Our American system of justice speaks about things like due process, the equitable concept of fairness, and the goal of achieving a just result. The case of Opplinger v. U.S. suggests, however, these lofty notions of jurisprudence don’t necessarily apply to when the IRS decides to penalize you.
IRS attorneys say the Opplinger case, decided in the Eighth Circuit U.S. Court of Appeals, represents an extreme example of business owners being held responsible for an employment tax penalty despite egregious facts. In Opplinger, the companies’ accountant (there were two companies; a trucking company called Double O, and a separate payroll company called LFC) embezzled funds, didn’t pay payroll taxes for three years, and then had the good sense to commit suicide before being caught, leaving the business owners responsible for unpaid employment taxes and $2 million dollars in IRS penalties. Why you ask? Because the Court concluded the business owners were “responsible persons” under Section 6672(a) of the IRS tax law.
According to IRS tax lawyers if you are identified as a “responsible person” the IRS may pursue you for payroll taxes. The Agency can impose a trust fund recovery assessment, a.k.a. a 100% penalty, against every responsible person involved. In fact, IRS attorneys say you may be held liable even if you had no knowledge the IRS wasn’t being getting the payroll tax payments, and you did not directly benefit from the non-payment (as in the case of the embezzling accountant).
Perhaps even more disconcerting, IRS tax attorneys say you don’t have to be an owner of the company to be held liable for the penalty. Even non-owner officers with check signing authority who “could have” paid the IRS, even though they didn’t know the IRS wasn’t being paid, are subject to the penalty.
IRS attorneys say that while the IRS tax law requires a degree of “willfulness”, the Courts in recent years seem to focus on whether the “responsible person” had knowledge the payroll taxes was not being paid, or if they exhibited a “reckless disregard” with respect to whether the payments were made. It is the later criteria that most IRS attorneys say the Courts tend to rely upon in cases like Opplinger.
If you may be a “responsible person” for a company which has fallen behind in making payroll tax payments, and you owe back taxes and are concerned about penalties, you are encouraged to immediately seek out help from a competent IRS tax attorney. Delays can be costly, and failing to act promptly could mean stiffer penalties.
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