USTC ¶50,747, 375 BR 740.

The chairman of a corporation was a responsible person who willfully failed to collect, account for and pay over the withheld income and employment taxes of the corporation. The IRS's evidence showed that he had the ability to sign checks, hire and fire employees, and sign the corporation's tax returns. He owned stock in the corporation, was ultimately responsible for making financial decisions and directed payment to the corporation's creditors despite knowledge of the corporation's unpaid employment taxes. However, a genuine issue of material fact existed as to whether another corporate officer, the CEO, had sufficient authority over the corporation's financial affairs to be considered a responsible person for purposes of the trust fund recovery penalties.

R.C. Savona, DC Calif., 2007-2 USTC ¶50,788.

The CEO and the Chief Financial Officer of a trucking company were both responsible persons who were jointly and severally liable for the trust fund recovery penalties in connection with the company's failure to pay its federal employment tax obligations. Both officers acted willfully when they made numerous voluntary and intentional payments to creditors despite having knowledge that the employment taxes were unpaid. Both exercised significant control over the disbursement of company's funds, had active day-to-day involvement in the business and had full authority to sign checks and Form 941 tax returns.

J.M. Horovitz, DC Pa., 2008-1 USTC ¶50,186, 543 FSupp2d 441.

The founder, shareholder and officer of a corporation was liable for the trust fund recovery penalty because he exercised significant control over the corporation's day-to-day activities and participated in the decision to hire or fire management employees and accountants in charge of the corporation's payroll operations. He also reviewed weekly and monthly financial statements, personally guaranteed payments to vendors and directed checks to be written and expenses to be paid.

C.B. Erwin, DC N.C., 2008-1 USTC ¶50,258.

The owner and the bookkeeper of a limited liability company (LLC) were liable for trust fund recovery penalties in connection with the operation of a restaurant. The owner was a responsible person because she organized the LLC, entered into a lease agreement for the restaurant, obtained a liquor license and failed to make a timely election for the LLC to be taxed as a corporation. Further, the bookkeeper was also a responsible person because he had the authority to sign checks for the restaurant, to make and authorize bank deposits, to identify and calculate the amount to be withheld for federal payroll taxes, to authorize payment of federal tax deposits and to authorize payroll checks. Moreover, he acted willfully because he knew about the delinquent taxes and voluntarily paid other creditors before paying the government.

D.M. Seymour, DC Ky., 2008-2 USTC ¶50,406.

An individual who was the president, director, Chief Executive Officer and majority shareholder of a corporation was liable for the trust fund recovery penalty assessed against him in connection with the corporation's unpaid withholding taxes. The individual was a "responsible person" with respect to the corporation because he had complete authority over every aspect of the corporation's finances, including the sole authority to hire and fire employees, take out loans, sign contracts and checks, withhold income and FICA taxes from wages and pay those taxes to the government.

J.C. Tornes, DC Ohio, 2008-2 USTC ¶50,431.

The majority stockholder of two retail optometry companies was not entitled to a refund of the trust fund recovery penalty he paid to the IRS in satisfaction of the companies' unpaid withholding taxes. The individual was a responsible person because he exercised significant control over the companies' finances, had check-signing authority and the authority to sign the companies' employment tax returns. Furthermore, more than one person can be a responsible person with respect to liability for unpaid taxes.

L.H. Joel, DC Ky., 2008-2 USTC ¶50,451.

The director, shareholder and secretary-treasurer of a closely held corporation was liable for the trust fund recovery penalty assessed against her in connection with the corporation's unpaid withholding taxes. The individual was a responsible person because she was involved in the corporation's business operations, had check signing authority, attended meetings to discuss the corporation's cash-flow problems, had access to the corporation's financial records and books and knew of the corporation's tax problems. Although her responsibilities did not typically include the payment of withholding taxes and she did not believe that it was within her control, she had the power to pay the corporation's withholding taxes.

N. Noronha, DC Ky., 2008-2 USTC ¶50,554.

The president of a company was liable for the trust fund recovery penalties assessed against him. The individual was the responsible person with respect to the company since he had the sole authority to write and sign checks on corporate accounts and to hire and fire personnel.

C.C. Anuforo, DC Minn., 2008-2 USTC ¶50,584.

The owner of a company was liable for the trust fund recovery penalty (TFRP). The individual maintained the company's books, prepared its financial statements, authorized payment of its bills and payroll, reviewed federal income tax returns and prepared and signed federal payroll tax returns. He acted willfully because he had reason to know that the taxes were not being paid and failed to exercise his authority to ensure their payment. Despite knowledge of the tax deficiencies, he regularly directed that payments be made to creditors other than the IRS.

S.O. Johnson, DC Ill., 2008-2 USTC ¶50,585.

The president of the board of directors of a tax-exempt organization was not entitled to a refund of federal employment and withholding taxes he paid from his personal funds. Although his position was voluntary and uncompensated, and although he was not involved in the day-to-day operations of the day care center, the individual had enough involvement in and control over the organization's financial affairs to qualify him as a "responsible person" within the meaning of Code Sec. 6672.

C.E. Jefferson, CA-7, 2008-2 USTC ¶50,587.

The owners of three companies and their employee, a certified public accountant (CPA), serving as the vice president of finance for those companies, were all responsible persons for purposes of the trust fund recovery penalty. The owners were the founders, officers, board members, and equal shareholders of each of the three companies. They had check-signing authority, could hire and fire employees, could exercise control over the companies' finances, including the payment of payroll taxes, and were intimately involved in running the companies. Although the CPA/employee had no check-signing authority, he supervised the accounting department, oversaw the preparation of checks, including payroll and federal tax deposit checks and had the authority to direct the accounting department to draft checks to the IRS instead of to other creditors. Further, the individuals acted willfully when they made payments to other creditors despite knowing that the trust fund taxes remained unpaid.

S.P. Davis, Sr., DC La., 2008-2 USTC ¶50,613.


Knowledge of nonpayment. --Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax: Willfulness: Knowledge of nonpayment

The president of the company was a responsible person, but his lack of knowledge that withheld taxes were not being paid over might have diminished the willfulness of his action. Therefore, the case was remanded.

R.J. Kalb, CA-2, 74-2 USTC ¶9760, 505 F2d 506.

In ruling that the major shareholder in two corporations could not be held liable for the corporations' unpaid withholding taxes, the court held that the IRS could not prove that the shareholder acted willfully in failing to pay the taxes since he did not actually know of the tax delinquencies.

M.J. Premo, BC-DC Mich., 90-2 USTC ¶50,396.

In a charge to a jury, the court instructed that a responsible person has not willfully failed to collect and pay over taxes if he prefers other creditors at a time when he does not know that the taxes have not been paid over. The court further instructed the jury that such a person willfully fails to pay taxes when he learns that the taxes have not been paid and he continues to pay other creditors.

R.S. Chappell, DC, 75-1 USTC ¶9296. Aff'd CA-7 (unpublished opinion 11-18-75).

A company's newly hired Chief Financial Officer was liable for the company's unpaid employment taxes even though he was unaware of the unpaid amounts. Having been aware of the company's inability to pay debts owed to creditors other than the IRS, he should have investigated the company's ability to pay the IRS. Later, he should not have capitulated to directives from the company's president and a leading creditor of the company to refrain from making the payments.

