COO Ordered to Pay Delinquent Employment Taxes as a Responsible Party

The IRS imposes stiff penalties on employers who fail to collect and turn over employment taxes. These penalties are particularly noteworthy because the taxes can be personal liability of the party who fails to account for the taxes, even if the company is a limited liability entity. The penalty for failing to pay employment taxes is typically the entire amount of tax that the employer failed to collect. When payroll taxes are unpaid, the IRS will attempt to collect from multiple responsible parties connected to the business.

In a recent case, the United States Tax Court held that a corporate officer failed to fulfill her tax accounting duties and as a result, was liable for the company’s unpaid payroll taxes.  In this case, the COO was determined to be responsible because she had oversight and responsibility over the company’s finances and allowed the company to use withheld employment taxes to pay off other creditors.

© 2012 Parsonage Vandenack Williams LLC

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