If you didn’t sign payroll checks, weren’t an officer or shareholder and did not make decisions about which of the company’s creditors got paid and which did not, you are probably not a responsible person for purposes of the IRS trust fund recovery penalty.

Also, if your employer gave you a W-2 form showing that she withheld taxes from your paycheck, you should get credit for those withholdings whether or not she remitted them to the IRS.

I sent you an email regarding this. Have a qualified CPA or tax lawyer do your return and if you get any IRS notices, immediately turn them over to your tax advisor.

Good luck.

I don’t have sympathy for the business operators either. I mean the ones who really are responsible.

In my experience revenue officers generally choose the path of least resistance in assessing and attempting to collect the trust fund. Let’s face it, it is much more difficult to assess the trust fund against a shareholder who ran the business, made all key decisions, but intentionally delegated duties to avoid being found liable. These are the real crooks. They pocket the trust fund taxes knowing that because they didn’t sign checks and contractually bind the company in any way, the IRS could never prove (would be too lazy to attempt to prove?) that they are responsible.

I have seen it happen time and again. The innocent, trusting, bookeeper gets slammed with the trust fund penalty and the guy who pocketed all the money gets away scot free because he didn’t sign any checks.

It’s more work for the revenue officer to assess the trust fund penalty against the shareholder than it is against the bookeeper.

You said, “the collection potential on these cases is very low so, as a sanction, it doesn’t amount to that much.”

Do you call having a federal tax lien slapped on you, your credit and reputation destroyed and your marriage damaged beyond repair not amounting to much?

Personally, I think if you can prove that you did not personally benefit from the company’s failure to pay over the trust fund taxes, you should not be held liable for the penalty.

Perhaps Congress needs to change the law forcing the IRS to do some real forensic work to find out who the real benefactors of the non-remittal of trust fund taxes really are.

Go after the real crooks and leave the little old bookkeeper, single mother of five, who needs her meager job so badly that will do anything she is told a-friggin-lone.

Your narrative seems to aim its criticism at business owners who live well while not paying withheld taxes and presumes the money is out there waiting for IRS to pluck it and that most of these people are evil. While some are, in most cases what you have is your basic business failure where the officer is incompetent or unlucky and goes down with the ship. The collection potential on these cases is very low so, as a sanction, it doesn’t amount to that much.

What is needed is a sanction that will work or a new means of preventing the accumulation of unpaid withholding tax at the start. IRC 7202, the criminal counterpart of IRC 6672 reads almost the same but treats the failure to pay the same as embezzlement with jail time as the consequence instead of a bill. It is used rarely and only in especially egregious cases. Using this section without requiring too much evil intent would be better than creating uncollectible assessments.

Another alternative would be to stop giving employees credit for collected but unpaid over withholding taxes. Currently, it does not matter that the employer doesn’t pay; the employee gets the credit and the government gets the shaft. If the deadbeat employer was required to inform employees that they their withheld money is just going into his pocket and they will have to write IRS a check instead of the other way around, the problem would self correct when the employees walk out (or beat their boss to a pulp.)