M. Sederoff, BC-DC Calif., 90-2 USTC ¶50,558.

A president of a corporation was a responsible person liable for unpaid federal employment taxes to the extent of unencumbered funds received by the corporation after he learned of the nonpayment (i.e., after the corporation's failure to pay became willful with respect to the president). The fact that the president paid other creditors before the IRS with unencumbered funds received after he acquired knowledge of the nonpayment constituted willfulness as a matter of law. The bankruptcy court's conclusion that a responsible person is liable for the penalty only to the extent of unencumbered funds on the date that the failure to pay became willful was reversed. The court distinguished Slodov (¶39,780.69, above), in which a responsible person was held not liable for the trust fund tax incurred before he became a responsible person (rather than before the failure to pay became willful). The president's liability extended to delinquent taxes incurred before he had actual knowledge of the delinquency because he was involved with the corporation at all relevant times and the situation involved different policy interests than Slodov.

W.A. King, DC Ala., 95-1 USTC ¶50,241.

A construction firm's director-treasurer was liable where he was aware that the taxes were not being paid.

Messina, DC, 65-1 USTC ¶9370.

An officer-stockholder of two corporations was not liable for unpaid withholding and Social Security taxes owed by one corporation where he relied on an employee of the corporation to pay the taxes, but he was liable for the taxes owed by the successor corporation since he was then aware of the fact that the employee had failed to properly pay the taxes due from the predecessor corporation.

R.D. Leuschner, Sr., CA-9, 64-2 USTC ¶9742, 336 F2d 246.

Although an officer of a bankrupt corporation qualified as a responsible person, his knowing failure to pay over the taxes, without more, was insufficient to establish that he willfully attempted to evade or defeat the tax.

F.P. Macagnone, BC-DC Fla., 98-2 USTC ¶50,624, 224 BR 212.

On reconsideration, the bankruptcy court found that it did not err in placing the burden of proof on the IRS to show that the taxpayer was a responsible person.

F.P. Macagnone, BC-DC Fla. 99-1 USTC ¶50,276, 228 BR 784.

The Bankruptcy Court erred in determining that the government's failure to prove that a bankrupt responsible person willfully failed to collect and pay over employment taxes relieved him of liability for the trust fund recovery penalty. According to well-established precedent in the U.S. Court of Appeals for the 11th Circuit, an individual who has been determined to be a responsible person bears the burden to disprove willfulness.

F.P Macagnone, DC Fla., 99-2 USTC ¶50,681. Rev'g and rem'g BC-DC Fla. 99-1 USTC ¶50,276, 228 BR 784.

On remand, the bankruptcy court held that the responsible person/debtor was not liable for the trust fund recovery penalty for failure to collect and pay over employment taxes. This was affirmed on appeal. The officer did not show reckless disregard for a known or obvious risk by failing to determine whether funds withheld from employees' wages were remitted to the government. Despite the taxpayer's failure to inquire about the status of the employment taxes after his business encountered financial difficulties, absent a history of delinquency, his failure to do so was not reckless.

F.P. Macagnone, DC Fla., 2000-2 USTC ¶50,551. Aff'g BC-DC Fla., 2000-1 USTC ¶50,207.

The son of the president of a corporation was a responsible person where he had check writing authority, controlled the daily operations of the company, and was considered a substantial stockholder and at least a de facto vice-president. The failure to pay was willful because he caused payments to be made to other creditors when he knew that such funds were owed to the government. The duty of a responsible person to pay over withheld tax to the government may not be contravened by a superior's contrary instructions.

J. Bernard, BC-DC La., 91-2 USTC ¶50,516.

A president and major shareholder of a corporation was the responsible officer liable for willfully failing to pay withholding and social security taxes of the corporation's employees. The taxpayer contended that because he lacked knowledge of the corporation's failure to pay taxes until after they were due, his subsequent use of corporate revenues to compensate creditors rather than to pay the delinquent taxes did not evince willfulness. Since this argument was inconsistent with the definition of willfulness promulgated by the Supreme Court and other courts of appeals, it was rejected.

D.O. Davis, CA-9, 92-1 USTC ¶50,292, 961 F2d 867. Cert. denied, 113 SCt 969.

An officer of a corporation who had the authority to decide whether corporate funds should be expended was a responsible person. The taxpayer did not carry his burden of proving that he did not act willfully in failing to timely pay the taxes. The taxpayer, who forced his role of authority on the other shareholders, had a duty to insure prompt payment of the corporate tax liability. Because the taxpayer was aware of a previous tax delinquency, as well as of the inadequate performance of the acting financial manager, he could not escape culpability by delegating the payment of taxes to the manager or by disregarding his own obligations.

R.M. Guito, Jr., DC Fla., 92-1 USTC ¶50,231.

A supervisor of a trucking company was a responsible person liable for willfully failing to pay over withholding taxes. The evidence indicated that the taxpayer willfully failed to pay over the taxes. His signing of the paychecks and the withholding tax form indicated that he should have known of his responsibility.

W.E. Whiteside, ClsCt, 92-2 USTC ¶50,436.

A president of a corporation did not willfully fail to withhold and pay employment taxes for the two calendar quarters prior to his resignation, even though, as president, he had final authority regarding the payment of creditors and directly supervised the person actually responsible for paying the taxes. The taxpayer had no knowledge of any nonpayment nor did he recklessly disregard whether the taxes were paid. Moreover, upon discovery of the nonpayment, a payroll tax deposit was made. Since the IRS offered no evidence to rebut the evidence of payment, there was no genuine issue of material fact, and the taxpayer's motion for summary judgment was granted.

J.M. Cohen, DC Calif., 93-1 USTC ¶50,350. Aff'd, CA-9 (unpublished opinion 3/24/94).

The chief executive officer (CEO) of an airline carrier in bankruptcy did not "willfully" fail to collect, account for, or pay over taxes. The CEO was not liable for a penalty assessment for taxes accrued before his appointment, and his knowledge of prior tax deficiencies did not establish willfulness with respect to future deficiencies. His attendance at a hearing before the bankruptcy court during his brief tenure as CEO did not provide him with an awareness of current unpaid payroll taxes. There was no evidence that he was anything more than an observer at the hearing or that current delinquencies were discussed there in any detail. In addition, there was nothing in the airline's records that would have alerted him to any substantial deficiency in the payment of currently accruing taxes.

B.A. Cooke, DC Calif., 93-1 USTC ¶50,294.

A corporate president and director was liable for the penalty for unpaid withholding taxes. Although he claimed to have no knowledge of the corporate vice president's failure to pay over the withholding taxes at issue, he did know of a prior, relatively small tax delinquency levied against his company, took no steps to confirm or ensure that this tax delinquency and future taxes were being paid and signed smaller checks to other creditors during the same time period.

P.J. Strunk, DC Iowa, 94-1 USTC ¶50,110.

A corporate officer was not liable for the 100% penalty because he did not willfully fail to pay over withholding taxes. At the time of his resignation from the parent of his employer, the parent corporation was current in paying its taxes, and, after his resignation, he lacked actual knowledge of the nonpayment of taxes and was not responsible for preparing the corporation's tax returns.

M.P. Running, CA-7, 93-2 USTC ¶50,568.

