• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

RJS Law - A Tax Law Firm

RJS Law: San Diego Tax Attorney & Lawyer | CPA | IRS | FTB | California

Header Right

SOUTHERN CALIFORNIA’S FINEST
LAW FIRM

COMPLIMENTARY CASE EVALUATION

SAN DIEGO
(619) 595-1655
ORANGE COUNTY
(949) 535-2000
El CAJON
(619) 595-1655
  • Home
  • About
    • Ronson J. Shamoun, JD, LL.M.
    • Chandara Diep, JD, LL.M.
    • Joseph Cole, JD, LL.M.
    • Brendan O’Connor, CPA, MST, JD, LL.M.
    • Ashley E. Teague, ESQ.
    • Brian M. Malloy, Esq.
    • Quinn Disparte, JD, LL.M.
    • Martin Schainbaum, JD, LL.M.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Leandro Favano
    • Jewell Cornejo
    • Devon J. Arabo
    • Christopher Engelmann
    • Gwendolyn K. Davis
  • Services
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS Law for your IRS Appeal?
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • IRS Field Audits
          • Initial Compliance Center Audits
          • IRS Office Audits
          • What to Expect During an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearings
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • IRS Automated Collections
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • Our Approach to Collections
          • Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • TAX PENALTIES
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax Matters
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • The Trust Fund Recovery Penalty
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing a Rejected Offer in Compromise
          • How the IRS evaluates an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Retain RJS Law?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration
        • California State Tax Matters
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • International Taxes
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • Estate Planning
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
    • Criminal Defense
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
    • NOTICES
      • IRS Notices
      • IRS Letters
      • FTB Notices
      • Avisos en Español
  • Tax Institute
  • Blog
  • Testimonials
  • Giving
    • RJS Law Donates Billboard to the Girl Scouts
  • Awards
    • Events
    • SD Metro San Diego’s Top Attorneys 2020
    • SD50 Extraordinary Leadership
    • Media
    • Video Gallery
    • USD Feature Story
    • Publications
  • Contact

WINNER OF THE UNION TRIBUNE SAN DIEGO'S BEST TAX LAW FIRM

 


5 YEARS IN A ROW

Call
Contact
Blog
  • Home
  • About
    • Ronson J. Shamoun, JD, LL.M.
    • Chandara Diep, JD, LL.M.
    • Joseph Cole, JD, LL.M.
    • Brendan O’Connor, CPA, MST, JD, LL.M.
    • Ashley E. Teague, ESQ.
    • Brian M. Malloy, Esq.
    • Quinn Disparte, JD, LL.M.
    • Martin Schainbaum, JD, LL.M.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Leandro Favano
    • Jewell Cornejo
    • Devon J. Arabo
    • Christopher Engelmann
    • Gwendolyn K. Davis
  • Services
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS Law for your IRS Appeal?
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • IRS Field Audits
          • Initial Compliance Center Audits
          • IRS Office Audits
          • What to Expect During an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearings
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • IRS Automated Collections
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • Our Approach to Collections
          • Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • TAX PENALTIES
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax Matters
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • The Trust Fund Recovery Penalty
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing a Rejected Offer in Compromise
          • How the IRS evaluates an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Retain RJS Law?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration
        • California State Tax Matters
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • International Taxes
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • Estate Planning
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
    • Criminal Defense
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
    • NOTICES
      • IRS Notices
      • IRS Letters
      • FTB Notices
      • Avisos en Español
  • Tax Institute
  • Blog
  • Testimonials
  • Giving
    • RJS Law Donates Billboard to the Girl Scouts
  • Awards
    • Events
    • SD Metro San Diego’s Top Attorneys 2020
    • SD50 Extraordinary Leadership
    • Media
    • Video Gallery
    • USD Feature Story
    • Publications
  • Contact

Leave a Comment

New Argument for Contesting the Trust Fund Recovery Penalty

New Argument for Contesting the Trust Fund Recovery Penalty
New Argument for Contesting the Trust Fund Recovery Penalty

Employers are responsible for withholding income and employment taxes from their employees. These taxes are referred to as trust fund taxes because the employer is only holding the money for the employee to pay the IRS. When an employer fails to withhold the money and pay it to the IRS, individuals who are “responsible” and “willful” can be personally liable for the trust fund recovery penalty. Responsible persons are often officers of the employer, members of a board of trustees, directors, and shareholders. Responsible persons can be held personally liable under Internal Revenue Code section 6672.

The IRS has a long-established policy that the purpose of section 6672 was to recover trust fund taxes and not as imposing any additional penalties. As such, if the employer were to pay all the trust fund taxes back, the responsible person would not owe anything additional.

