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Old 03-12-2012, 07:00 PM   #21
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I don't see where SD simply being on the board translates to personal liability for the swim club's malfeasances absent gross negligence. She should consult with a lawyer, but I would be cooperative and try to cause the swim club to be cooperative but consistently insist that it is the swim club's issue and no personal liability exists.

Worst case the swim club can declare bankruptcy.
Trust Fund Penalties are always personal liability. No corporate shield. The only way to not have personal liability is to not have had anything to do with payroll, but a director may have a hard time convincing IRS of this.
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Old 03-12-2012, 07:11 PM   #22
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Trust Fund Penalties are always personal liability. No corporate shield. The only way to not have personal liability is to not have had anything to do with payroll, but a director may have a hard time convincing IRS of this.
Only if one is a "responsible person" and from what I understand it is unclear if SD is a "responsible person" or not. Let's agree to disagree.
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Old 03-12-2012, 07:29 PM   #23
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Trust Fund Penalties are always personal liability. No corporate shield. The only way to not have personal liability is to not have had anything to do with payroll, but a director may have a hard time convincing IRS of this.
The IRS is definitely treating the situation as no corporate shield. I'm afraid I can see where SD would be considered a person of responsibility because she was a member of the BOD. A club member as responsible person, no. A board member, yes.

I guess the board members could show "due diligence" if they could pull out annual board meeting minutes where the "tax person" was asked, "Did you pay all the payroll taxes for the year?" and he/she responded "yes" and showed some report to show they paid the taxes. I doubt such backside covering minutes exist.
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Old 03-12-2012, 07:43 PM   #24
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See below. Assuming that the payment of payroll taxes was not part of SD's responsibilities while she was with the organization and assuming that she was not aware that they didn't pay, she may not meet the criteria below. The agent will press it but she should seek counsel (and IMO resist any characterization that she was responsible).

From IRS website:

Who Can Be Responsible for the TFRP

The TFRP may be assessed against any person who:

is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and
willfully fails to collect or pay them.

A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:

an officer or an employee of a corporation,
a member or employee of a partnership,
a corporate director or shareholder,
a member of a board of trustees of a nonprofit organization,
another person with authority and control over funds to direct their disbursement, or
another corporation or third party payer.

For willfulness to exist, the responsible person:

must have been, or should have been, aware of the outstanding taxes and
either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).

Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.

You may be asked to complete an interview in order to determine the full scope of your duties and responsibilities. Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business. An employee is not a responsible person if the employee's function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid. Notice 784, Could You Be Personally Liable for Certain Unpaid Federal Taxes?, contains additional information regarding the TFRP.
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Old 03-12-2012, 08:28 PM   #25
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There may be documentation which details the responsibilities of the Board.

In any case, the swim club has some assets, no? There were frozen bank accounts mentioned for example. We're not talking about zillions of dollars here. Find out what is owed. Pay it. If the swim club is lacking a small portion of what is owed and can't sell an asset or borrow the money, perhaps the amount when split among the several directors will be less than a legal battle with the IRS. Understand that and don't put pride before the fall. Remember, intentionally or not, the swim club and its BOD has done a big no-no and while it's fun to get indignent over how the IRS is handling it, the swim club is guilty. At least that's what I'm hearing.

If the swim club stuggles to operate after this, so be it. SD should find another way to serve the community where she isn't assuming responsibility and accountibility for a business where these types of issues could very well happen.

Look for the easy way out and get out.

My best wishes that this ends with a minimum of aggravation.
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