An officer-stockholder of a condominium management company was liable for the trust fund recovery penalty with respect to withholding taxes owed by the predecessor corporation because he willfully failed to pay over the taxes. Even though he did not have actual knowledge of a failure to pay the tax, the officer was put on notice of the obvious risk that the taxes were not paid and acted with reckless disregard to that risk. The officer restructured the company to circumvent any responsibility for the unknown liabilities. His reliance on the bookkeeper's and owner's assessment of the predecessor corporation's state of affairs did not absolve him from making inquiries as to the actual tax liability.

S.A. Malloy, CA-11, 94-1 USTC ¶50,145.

A corporation's president and majority shareholder was liable for the trust fund recovery penalty because his failure to pay over withheld taxes was willful. He could not avoid liability for the penalty on the ground that, since the jury did not specifically find that he had actual knowledge of the delinquency before resigning and surrendering his stock, he did not act willfully. Willfulness includes the reckless disregard for an obvious or known risk of nonpayment. Also, the evidence did not support the president's contention that his ownership of the corporation had ceased before he discovered the unpaid taxes; thus, a jury instruction regarding his failure to make payment with available corporate assets after discovering the delinquency was valid. Moreover, the jury was properly instructed that a person who is responsible for withholding taxes cannot escape that obligation by delegating it to others.

J.N. Hauf, DC N.Y., 97-2 USTC ¶50,645.

An employer was liable as a responsible person for his failure to collect and pay over employment taxes owed by his wholly owned corporation. The willfulness requirement was satisfied because, after the IRS had sent several notices of delinquency, the company received unencumbered funds and used those funds to pay employee claims rather than the delinquent employment taxes.

C.G. Vaglica, CA-5, 94-1 USTC ¶50,114.

An owner and officer of a corporation was liable for the trust fund recovery penalty. He willfully failed to pay the taxes since he knew about the tax liability but continued to pay creditors and employees ahead of the government. The officer's claim that he was not liable for taxes attributable to periods prior to the date he acquired knowledge of the tax liability was rejected because he had a legal duty to make up any prior deficiency once he obtained knowledge of it. Moreover, a lender's alleged refusal to allow the corporation to pay the taxes did not insulate the officer from liability because the corporation voluntarily entered into the lending arrangement and continued to operate and pay employees, thereby incurring new tax liabilities. The individual also could not rely on assurances of others that the taxes would be paid.

J.D. Durham, DC Okla., 94-2 USTC ¶50,331.

The volunteer chairman of the board of directors of a not-for-profit organization who volunteered his time to the organization was liable as a responsible person for the trust fund recovery penalty. He willfully failed to pay withholding taxes because he signed checks to pay creditors other than the government, and the organization had unencumbered funds in an amount sufficient to pay the taxes. The taxpayer was on notice of substantial cash shortfalls and improprieties in the financial management of the organization, and his failure to investigate and correct such mismanagement was reckless and constituted willful conduct.

H. Wright, DC N.Y., 96-1 USTC ¶50,114.

A corporate vice president's reckless disregard of the obvious risk that the taxes would not be paid to the government constituted willfulness as a matter of law. Once he became aware of the payroll tax delinquencies, he had a duty to investigate or correct the problem. Another officer's assurances of payment did not relieve him of that duty.

W.C. Kelver, DC Colo., 98-2 USTC ¶50,766.

Although he may have been negligent, a responsible person was not liable for the trust fund recovery penalty because the failure to pay withholding taxes was not reckless, and, therefore, was not willful. First, he had little responsibility for finances and taxes. He was not involved in preparing company tax returns, nor did he exercise primary authority over check writing and bill paying (except for those arising at construction sites). Second, he had no knowledge of past or present tax deficiencies or other indications that the taxes were unpaid. Since the taxpayer resigned after learning of the unpaid taxes, his failure to pay the taxes at that point did not constitute willfulness.

P.E. Abel, DC Pa., 96-2 USTC ¶50,498.

A corporate president and chairman of the board of directors was a responsible person subject to the trust fund recovery penalty. For some of the quarters at issue, willfulness was established by the president's admissions that he was aware of the delinquency, reviewed the corporation's payroll tax returns, and signed the company's Forms 941, Employer's Quarterly Federal Tax Return, all of which reflected a balance due. For other quarters, the admissions were vaguely phrased and did not clearly state that the president was aware of the deficiencies for those quarters. Nonetheless, those admissions established the president's knowledge of the deficiencies for those quarters. The admissions regarded conversations with the company's outside accountant, review of the payroll tax returns, and the president's authority over financial decisions. Additionally, the president admitted that he authorized payment of company expenses other than the taxes.

A. Hutchinson, DC Tex., 97-2 USTC ¶50,795.

A president failed to meet his burden of disproving willfulness. There was evidence that he was aware of the corporation's cash flow problems and recklessly disregarded the risk of nonpayment of taxes, and he made no effort to prove that funds deposited into and withdrawn from corporate accounts during one of the quarters at issue were encumbered and, thus, unavailable for taxes.

E. Rojo, BC-DC Fla., 97-2 USTC ¶50,789.

Sufficient evidence existed to support a jury verdict that a president and CEO of a corporation was a "responsible person" who willfully failed to pay the corporation's withholding taxes. Accordingly, he was liable for the trust fund recovery penalty. His contention that he lacked control of the corporation's finances and was unable to make the appropriate tax payments was rejected. The taxpayer was aware of the delinquent taxes and that the corporation had sufficient funds to pay the delinquent taxes in full. However, he used the corporation's funds to pay other creditors.

M.P. Logal, CA-5, 99-2 USTC ¶50,988. Aff'g DC Tex., 98-2 USTC ¶50,716.

A corporation's majority shareholder was found to have willfully failed to see that the withheld federal taxes were paid when he had notice and acted in reckless disregard of a known risk that the funds may not be remitted to the government. Since the taxpayer had personally borrowed the funds to pay an earlier tax deficiency, he was on notice that the corporation's president had mismanaged the company and could not be trusted to pay the taxes. His failure to take a more active role in securing payment constituted willful failure to pay over withheld taxes.

P.M. Larson, DC Wash., 99-2 USTC ¶50,787.

The president and vice president of a corporation who failed to remit withholding taxes to the IRS acted willfully by paying other creditors and employees ahead of the IRS after becoming aware of the corporation's unpaid tax liabilities.

D.C. Stull, DC Tex., 2000-1 USTC ¶50,168. Aff'd, per curiam, CA-5 (unpublished opinion), 2001-1 USTC ¶50,333.

The president of a corporation that failed to remit payroll taxes to the IRS qualified as a responsible person for purposes of determining liability for the trust fund recovery penalty. The officer, who had been hired to revive the financially strapped corporation, acted willfully in failing to pay over the taxes because he had knowledge of the tax delinquency and deliberately paid other creditors ahead of the IRS.

W.W. Borland II, DC Mich., 2000-1 USTC ¶50,458.

The president and majority shareholder of a corporation who was found to be a responsible person willfully failed to pay his corporation's employment taxes. The taxpayer paid off a tax lien that his bank had placed on his corporation's line of credit despite having actual knowledge of the tax deficiencies.

E.D. Battles, BC-DC Ala., 2000-1 USTC ¶50,536.

