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FACTS

Lacy Corporation was incorporated in the year of 1983 by Dave Jones, who has served as a member and officer of the board of the directors.  Mary Smith has served as secretary-treasurer of company as a convenience to friend Dave.  Mary acted as part-time bookkeeper but didn’t run the everyday business affairs and paid only the bills she was instructed to pay.  Mary was an authorized signatory for corporate bank accounts however had no final control over the expenditures.

Beginning from the last quarter of 2011, the company unsuccessful to pay all of the taxes withheld from employees and the employer’s share of FICA taxes to the IRS.  Despite this delinquency, the corporation continued to pay other creditors including its employees, in preference to the IRS.

In January 2012, Lacy Corporation entered in an instalment agreement with the IRS to keep current on its withholding taxes and to create payments on the past due balance till paid in full.  The company consequently defaulted on the agreement in April 2012.  Throughout this period, Dave Jones was serving as chief financial officer and was a member of the board of directors.  He had the authority to make policy decisions.  He was accountable for negotiating the instalment agreement with the IRS and the decision to default on the agreement.

ISSUE

problem1. Who is liable for the penalty for non-payment of the payroll tax withholdings?

problem2. describe your answer in detail 1-2 pages, with research support provided by the following authority.  A link is provided for IRC section 6672 and the Carlson case file is provided as a link on D2L.

AUTHORITY

IRC Sec. 6672

http://www.law.cornell.edu/uscode/text/26/6672

Taxation, Accounting

  • Category:- Taxation
  • Reference No.:- M9895

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