The Mr. A was the sole shareholder and president of a concrete construction (Concrete) company. As president of Concrete, he oversaw all aspects of the business, including reviewing and signing all federal and state tax returns for Concrete. Mr. A was also a minority shareholder and president of Company B. As president of Company B, Mr. A approved, signed, and submitted a variety of tax forms and documents to Federal and state authorities on behalf of Company B and Concrete had the same business address and phone number. The two companies also shared top-level management and employees. In 2008, Concrete subcontracted Company B to help it with a construction project.
While Mr. A was president of Concrete and Company B, he signed checks from a Concrete account to pay Company B's liability for state unemployment compensation insurance. Mr. A also approved, signed and submitted to the IRS Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, for Company B.
On September 12, 2014, the IRS assessed a trust fund recovery penalty under Code Sec. 6672 against Mr. A. The IRS determined that Mr. A was a responsible person who failed to collect, account for, and pay over trust fund taxes for four quarters during which Company B was working with Concrete as a subcontractor.
Mr. A paid part of the assessed tax liability and filed a refund claim alleging that he was only a minority shareholder in Company B, he had no knowledge of Company B's finances, operations, or general decision making, and he had no power or authority to pay Company B's taxes.
Mr. A was a person responsible for paying trust fund taxes who willfully failed to pay such taxes to the government; therefore, he was liable for the trust fund penalty under Code Sec. 6672. The district court rejected Mr. A's claims that he was not a responsible person because he had no oversight or control of Company B's finances.
Mr. A signed and certified government forms for Company B as its "manager" or as its "president." In addition, he paid taxes owed by Company B using funds from a Concrete account for which he had signatory authority. Thus, he clearly had enough authority to be a responsible person for Company B under Code Sec. 6672.
The district court also rejected Mr. A's argument that, even if he was a responsible person, he did not willfully fail to pay over the trust fund taxes to the government. He testified that he did not take any steps to ensure that Company B's trust fund taxes were, in fact, being paid to the government. Mr. A's admission, coupled with the fact he was a responsible person, was sufficient to establish that he acted willfully.
Given his position as president of Company B, Mr. A should have known that there was a grave risk that the trust fund taxes were not being paid, he was in a position to very easily find out for certain whether they were being paid, but he did nothing to find out if the trust fund taxes were actually being paid.
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