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Corduroy Frog

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You shouldn't sign on the company's bank accounts because the IRS could actually hold you responsible for unpaid trust fund taxes.

I borrowed the above quote from Judy on another thread, and thought this topic was significantly different - hence the new topic.

I have long wondered about electronic filing with EFTPS and various state websites.  States have passed laws which now require electronic filing plus a requirement to PAY electronically as well.  Some states are really aggressive - won't let you file at all unless you pay simultaneously.  Whoever completes the process has enjoined a withdrawal to the taxpayer's bank account, having the same effect as a check.

Question:  Does liability attach to the person who pays electronically?  Even if that person is not a signatory to the bank account?  Is it the same liability that would attach as if a paper check had been signed?

Thanks in advance for responses.

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That's a really good question.  No citation at the moment, as I'm done for the night, but I recall looking in to this at one point.  What I found was that if you only do it when told, and/or after client says to schedule payment, it's considered the equivalent of printing the check and leaving it for the one with signatory authority to sign.  I may well be wrong.

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The IRS uses an interview form (4180), Trust Fund Recovery Penalty, to determine who the responsible person(s) are. 

A "Yes" to Questions 7 & 8 would seem to answer Edsel's question. However, "No's" to the others would probably relieve that person of the Trust Fund responsibility.

1. Do you handle the financial direction and management of the business?

2. Is your signature or authority needed to disburse or transact payments for bills as well as pay loans?

3. Are you part of the team who handles the reviewing, preparation, signing as well as authorizing the transmission of checks?

4. Do you have knowledge about the withholding, or lack thereof, of taxes?

5. Is control of the authorization of payroll under your role or power?

6. Are you the key person for making federal tax deposits?

7. Do you have the authority to make or assign the electronic payment of taxes through the EFTPS?

8. Do you handle the electronic banking part of the business, as well as hold the PINS/passwords?

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Thanks Max.  This is good information.  I believe the person doing only EFTPS could be immune for most practical purposes.  But if the IRS can't find anyone more central to management who has any money, they will go down the list until they find someone who does.

Items 6 and 7 are usually synonymous.  And if they had intended for #7 and #8 to be exempt, they wouldn't have put them on the list.

 

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The IRS will throw a wide net, and see who fail to wiggle out. I have been subpoenaed merely because I provide payroll software for others to use, and the case had nothing to do with payroll (it was tax prep fraud, where the preparer was faking returns after the fact, and collecting refunds in the names of their clients).  The IRS found my software on one of the computers...

There are those who are paid to really manage payroll, and thus, openly accept liability.  They usually do nothing without first having the funds available, deposit every payroll, and properly limit exposure.  There are those who only do calculations and provide unsigned reports, sort of a grey market.  Then there are the rest, who likely do not realize their liability.

Whether or not someone is eventually held liable, defense is not free!

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16 hours ago, Corduroy Frog said:

Thanks Max.  This is good information.  I believe the person doing only EFTPS could be immune for most practical purposes.  But if the IRS can't find anyone more central to management who has any money, they will go down the list until they find someone who does.

Items 6 and 7 are usually synonymous.  And if they had intended for #7 and #8 to be exempt, they wouldn't have put them on the list.

 

7 & 8 are not synonymous.  There is a huge difference between "authority" and "handle".  Companies that pay their payroll taxes do not have problems.  It is the ones that become delinquent that do.   

I have been through a few of these "interrogations" and what the IRS is looking for is that individual(s) that decide who is going to be be paid and when.    The one that says we are going to pay our salaries and suppliers first and not pay the IRS.

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