When it comes to payroll taxes, one would assume that it would be the responsibility of the business owner to pay the tax bill. According to the IRS, all “responsible parties” must meet responsibility and willful requirements.
To determine whether an individual can rightfully be designated as a “responsible party” the courts take into account the following questions:
· What are the duties that the individual engages in at the place of business?
· Does the individual have the ability to sign checks on behalf of the business?
· Who are the officers, directors, and shareholders?
· Who is in charge of hiring or firing individuals employed by the company?
· Who is in control of the finances of the business?
To prove the other aspect, “willfulness,” the courts designate an individual has willfully engaged in the action when he meets the following requirements:
· The individual has knowingly paid other creditors before paying the IRS, despite being aware of an outstanding balance with the government agency.
· The individual has recklessly disregarded a known risk that taxes were not being paid.
According to the IRS, even if an individual does not have “actual knowledge” that taxes were not being appropriately paid, he is still liable if he disregards the facts with recklessness. The IRS must identify action beyond negligence, as that is not sufficient. Not investigating the practices within the business when notified that payroll taxes are not being paid constitutes the willfulness necessary to make the individual liable.
If you have any questions about payroll taxes, contact your competent tax professional. The IRS is extremely aggressive when it comes to payroll taxes. Any issues should be resolved immediately.
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