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Tagged Posts: encumbered funds’

Corporate Officers’ Trust Fund Tax Responsibility (Part III)

March 24, 2016

In Schiffmann v. United States, on appeal, the court noted that Schiffmann, as CEO and president, had access to the company funds and signing power, and as a director and shareholder, was deeply involved in the day-to-day management of the company, making him a “responsible person.”[1]  His “deep-seated involvement in the financial affairs of the company, including his power over ICOA’s bank accounts and payroll, and his check-signing authority, gave him “’effective power’ to pay the taxes.”[2]  The court found that Schiffmann acted willfully because he was aware of the unpaid trust fund taxes and “did not lift a finger to pay them.”[3]  Similarly, Cummings, as CFO, was a signatory to the company’s principal bank accounts and enjoyed check-signing authority, with a power to decide which outstanding bills to pay, and in what order, making him a “responsible person.”[4]  The court found that Cummings, too, acted willfully because he was aware of the unpaid trust fund taxes and instead paid other bills, such as rent and operational expenses, over the government—despite the expertise he had gained as an IRS field auditor, which should have made him understand the extent of his fiduciary obligation with respect to these liabilities.… Read the rest

Corporate Officers’ Trust Fund Tax Responsibility (Part II)

March 17, 2016

In Schiffmann v. United States, the IRS, following notice and demand, made trust fund recovery penalty assessments against Schiffmann and Cummings, among others, alleging that, as of March 2014, Schiffmann owed close to $400,000 plus interest for nearly five full quarters beginning April 1, 2005, and Cummings owed more than $250,000 plus interest for nearly three full quarters beginning October 1, 2005.[1]  Schiffmann, after an unsuccessful refund and abatement request, filed suit in the federal district court seeking to recover his seized sums and nullify the assessments.… Read the rest

Corporate Officers’ Trust Fund Tax Responsibility (Part I)

March 10, 2016

As most employers (and employees) know, the Internal Revenue Service (IRS) requires employers to withhold federal income taxes from employees’ wages and to hold such taxes in trust for the government, often referred to as “trust fund taxes.”[1]  If they are not paid to the government as required, the IRS may look past the corporate form and hold officers of the corporation personally liable under certain circumstances.[2]  Specifically, the Internal Revenue Code provides that “any person required to collect .… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.