Trust Fund Penalties
TAXPAYER BILL OF RIGHTS II
10. TITLE IX--MODIFICATIONS TO PENALTY FOR FAILURE TO COLLECT AND PAY OVER TAX
10.1. Preliminary Notice Requirement For Trust Fund Penalty Assessment. Under section 6672, a "responsible person" is subject to a penalty equal to the amount of trust fund taxes that are not collected or paid to the government on a timely basis. An
individual the IRS has identified as a responsible person is permitted an administrative appeal on the question of responsibility. The new law requires the IRS to issue a notice to an individual the IRS had determined to be a responsible person with
respect to unpaid trust fund taxes at least 60 days prior to issuing a notice and demand for the penalty. The statute of limitations shall not expire before the date 90 days after the date on which the notice was mailed. The provision does not apply if
the Secretary finds that the collection of the penalty is in jeopardy. The provision applies to assessments made after June 30, 1996. TPBR2 §901. IRC §6672(b). SEC. 901 OF THE BILL
10.2. Disclosure Of Certain Information Where More Than 1 Person Liable For Penalty For Failure To Collect And Pay Over Tax. Under prior law, the IRS may not disclose to a responsible person the IRS's efforts to collect unpaid trust fund
taxes from other responsible persons, who may also be liable for the same tax liability. The new law requires the IRS, if requested in writing by a person considered by the IRS to be a responsible person, to disclose in writing to that person the name of
any other person the IRS has determined to be a responsible person with respect to the tax liability. The IRS is required to disclose in writing whether it has attempted to collect this penalty from other responsible persons, the general nature of those
collection activities, and the amount (if any) collected. Failure by the IRS to follow this provision does not absolve any individual for any liability for this penalty. The provision is effective on the date of enactment. TPBR2 §902. IRC §6103(e)(9). SEC. 902 OF THE BILL
10.3. Right Of Contribution Where More Than 1 Person Liable For Penalty For Failure To Collect And Pay Over Tax. A responsible person may seek to recover part of the amount which he has paid to the IRS from other individuals who also may
have the obligations of a responsible person but who have not yet contributed their proportionate share of their liability under section 6672. Under prior law, taxpayers must pursue such claims for contribution under state law (to the extent state law
permits such claims). The IRS may collect this penalty from a responsible person from whom it can collect most easily, rather than from the person with the greatest culpability for the failure. If more than one person is liable for this penalty, each
person who paid the penalty is entitled to recover from other persons who are liable for the penalty an amount equal to the excess of the amount paid by such person over such person's proportionate share of the penalty. This proceeding is a Federal cause
of action and must be entirely separate from any proceeding involving IRS's collection of the penalty from any responsible party (including a proceeding in which the United States files a counterclaim or third-party complaint for collection of the
penalty). The provision applies to penalties assessed after the date of enactment. TPBR2 §903. IRC §6672(d). SEC. 903 OF THE BILL
10.4. Volunteer Board Members Of Tax-Exempt Organizations Exempt From Penalty For Failure To Collect And Pay Over Tax. The new law clarifies that the section 6672 responsible person penalty is not to be imposed on volunteer, unpaid
members of any board of trustees or directors of a tax-exempt organization to the extent such members are solely serving in an honorary capacity, do not participate in the day-to-day or financial activities of the organization, and do not have actual
knowledge of the failure. The provision cannot operate in such a way as to eliminate all responsible persons from responsibility. The new law requires the IRS to develop materials to better inform board members of tax-exempt organizations (including
voluntary or honorary members) that they may be treated as responsible persons. The IRS is required to make such materials routinely available to tax-exempt organizations. The new law also requires the IRS to clarify its instructions to IRS employees on
application of the responsible person penalty with regard to honorary or volunteer members of boards of trustees or directors of tax-exempt organizations. The provision is effective on the date of enactment. TPBR2 §904. IRC §6672(e). SEC. 904 OF THE BILL
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