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Court widens net for 100% IRS penalty.

The most severe monetary penalty imposed by the Internal Revenue Service is the 100% penalty levied against employers that fail to collect and pay taxes withheld from employees' wages.

Until recently, the 100% penalty was assessed against so-called responsible persons who willfully failed to pay the tax. However, a recent federal court decision has widened the interpretation of responsible persons to include those who have no knowledge the tax had not been paid.

Any person required to collect, account for and hand over these taxes can be held liable as a responsible person. This can be a corporate officer, director, employee or shareholder. In addition, a partner or employee of a partnership, or a person with sufficient control over funds to direct disbursement, may be named as a responsible person. Third parties that control business operations also can be held liable in some cases.
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Publication:Journal of Accountancy
Date:Aug 1, 1991
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