Related officers and a consultant of a bankrupt corporation who were deemed to be responsible persons within the meaning of Code Sec. 6672 acted willfully in their failure to remit withheld employment taxes and, thus, were liable for the trust fund recovery penalty. Each individual had knowledge of or were involved in settlement discussions with the IRS concerning the corporation's employment tax liability.

W. Mahler, DC Conn., 2000-2 USTC ¶50,808, 121 FSupp2d 179. Aff'd, on another issue, CA-2 (unpublished opinion), 2002-1 USTC ¶50,292.

The conduct of a bankrupt corporation's president, who qualified as a responsible person for purposes of determining his liability for the trust fund recovery penalty, was deemed to be willful because he failed to pay the IRS ahead of other creditors despite knowing the company was delinquent.

A. Bruno, DC Ill., 2000-2 USTC ¶50,831.

The president and sole officer of a closely held corporation willfully failed to pay over withheld employment taxes to the IRS. She admitted that she was aware of the corporation's failure to pay over the taxes and that she paid other creditors ahead of the IRS. Thus, she had no reasonable cause for failing to remit the taxes.

J.C. Luce, DC Ohio, 2000-2 USTC ¶50,847, 119 FSupp2d 779.

A vice-president of a defunct corporation qualified as a responsible person and was not entitled to a refund of payments issued in partial satisfaction of a trust fund recovery penalty assessed against him individually in connection with the corporation's failure to pay over withheld employment taxes. The taxpayer had extensive control over the financial affairs of the business including the ability to sign checks and pay bills. Moreover, his conduct was willful in that he knew that the withholding taxes were not being paid and that available funds were being used to pay other creditors in preference to the IRS.

H.W. Fisher, DC Okla., 2001-1 USTC ¶50,159.

A bankrupt corporate officer's objection to the IRS's claim for the trust fund recovery penalty assessed against him was denied because he was properly deemed a responsible person within the meaning ofCode Sec. 6672. The debtor had extensive control over the corporation's financial affairs, including check signing authority and the ability to pay bills. Further, his conduct was willful in that he knew the withholding taxes were not being paid and that available funds were being used to pay other creditors, including himself, in preference to the IRS.

W. Karnofsky, BC-DC Fla., 2001-1 USTC ¶50,170.

The president, director and sole shareholder of a bankrupt contracting business who qualified as a responsible person and who willfully failed to remit employee withholding taxes to the government was liable for the trust fund recovery penalty. Although he withheld the taxes from his employees' wages during the 10 quarters at issue and knew that the taxes were due and owing, he failed to remit payment to the IRS. Instead, he used corporate funds to pay wages to such employees as himself, his wife and his son, and he paid a broad array of other creditors ahead of the IRS.

L.B. Breaux, DC La., 2001-1 USTC ¶50,255.

A corporate accountant who was deemed to a responsible person was liable for the trust fund recovery penalty because she had knowledge of the unpaid employment taxes, yet paid off debts to other creditors before the government. That she was directed by the corporation's CEO not to pay the outstanding employment taxes was irrelevant to her knowledge of them.

B. Frey, DC Tex., 2001-1 USTC ¶50,417. Aff'd, per curiam, CA-5 (unpublished opinion), 2002-2 USTC ¶50,690, 34 FedAppx 151.

Although the partial owner of a closely held business qualified as a responsible person, he was not liable for the trust fund recovery penalty because he did not willfully attempted to evade or defeat payment of employment taxes. The individual's daughter was the business's bookkeeper and managed its finances, including the payment of employment taxes. The individual did not know of the unpaid amounts, and would not be expected to have checked on those payments.

M.E. Pitts, DC Ariz., 2001-1 USTC ¶50,419.

The conduct of an individual who was conceded to being a responsible person with respect to one of three related businesses, was deemed to be willful; thus he was liable for the trust fund recovery penalty. The IRS's levying of the business's assets did not relieve him of his liability as a responsible person, which was separate and distinct from the business's liability, or negate his knowledge that employment taxes were not being paid.

S. Rocha, DC Ore., 2001-1 USTC ¶50,425, 142 FSupp2d 1277.

The owner and former president of a bankrupt corporation was not liable for the trust fund recovery penalty because he did not willfully fail to pay his company's employment tax delinquency. While the individual conceded he was a responsible person within the meaning of Code Sec. 6672, he had no reason to know that his company was in arrears since he turned over control of his company when it was in good standing. Moreover, he took immediate action when he became aware of its failure to remit payroll taxes to the IRS, retaking control of the company, ensuring that it remained current with its tax obligations and making arrangements for paying past-due taxes. Moreover, he did not favor other creditors above the IRS.

R.D. Nutt, DC Fla., 2003-1 USTC ¶50,395, aff'g BC-DC Fla., 2002-2 USTC ¶50,753.

A trust fund recovery penalty was imposed against an individual for failure to pay over employment withholding taxes for one tax year. The taxpayer had significant day-to-day control and decision-making authority over the operations and financial affairs of the company, which was supported by his ability to decide which creditors to pay, unrestrained check-writing authority, and access to corporate books and records. Consequently, he was a responsible person under Code Sec. 6672. Moreover, the taxpayer knew that the company was not paying employment taxes and took no steps to ensure that the taxes would be paid. As a result, the taxpayer's failure to collect, account for, or pay over the company's withholding taxes was deemed willful.

H.N. Werkheiser, DC Pa., 2002-1 USTC ¶50,212.

A corporate president was deemed to be a responsible person in connection with the corporations failure to pay over employment taxes. In addition to being the corporation's president, he was the chairman of the board, majority shareholder and actively involved in the day-to-day activities of the corporation. That he employed an individual to lead the corporation's financial department was insufficient to relieve him from liability because he had supervisory control of that individual.

F.T. Johnson, Jr., DC Md., 2002-1 USTC ¶50,267, 203 FSupp2d 416. Aff'd, per curiam, CA-4 (unpublished opinion), 2003-1 USTC ¶50,345, 50 FedAppx 113. Cert. denied, 10/6/2003.

The wife of the owner of a sole proprietorship willfully failed to pay the outstanding employment tax liability of the business. The taxpayer, who was a responsible person, stipulated that she knew the business was delinquent on its withholding obligations during the tax quarters in issue, yet she continued to draft and sign checks to pay other creditors, payroll and personal expenses.

D.M. Keohan, DC Mass., 2002-1 USTC ¶50,279.

The failure of a corporate vice president, who was a responsible person, to withhold or pay over employment taxes was willful. Following his receipt of the notice of deficiency regarding the corporation's unpaid tax liability, he was aware that the corporation was paying creditors other than the government. In addition, he continued to sign payroll checks and he favored payment of the corporation's debts that were owed to him over the payment of the deficient withholding taxes.

B. Crutcher, DC Ala., 2002-1 USTC ¶50,289.

A corporate president was liable for the trust fund recovery penalty in connection with the corporation's failure to pay over its employment tax liability. The taxpayer's failure to pay over the taxes at issue was willful. He knew of the corporation's liability for employment taxes but paid net wages to employees knowing that payroll taxes would not be paid over to the government. The taxpayer unsuccessfully contended that his actions were not willful because he acted on orders of the bankruptcy court to use the company's available funds for environmental cleanup and operating expenses. The bankruptcy court, however, did not compel him to avoid paying the corporation's employment tax obligations.

D.F. Cook, FedCl, 2002-1 USTC ¶50,328.

