The IRS utilizes a very broad definition of “responsible person” in the context of trust fund recovery penalties. The term, which may extend to more than one party within a corporation, partnership or LLC, applies to any person who willfully fails to perform a duty to pay trust fund taxes. It may be a corporate officer, director, employee, or shareholder, as well as a manager, employee, or member of a limited liability company. If a person is in any of the aforementioned positions where he or she controls a business’s financial affairs, liability as a responsible person for trust fund recovery penalties is a genuine possibility.
The Trust Fund Penalty – No One Is Safe
Employers are required to withhold federal income and payroll taxes from their employees’ wages for payment of payroll taxes such as federal income taxes and FICA (Federal Insurance Contributions Act) taxes. Such taxes are held in trust by an employer until it makes a federal deposit of the due amounts.
The IRS applies a term, “Trust Fund Recovery Penalty” (TFRP), for the fine related to an employer’s willful failure to pay over necessary federal income and FICA taxes. “Responsible persons” making such payments may be subject to criminal charges for any willful failure to remit these taxes. Most TFRP cases involve corporate officers and companies that are no longer in business, in which case the IRS may only collect TFRP from “responsible persons.”
Fitzpatrick V. Commissioner & The Trust Fund Penalty – The Aggressive IRS Loses A Big Case
How aggressive is the IRS in enforcing and collecting Trust Fund Recovery Penalties? A case from the U.S. Tax Court case illustrates the aggressive nature of the IRS when using the trust fund recovery penalty (TFRP) to collect trust fund taxes. Business enterprises must be careful to ensure that they do not incur Trust Fund Recovery Penalties for any failure to remit federal payroll and trust fund taxes when due.
Most Confusing Parts Of The Income Tax Code, Part 2: Alternative Minimum Tax
Many provisions of the Internal Revenue Code are complicated. Proper interpretation of the rules and regulations contained in these provisions requires the assistance of an experienced and knowledgeable tax professional. The second part of our series about the most confusing provisions of the Internal Revenue Code addresses everyone’s favorite, the alternative minimum tax.
Why Is It Confusing?
- The AMT doesn’t seem to achieve its purpose
- Taxpayers have to compute two taxes
- The computation of the AMT itself is enormously long and complicated
IRS To Use Private Debt Collectors
In the spring of 2017, the IRS will begin outsourcing the collection of not all, but some, overdue federal tax debts to private contractors. In early December of 2015, President Obama signed into law the Fixing America’s Surface Transportation Act, or “FAST Act.” The FAST Act provides funding for transportation project over the next ten years. Of course, any bill related to highways is likely to include provisions requiring the IRS to use private debt collection companies, which this bill, in fact, includes.
Yes, Olympic Medals and Prize Money Are Taxable
The Summer Olympics in Rio de Janeiro recently concluded and many Americans took home gold, silver, and bronze medals. To be precise, 46 gold, 37 silver, and 38 bronze medals were won by American athletes. But not only were U.S. athletes like Michael Phelps and Kevin Durant raking in the gold in Brazil, so was the U.S. Treasury Department and the Internal Revenue Service. Yes, big surprise, the U.S. government has a stake in the Olympics as it taxes Olympic winnings as income.
The Most Overlooked Tax Deductions, Part 3
Many taxpayers overlook the long list of deductions that they may take when completing and filing their tax returns. The IRS has estimated that millions of taxpayers overpay their taxes each year mainly because they fail to avail themselves of all of the possible deductions. The tax professionals at the Thorgood Law Firm can help ensure that all taxpayers take advantage of any and all deductions that may apply to them. Here is the third part of our multi-part blog on the most overlooked tax deductions:
PAYMENT OF TAXES AS DEDUCTIONS
Estate tax on income in respect of a decedent
Part 1 – What If: Job Related Life Events And Struggling Taxpayers
If you have any type of financial difficulty, keep in mind that there’s a tax impact to events such as job loss or foreclosure. Such consequences may not necessarily be predominantly negative. For example, if your income decreased, you may be newly eligible for the Earned Income Tax Credit or other tax credits, which is a good thing.
Of the utmost importance when facing some financial obstacle is to contact the IRS immediately if you believe that you may have trouble paying your tax bill. Please see our blog You Can’t Pay Your Tax Bill in Full You Have Options…An experienced and knowledgeable tax attorney may help ease any financial burden. Remember that to avoid additional penalties, you also should always file a tax return even if you are unable to pay.
What A Mess: The Donald And His Tax Returns
In March, Donald Trump’s campaign published a letter written by his tax attorneys explaining the status of his tax returns, an apparent sore subject for the Donald whenever he is questioned about it by the media. Although the letter is dated March 7, 2016, it wasn’t released by his campaign until twenty-three days later. Regardless, he continues to thumb his nose at the time-honored tradition of presidential nominees disclosing their tax returns at some sufficent time prior to the election.
Makric Enterprises, Inc. v. Commissioner: When Tax Mistakes Are Costly
Not knowing the details of a business transaction sounds preposterous on its face, especially when the ignorant taxpayer is the party which formulated the transaction. In the case of Makric Enterprises, Inc. v. Commissioner, TC Memo 2016-44, a failure to make sure that the right corporation was sold as part of the agreement literally proved costly to the taxpayers involved, to the tune of $2,839,780.
This tax matter involved two corporations. One of which was a holding company (Makric Enterprises, Inc.) which owned only one asset, the stock of a wholly owned subsidiary (Alpha Circuits, Inc.). A third party expressed interest in purchasing the business conducted by Alpha.