Typically, penalties must be approved in writing by the IRS employee’s supervisor prior to the initial determination that the penalty is due. “No penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination.” IRC 6751(b)(1). However, Trust fund taxes were interpreted as a ‘recovery’ instead of a ‘penalty’ which requires no supervisory approval before imposing methods to recover the unpaid trust fund taxes. This all changed on January 21, 2020 when the United States Tax Court published the David J. Chadwick v. Commissioner decision.

In Chadwick, Mr. Chadwick was a sole member of two entities which had failed to pay employment taxes. The two Revenue Officers that were assigned decided that Mr. Chadwick was liable for the trust fund recovery penalty. The two Revenue Officers signed off on the paperwork and issued a letter giving Mr. Chadwick the opportunity to appeal. However, he did not appeal and so the Internal Revenue Service (IRS) assessed the penalties.

The IRS argued that there was no need for a supervisor’s approval since the trust fund recovery penalty was merely a collection tool and not a true penalty. The court disagreed, stating, “Like penalties for failure to file returns and failure to disclose information, the trust fund penalties are imposed as a sanction for failing to do something. From the standpoint of the person sanctioned, they are penalties both as denominated by the code and in the ordinary sense of the word.” Chadwick v. Commissioner.

The decision in Chadwick makes clear there must be supervisory approval for the trust fund recovery penalty. Relying on another recent case, the court found the approval needed to occur prior the letter where the IRS formally notifies the taxpayer of its definite decision to assert the trust fund recovery penalty.

While this is the current case law on Trust Fund Recovery penalties in Tax Court, it is subject to review in federal district court. This is due to the fact that most decisions regarding Trust Fund Penalties are made in federal district courts and Tax Court decisions are not binding on the federal courts.

For a complimentary case evaluation, please call 619-595-1655 or inquire online today.  

Published by Lauren Lee

Filed Under: Tax Law Tagged With: California Tax Attorneys, California Tax Lawyers, California taxes, Chadwick v. Commissioner, history of rjs law, Internal Revenue Code section 6672, IRC 6751(b)(1), IRS, New Argument for Contesting the Trust Fund Recovery Penalty, rjs law, rjs law firm, RJS Law Firm San Diego, rjs law san diego, San Diego, San Diego Super Lawyer, San Diego Tax Attorney, san diego tax lawyer, SD Tax Law, SD Tax Lawyer, SD Tax Lawyers, section 6672, tax attorney san diego, Tax Law San Diego, Tax Lawyer San Diego, Tax Lawyers San Diego, Trust Fund, trust fund recovery penalty

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Contact Us

Recent Posts

  • WHERE’S THE MONEY, LEBOWSKI? CALIFORNIA PROPOSITION 19
  • California Franchise Tax Board’s Top 500 Delinquent Taxpayer List
  • California Franchise Tax Board – Can You Ever Leave the Hotel California?

Categories

  • Bank Fraud
  • Bankruptcy
  • CARES Act
  • Company News
  • Contracts
  • Coronavirus
  • COVID-19
  • Cryptocurrency
  • E-Commerce
  • Economic Stimulus
  • EDD
  • EDD Audit
  • Estate Planning
  • FTB Audits
  • FTB Collections
  • FTB Issues
  • Guardianship
  • How-To Legal Advice
  • IRS
  • IRS Appeals
  • IRS Audits
  • IRS Collections
  • IRS Forms Explained
  • IRS Issues
  • IRS Notices
  • IRS OVDI
  • IRS Website
  • Levies
  • Liens
  • Mail Fraud
  • No Worries Law Firm
  • Offer in Compromise
  • PPP Loan
  • Revocable Trust
  • RJS LAW In The Community
  • San Diego Law Firm
  • SBOE Audits
  • SBOE Issues
  • Small Business
  • Stock Options
  • Tax Attorney
  • Tax Law
  • Tax Tips
  • Uncategorized
  • Unemployment

Footer

Legal Resources

  • Payments
  • Services
  • Tax Law Blog
  • Video Gallery

SAN DIEGO

Map & Directions
FREE Underground parking in building

303 A Street
Suite 400
San Diego, CA 92101

Phone No.
(619) 595-1655

ORANGE COUNTY

Map & Directions

2 Park Plaza
Suite 870
Irvine, CA 92614

Phone No.
(949) 535-2000

El CAJON

Map & Directions

900 N. Cuyamaca St., Suite 101
El Cajon, CA 92020

Phone No.
(619) 595-1655


© 2018 | RJS Law Firm | All Rights Reserved | Privacy Policy.