The chairman of a corporation was liable for the trust fund recovery penalty because he was a responsible person who willfully failed to remit his company's employment taxes. He failed to fulfill his obligation to apply unencumbered corporate funds to pay its tax liabilities despite his knowledge that the taxes were unpaid. His self-serving statements that he lacked such knowledge were insufficient to satisfy his burden of proving that he had not acted willfully. In addition, he devoted corporate funds to purposes other than payment of the withholding taxes.

C.S. Perlman, DC Fla., 2002-1 USTC ¶50,346.

A corporate vice president's failure to pay withholding taxes was willful. The record indicated that he continued to make payments to other creditors after learning of the corporation's failure to pay employment taxes.

D.W. Parr, DC Tex., 2002-1 USTC ¶50,376.

A responsible person who willfully paid other creditors of his delinquent corporation ahead of the IRS was liable for the trust fund recovery penalty. The individual, who was a corporate officer who owned stock in the company, acted willfully in failing to remit the company's withholding taxes because he was aware that other parties were being paid ahead of the IRS. His failure to make the payments on orders of the second responsible person and his approval of payments to other creditors in order to keep the company going and to preserve its ability to repay the delinquent taxes did not relieve him of liability for the penalty.

P. Thosteson, CA-11, 2002-2 USTC ¶50,649, 304 F3d 1312.

The First Circuit affirmed special jury verdicts that an individual could be held liable for a company's debt. The taxpayer was a responsible person with respect to the company's unpaid employment taxes and the trust fund recovery penalty, and his failure to pay over the taxes was willful. The "effective power" and "significant control" tests for the responsible person prong of liability constituted a proper standard of proof, despite the taxpayer's argument that he had a tenuous and indirect formal connection to the business. There was evidence that the taxpayer retained managerial control of the company and had knowledge of nonpayment of the employment taxes. Moreover, he failed to show that he investigated or corrected mismanagement of funds that allowed other creditors to be paid ahead of the IRS. Thus, the district court did not abuse its discretion in denying a new trial.

J.V. Stuart, CA-1, 2003-2 USTC ¶50,585, 337 F3d 31.

The president and sole owner of a roofing construction company was the responsible officer liable for the corporation's unpaid payroll taxes. The taxpayer contended that he lacked knowledge of the corporation's failure to pay taxes until after they were due. Moreover, his subsequent use of corporate revenues to compensate creditors rather than to pay the delinquent taxes was done in an attempt to increase the ultimate payout to the IRS. Basing its decision on the credibility of presented testimony, the Bankruptcy Court concluded it was not plausible that the individual did not know that the payroll taxes were not being paid. At the very least, the court concluded that he recklessly disregarded whether the taxes were being paid.

C.R. Howard, BC-DC N.C., 2003-2 USTC ¶50,683, 301 BR 456.

An officer of a bankrupt corporation that failed to pay over withholding taxes was a responsible person liable for the trust fund recovery penalty. As the entity's majority shareholder and chief operating officer, he ran the company and controlled its financial affairs. Also, he knew about the tax delinquencies and voluntarily paid other creditors ahead of the government. His contention that the company's relationship with its lending institution deprived him of control over the funds was rejected. Disbursement of the corporate funds was not "encumbered" by the contractual obligations with the lender. Thus, the officer acted willfully in failing to remit the taxes.

R. Bell, CA-6, 2004-1 USTC ¶50,118,355 F3d 387.

The CFO and controller of a bankrupt airline company willfully failed to pay airline ticket excise taxes to the government since both had knowledge that the taxes were not being paid over to the government.

D.R. Ferguson, DC Iowa, 2004-1 USTC ¶50,247.

A debtor's objection to the IRS's claim for the trust fund recovery penalty assessed against him was denied because he was determined to be a responsible person who willfully failed to pay over withheld taxes. The debtor stipulated that he was a responsible person and his failure to remit the withheld taxes was willful because he was aware of the company's employment tax deficiency yet chose to pay creditors other than the government. The fact that the debtor was told by the company's owner not to pay the taxes and that he might have been fired had he disobeyed orders did not excuse his liability for nonpayment.

L. Borman, BC-DC Fla., 2005-1 USTC ¶50,109.

A 100-percent trust fund penalty was reduced to judgment since the taxpayer was determined to be the responsible person who willfully failed to pay over trust fund taxes. The sole exception did not apply because he knew of the debt to the IRS and continued to use funds to pay other creditors.

R. Sage, DC N.Y., 2006-1 USTC ¶50,175, 412 FSupp2d 406.

Despite recurring health problems and absences from work, a CEO was a "responsible person" who willfully avoided tax obligations under Code Sec. 6672. The taxpayer's behavior was willful because he consciously and intentionally preferred another creditor over the United States; factual issues as to prior ignorance of non-payment then became irrelevant. Furthermore, allowing a responsible person to discount his liability based on the amount he actually wrongfully diverted to other creditors is inconsistent with the language of the statute.

D. S. Savage, DC-Calif., 2006-1 USTC ¶50,202.

The chairperson of a corporation's board of directors and the corporation's largest shareholder was a "responsible person" for purposes of the corporation's unpaid employment taxes and was liable for the trust fund recovery penalty. He satisfied the willfulness requirement because he knew of the corporation's unpaid taxes and made no effort to urge other members of the board to pay the IRS, rather than the other creditors.

T.C. Turner, DC Wash., 2006-1 USTC ¶50,238.

For the periods after an individual signed a check for partial payment of unpaid withholding taxes that accompanied the federal withholding tax form, his claim of ignorance of the company's withholding tax problems was not credible. Since he was either aware that other liabilities were being satisfied in preference to withholding taxes or recklessly disregarded that information, he willfully failed to pay the federal withholding taxes of the company.

D.J. Thatcher, DC Pa., 2006-1 USTC ¶50,334.

The manager of a grocery store was determined to be a responsible person with regard to the store's failure to pay over withholding taxes. Despite being the person responsible for the submission of withheld payments, and personally making such payments in the past, the individual did nothing to ensure that the taxes were in fact fully paid for the period at issue, although more than enough liquidation proceeds were generated from the closure of the store to pay the taxes.

J.H. Harold, CA-6 (unpublished opinion), 2006-2 USTC ¶50,525, aff'g an unreported DC Ohio decision.

A bankrupt airline company's chief financial officer willfully failed to pay the company's excise taxes. The individual was fully aware of the company's financial condition and of the nonpayment of excise taxes but he continued to direct payments to other creditors.

R. Musal, DC Iowa, 2006-1 USTC ¶50,207, 421 FSupp2d 1153. Aff'd sub nom. D.R. Ferguson, CA-8, 2007-1 USTC ¶50,481, 484 F3d 1068.

A trust fund recovery penalty (TFRP) assessed against a responsible person after he was discharged from bankruptcy was reduced to judgment. The individual was a responsible person because he controlled the business's finances and he recklessly failed to ensure that the withheld taxes were paid over to the government by the employee to whom he had delegated that responsibility.

D.H. Klohn, DC Fla., 2008-1 USTC ¶50,228.

