When employment taxes aren’t paid, the IRS will seek to collect the money from the person who was responsible for collecting, accounting for and remitting the taxes.
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The IRS considers a list of factors before it determines who gets the bill, said Reba Wingfield, a partner in the law firm Deininger Wingfield & Corry P.A. of Little Rock.
“What they look for mostly is who owned [the company]; who were the officers; who is on the bank signatory card; and who actually signed bank checks to other venders … during the time the taxes were incurred,” Wingfield said. “If you have any kind of management control, and you participate in any manner, that decision to pay other creditors and not pay the taxes over to the IRS, then you are going to be looked at as a responsible person.”
For a CEO to argue that someone else was responsible or that he assumed the taxes were being paid, “that’s not good enough,” Wingfield said. “As an owner and as a manager, as a person in control of his company, you know you’re incurring this liability.”
The top executive needs to verify that the tax bill has been paid. “If you don’t, you’ve breached your duty to the IRS, and you are part of the problem,” Wingfield said.
Wingfield said the IRS would also quiz the CEO about how much pressure was put on getting the taxes paid.
“This is the equivalent of embezzling,” she said. “You withheld funds out of your employees’ checks that belong to the IRS, and you are sort of a trustee for the IRS. You have a duty to turn that over to [the IRS].”