The Board Chairman of a tax-exempt hospital was not entitled to a refund of the trust fund recovery penalty. The individual was a responsible person because he actively participated in the day-to-day management of the hospital, Also, the individual acted willfully because he had reason to know that the taxes were not being paid and failed to exercise his authority to ensure their payment. The fact that the primary responsibility for paying the taxes rested with another did not excuse him since the trust fund recovery penalty is a joint and several liability. Finally, the individual did not qualify for exemption from the penalty under Code Sec. 6672(e) because he did not serve solely in an honorary capacity as Chairman of the Board.

S.K. Verret, DC Texas, 2008-1 USTC ¶50,248, 542 FSupp2d 526..

The founder, shareholder and officer of a corporation was liable for the trust fund recovery penalty assessed against him in connection with the corporation's unpaid withholding taxes. The individual was a "responsible person" with respect to the corporation, and had acted willfully because he had reason to know that the taxes were not being paid and failed to exercise his authority to ensure their payment. Despite knowledge of the tax deficiencies, he regularly directed that payments be made to creditors other than the IRS.

C.B. Erwin, DC N.C., 2008-1 USTC ¶50,258.

An individual who was the president, director, Chief Executive Officer and majority shareholder of a corporation was liable for the trust fund recovery penalty assessed against him in connection with the corporation's unpaid withholding taxes. The individual was a "responsible person" with respect to the corporation and acted willfully because he was aware of the tax debt, yet authorized and made payments to other creditors.

J.C. Tornes, DC Ohio, 2008-2 USTC ¶50,431.

The majority stockholder of two retail optometry companies was not entitled to a refund of the trust fund recovery penalty he paid to the IRS in satisfaction of the companies' unpaid withholding taxes. The individual continued to sign payroll checks, paying employees, rather than ensuring payment of the taxes, even after he became aware of the companies' delinquent tax obligations.

L.H. Joel, DC Ky., 2008-2 USTC ¶50,451.

The director, shareholder and secretary-treasurer of a closely held corporation was liable for the trust fund recovery penalty assessed against her in connection with the corporation's unpaid withholding taxes. The individual was a responsible person who acted willfully when she repeatedly failed to examine the corporation's documents and request more information from the IRS despite having knowledge of the corporation's unpaid withholding taxes. She had the power to pay the corporation's withholding taxes and could not rely on her Indian culture to explain her failure to question her husband's business practices and pay the corporation's taxes once she became aware of them.

N. Noronha, DC Ky., 2008-2 USTC ¶50,554 (aff'g an unreported Bankruptcy Court decision).

The owner of a company was liable for the trust fund recovery penalty (TFRP). The individual maintained the company's books, prepared its financial statements, authorized payment of its bills and payroll, reviewed federal income tax returns and prepared and signed federal payroll tax returns. He acted willfully because he had reason to know that the taxes were not being paid and failed to exercise his authority to ensure their payment. Despite knowledge of the tax deficiencies, he regularly directed that payments be made to creditors other than the IRS.

S.O. Johnson, DC Ill., 2008-2 USTC ¶50,585.

The president of the board of directors of a tax-exempt organization was not entitled to a refund of the federal employment and withholding taxes he paid from his personal funds. The individual's actions were willful because he ignored signs that the center's taxes were not being paid. While he asserted that he was not aware of the organization's ongoing failure to remit payroll taxes, he had access to the reports made available at the organization's office, and he was aware that at one time taxes had not been paid and penalties had been assessed. Additionally, although he had instructed a director to timely remit withheld taxes to the IRS, he did not ensure that the payments were actually made.

C.E. Jefferson, CA-7, 2008-2 USTC ¶50,587 aff'g DC Ill. 2007-1 USTC ¶50,304, 459 FSupp2d 685.

The owners of three companies and their employee, a certified public accountant (CPA), serving as the vice president of finance for those companies, were all responsible persons for purposes of the trust fund recovery penalty. The individuals acted willfully when they made payments to other creditors despite knowing that the trust fund taxes remained unpaid. Further, the involuntary bankruptcy proceeding instituted for one of the companies did not strip the owners' of control and authority to pay that company's withholding tax obligations.

S.P. Davis, Sr., DC La., 2008-2 USTC ¶50,613.

Paying others before IRS. --Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax: Willfulness: Paying others before IRS

The vice president, secretary and treasurer of a dry-cleaning company was subject to the trust fund recovery penalty for failure to pay over withheld employment taxes. The taxpayer's failure to pay over the taxes was willful as a matter of law because the officer admitted that he was aware that other corporate obligations were being paid while employment tax liabilities were outstanding. Thus, the officer, who had conceded that he was a responsible person, made a conscious decision to prefer other creditors over the government. The court rejected the officer's argument that he should be held to the "personal fault" standard of willfulness used in Slodov (see ¶39,780.726, above), because that case applies only to the situation in which a person becomes responsible after withheld taxes have been spent and other corporate funds have been dissipated. Slodov does not relieve a responsible person of the duty to remit taxes if the taxpayer has been a responsible person throughout the period during which withholding tax liability accrued and thereafter.

M.A. Richner, DC Kan., 93-2 USTC ¶50,668.

A trial judge's determination that, contrary to a jury verdict, as a matter of law, a corporate vice-president was "willful" for purposes of failing to pay over withheld employment taxes for the six quarters in issue was proper. He knew about the unpaid liability but chose to use the corporation's after-acquired unencumbered funds to pay creditors rather than the government.

M.H. Kim, CA-7, 97-1 USTC ¶50,370.

A president and sole shareholder of a company who made a plan to liquidate the company in an effort to secure a payment for the company's unpaid withholding taxes was liable for the trust fund recovery penalty. Although he informed the IRS of his plan, he paid other creditors, as part of the plan, while he knew the withholding taxes were unpaid. Although he was trying to ultimately rescue something for the IRS, the president, who was a continuing responsible person, was the one conducting the rescue operations. Further, even though an IRS revenue officer, whom the president notified of the plan by a letter, did not dissuade him from his course of action, the letter was insufficient to estop the government because it was not accepted in writing.

H.D. Buffalow, Jr., CA-9, 97-1 USTC ¶50,290, 109 F3d 570.

The senior officer of a community action agency, who administered millions of dollars of public funds to provide a variety of programs for low-income persons, was the responsible person accountable for remitting payroll taxes. Her failure to remit the withholding taxes was willful since her agency continued to expend a considerable portion of its funds for other purposes after she undeniably knew of the delinquent taxes. Despite the fact she was unsophisticated in the financial dealings of her agency and her actions were taken solely to improve the lives of the poor citizens of her community, it was not unfair to hold her accountable.

C.B. Stanley, BC-DC N.C., 92-2 USTC ¶50,480, 146 BR 655.

A district court did not clearly err when it determined that the president of a drilling company, although a "responsible person," did not willfully fail to pay over delinquent payroll taxes withheld from employees' wages during a period when a creditor-bank possessed and exerted substantial control over the company's accounts. The bank's withdrawal of funds from such accounts in violation of a written agreement with the company effectively prevented the president from discharging his withholding tax responsibilities. The president's actions did not constitute a voluntary, conscious and intentional preference of other creditors over the government.

S.R. Rykoff, CA-9, 94-2 USTC ¶50,601.

A responsible person willfully failed to pay over taxes when he paid other, nongovernmental creditors in preference to the IRS after he became aware of the tax obligation. The corporation's bankruptcy filing did not absolve the individual of liability for the penalty on wages already paid.

R.C. Kelley, CA-10, 95-2 USTC ¶50,561. Cert. denied, 2/20/96.

A corporate president who admitted he was a responsible person was liable for the trust fund recovery penalty with respect to withheld taxes that were used by the company to pay creditors other than the IRS. As a responsible person, he had a duty to pay over withholding taxes and his decision to forgo paying the government in favor of paying other creditors constituted a willful breach of that duty.

S. Layne, DC Mich., 97-1 USTC ¶50,423.

The trust fund recovery penalty was imposed against a corporate officer who had check-writing authority, was aware of the entity's payroll tax delinquencies, and paid others ahead of the IRS.

G.T. Sheppard, BC-DC S.C., 2000-1 USTC ¶50,362.

An individual who was the majority shareholder and president of a corporation was a responsible person for purposes of the corporation's unpaid withholding tax liabilities. He willfully preferred other creditors over the United States and checking account statements revealed that there were sufficient funds to pay the corporation's withholding taxes for five of the six quarters in issue.

M.W. Newton, BC-DC Ariz., 2000-2 USTC ¶50,681.

The general manager of a manufacturing corporation was liable for the trust fund recovery penalty in connection with unpaid employee withholding taxes because his failure to pay the taxes at issue was willful. He paid other creditors before the IRS although he had knowledge that employment taxes were due, and his claim that he was ordered to do so did not constitute a defense to liability. There was no evidence that he had reasonable cause for his failure to pay the withheld taxes.

J.J. Treacy, BC-DC Pa., 2000-2 USTC ¶50,776.

The president and sole officer of a closely held corporation willfully failed to pay over withheld employment taxes to the IRS. She admitted that she was aware of the corporation's failure to pay over the taxes and that she paid other creditors ahead of the IRS. Thus, she had no reasonable cause for failing to remit the taxes.

J.C. Luce, DC Ohio, 2000-2 USTC ¶50,847, 119 FSupp2d 779.

A vice-president of a defunct corporation qualified as a responsible person and was not entitled to a refund of payments issued in partial satisfaction of a trust fund recovery penalty assessed against him individually in connection with the corporation's failure to pay over withheld employment taxes. The taxpayer had extensive control over the financial affairs of the business including the ability to sign checks and pay bills. Moreover, his conduct was willful in that he knew that the withholding taxes were not being paid and that available funds were being used to pay other creditors in preference to the IRS.

H.W. Fisher, DC Okla., 2001-1 USTC ¶50,159.

A bankrupt corporate officer's objection to the IRS's claim for the trust fund recovery penalty assessed against him was denied because he was properly deemed a responsible person within the meaning ofCode Sec. 6672. The debtor had extensive control over the corporation's financial affairs, including check signing authority and the ability to pay bills. Further, his conduct was willful in that he knew the withholding taxes were not being paid and that available funds were being used to pay other creditors, including himself, in preference to the IRS.

W. Karnofsky, BC-DC Fla., 2001-1 USTC ¶50,170.

The president, director and sole shareholder of a bankrupt contracting business who qualified as a responsible person and who willfully failed to remit employee withholding taxes to the government was liable for the trust fund recovery penalty. Although he withheld the taxes from his employees' wages during the 10 quarters at issue and knew that the taxes were due and owing, he failed to remit payment to the IRS. Instead, he used corporate funds to pay wages to such employees as himself, his wife and his son, and he paid a broad array of other creditors ahead of the IRS.

L.B. Breaux, DC La., 2001-1 USTC ¶50,255.

A corporate accountant who was deemed to a responsible person was liable for the trust fund recovery penalty because she had knowledge of the unpaid employment taxes, yet paid off debts to other creditors before the government. That she was directed by the corporation's CEO not to pay the outstanding employment taxes was irrelevant to her knowledge of them.

B. Frey, DC Tex., 2001-1 USTC ¶50,417. Aff'd, per curiam, CA-5 (unpublished opinion), 2002-2 USTC ¶50,690, 34 FedAppx 151.

The conduct of a business owner, who was a responsible person within the meaning of Code Sec. 6672, was willful because he knew that the business had failed to properly account for and pay over withheld employment taxes, but paid other creditors of the business ahead of the IRS.

S. Rocha, DC Ore., 2001-1 USTC ¶50,425, 142 FSupp2d 1277.

The owner and former president of a bankrupt corporation was not liable for the trust fund recovery penalty because he did not willfully fail to pay his company's employment tax delinquency. While the individual conceded he was a responsible person within the meaning of Code Sec. 6672, he had no reason to know that his company was in arrears since he turned over control of his company when it was in good standing. Moreover, he took immediate action when he became aware of its failure to remit payroll taxes to the IRS, retaking control of the company, ensuring that it remained current with its tax obligations and making arrangements for paying past-due taxes. Moreover, he did not favor other creditors above the IRS.

R.D. Nutt, DC Fla., 2003-1 USTC ¶50,395, aff'g BC-DC Fla., 2002-2 USTC ¶50,753.

The trust fund recovery penalty was imposed against married taxpayers who failed to withhold or pay over employment taxes. Both taxpayers, were corporate officers with significant financial interest in the corporation, and were deemed responsible persons under Code Sec. 6672. They shared authority to authorize payroll, sign payroll checks, pay creditors, hire and discharge employees and enter into contracts on behalf of the corporation. Moreover, the taxpayers admitted that they knew about the unpaid withholding taxes and chose to pay creditors and fund payroll for themselves and other employees, rather than ensuring payment of the taxes.

A. Fuscaldo, DC Pa., 2002-1 USTC ¶50,141.

The wife of the owner of a sole proprietorship willfully failed to pay the outstanding employment tax liability of the business. The taxpayer, who was a responsible person, stipulated that she knew the business was delinquent on its withholding obligations during the tax quarters in issue, yet she continued to draft and sign checks to pay other creditors, payroll and personal expenses.

D.M. Keohan, DC Mass., 2002-1 USTC ¶50,279.

The failure of a corporate vice president, who was a responsible person, to withhold or pay over employment taxes was willful. Following his receipt of the notice of deficiency regarding the corporation's unpaid tax liability, he was aware that the corporation was paying creditors other than the government. In addition, he continued to sign payroll checks and he favored payment of the corporation's debts that were owed to him over the payment of the deficient withholding taxes.

B. Crutcher, DC Ala., 2002-1 USTC ¶50,289.

A corporate president was liable for the trust fund recovery penalty in connection with the corporation's failure to pay over its employment tax liability. The taxpayer's failure to pay over the taxes at issue was willful. He knew of the corporation's liability for employment taxes but paid net wages to employees knowing that payroll taxes would not be paid over to the government. The taxpayer unsuccessfully contended that his actions were not willful because he acted on orders of the bankruptcy court to use the company's available funds for environmental cleanup and operating expenses. The bankruptcy court, however, did not compel him to avoid paying the corporation's employment tax obligations.

D.F. Cook, FedCl, 2002-1 USTC ¶50,328.

The chairman of a corporation was liable for the trust fund recovery penalty because he was a responsible person who willfully failed to remit his company's employment taxes. He failed to fulfill his obligation to apply unencumbered corporate funds to pay its tax liabilities despite his knowledge that the taxes were unpaid. His self-serving statements that he lacked such knowledge were insufficient to satisfy his burden of proving that he had not acted willfully. In addition, he devoted corporate funds to purposes other than payment of the withholding taxes.

C.S. Perlman, DC Fla., 2002-1 USTC ¶50,346.

A corporate vice president's failure to pay withholding taxes was willful. The record indicated that he continued to make payments to other creditors after learning of the corporation's failure to pay employment taxes.

D.W. Parr, DC Tex., 2002-1 USTC ¶50,376.

An individual who owned 90 percent of his company's stock acted willfully in failing to collect and pay over the company's withholding taxes. He paid other creditors, including the entity's employees, ahead of the IRS. He was kept informed of the company's financial situation and was provided with financial statements that included lists of its outstanding liabilities. In addition, the shareholder spoke to an IRS agent about the unpaid taxes. In light of the fact that the company received revenues that were sufficient to pay the delinquent taxes, the shareholder's decision to prefer other creditors was conscious and intentional.

F.E. Riley, DC Mo., 2002-2 USTC ¶50,514.

A business owner who contended that adverse business circumstances were reasonable cause for failing to remit the business's employment taxes was liable for the trust fund recovery penalty. In order to continue business operations, he decided to forgo paying the government in favor of other creditors and employee salaries, including his own. Deciding to favor other creditors constitutes willfulness as a matter of law.

J.L. Carlson, DC Iowa, 2003-1 USTC ¶50,265.

A responsible person who willfully paid other creditors of his delinquent corporation ahead of the IRS was liable for the trust fund recovery penalty. The individual, who was a corporate officer who owned stock in the company, acted willfully in failing to remit the company's withholding taxes because he was aware that other parties were being paid ahead of the IRS. His failure to make the payments on orders of the second responsible person and his approval of payments to other creditors in order to keep the company going and to preserve its ability to repay the delinquent taxes did not relieve him of liability for the penalty.

P. Thosteson, CA-11, 2002-2 USTC ¶50,649, 304 F3d 1312.

A president and fifty percent shareholder of an employee leasing company was liable for the trust fund recovery penalty in connection with his company's failure to pay employee withholding taxes. The court determined that the taxpayer was liable for the penalty because he knew of the company's tax deficiency yet increased his salary, paid for personal expenses with corporate funds and paid other creditors.

S. Farkas, FedCl, 2003-2 USTC ¶50,574.

An individual willfully failed to pay over a company's employment taxes and was liable for the trust fund recovery penalty. The taxpayer argued that he had a tenuous and indirect formal connection to the business. However, there was evidence that the taxpayer retained managerial control of the company and had knowledge of nonpayment of the employment taxes. Moreover, he failed to show that he investigated or corrected mismanagement of funds that allowed other creditors to be paid ahead of the IRS. Thus, the district court did not abuse its discretion in denying a new trial.

J.V. Stuart, CA-1, 2003-2 USTC ¶50,585, 337 F3d 31.

A company's sole shareholder knowledge of previously dishonored checks amounted to reckless disregard of a risk of payroll tax delinquencies because he failed to ensure that checks to the IRS were actually honored before making additional payments to non-IRS creditors. However, as to an earlier period, the taxpayer was not obligated, after nearly four years of adequate payments, to double check with the IRS that a payment for that period was not applied to other liabilities.

H.W. Baimbridge, DC Calif., 2004-2 USTC ¶50,344, 335 FSupp2d 1084.

A debtor's objection to the IRS's claim for the trust fund recovery penalty assessed against him was denied because he was determined to be a responsible person who willfully failed to pay over withheld taxes. The debtor stipulated that he was a responsible person and his failure to remit the withheld taxes was willful because he was aware of the company's employment tax deficiency yet chose to pay creditors other than the government.

L. Borman, BC-DC Fla., 2005-1 USTC ¶50,109.

The president of a corporation admitted to causing the corporation to pay creditors other than the IRS making the failure to pay the corporation's trust fund taxes willful.

D.J. Frank, BC-DC N.C., 2005-1 USTC ¶50,222.

The IRS was granted summary judgment against the former president of a non-profit corporation for trust fund recovery penalties under Code Sec. 6672. The taxpayer had significant control of the corporation's finances, had check writing authority, and was responsible for ensuring that the company paid its trust fund taxes. Further, once the taxpayer became aware of the deficiency, he failed to ensure its payment before any other creditors were paid. Such a failure is willful and subjects the responsible person to trust fund recovery penalties.

Reverend R. W. Schlicht, DC Ariz., 2005-2 USTC ¶50,527.

An individual who had control over a corporation's financial affairs willfully failed to collect and pay over unpaid corporate trust fund taxes. He had assumed complete financial control of the corporation and had control over the corporation's unrestricted assets. Although he had actual knowledge of the unpaid withheld taxes, he acted with reckless disregard by using unencumbered funds to pay other creditors of the company before repaying the corporation's tax obligation. A bank held a security interest in the company's assets but the funds in the company's bank account were not encumbered since the bank did not restrict the use of those funds.

F.B.J. Branagan, Jr., BC-DC Pa., 2006-2 USTC ¶50,379.

A debtor's actions with respect to the IRS's claim for unpaid withholding taxes were willful because he was a responsible person who allowed disbursements of funds to creditors other than the IRS although he knew that taxes were owed.

L.R. Mendez, BC-DC Tex., 2006-2 USTC ¶50,547.

A debtor, who was the owner and president of a financial services corporation, was properly determined by the bankruptcy court to be a responsible person who willfully failed to pay over the corporation's withholding taxes. After he became aware of the corporation's delinquent tax obligations, he continued to pay other creditors rather than the IRS. He failed to prove that the corporation's funds were encumbered under state and federal securities law or to establish how the creditors held a superior legal interest in the corporation's funds to the interest of the IRS.

J.L. Paris, DC Fla., 2007-1 USTC ¶50,235, 355 BR 867.

The CEO and board chairman of a motorcycle company was not entitled to a refund of a portion of the trust fund recovery penalty he paid to the IRS in satisfaction of the company's unpaid payroll withholding taxes. Testimony of the CEO and the company's chief operating officer and financial director established that the CEO was a responsible person who willfully failed to pay the company's taxes. He had overall authority, including raising capital and hiring, was involved in the day-to-day management of the company, had the authority to issue checks, and determined which creditors to pay and when to pay them. Further, he instructed the company's financial director that bills pertaining to utilities were to be paid first; thus, checks were issued to other creditors but not to the government.

R.K. Hagen, DC Md., 2007-1 USTC ¶50,510, 485 FSupp2d 622.

An individual who was the president, director, Chief Executive Officer and majority shareholder of a corporation was liable for the trust fund recovery penalty assessed against him in connection with the corporation's unpaid withholding taxes. The individual was a "responsible person" with respect to the corporation and acted willfully because he was aware of the tax debt, yet authorized and made payments to other creditors.

J.C. Tornes, DC Ohio, 2008-2 USTC ¶50,431.

The majority stockholder of two retail optometry companies was not entitled to a refund of the trust fund recovery penalty he paid to the IRS in satisfaction of the companies' unpaid withholding taxes. The inidividual was a responsible person who acted willfully by continuing to sign payroll checks, authorizing payment of wages, rather than ensuring payment of taxes, even after he became aware of the delinquent tax obligations.

L.H. Joel, DC Ky., 2008-2 USTC ¶50,451.