Trust fund penalties can be assessed against responsible parties who should have turnover the withholding and Social Security taxes to the government on 941 taxes, did not, and IRS deemed those individuals responsible under the willful standards.

The Internal Revenue Service has a number  of things that they look at before they set up the trust fund taxes against those responsible for the 6672 penalty.

One of the biggest things IRS  looks at is “willfulness” and who those should have paid over the taxes but failed to do so.

That willfulness standard is a hinge point on what IRS looks for.

Many times the willful standards need to be clarified so a person knows what they’re up against in dealing with the Internal Revenue Service or the Appellate Division.

Under The IRM   8.25.1.3.2 (12-07-2012) the current protocols are as follows:

Definition of Willfulness

1. The trust fund recovery penalty is a civil penalty; so the degree of willfulness in failing to collect or pay over any tax leading to liability for this penalty is not as great as that necessary for criminal proceedings.

Willfulness in the context of the TFRP is defined as intentional, deliberate, voluntary, and knowing, as distinguished from accidental. “Willfulness” is the attitude of a responsible person who with free will or choice either intentionally disregards the law or is plainly indifferent to its requirements.

Some factors to consider when determining willfulness are:

• Whether the responsible person had knowledge of a pattern of noncompliance at the time the delinquencies were accruing;


• Whether the responsible person had received prior IRS notices indicating that employment tax returns have not been filed, or are inaccurate, or that employment taxes have not been paid;


• The actions the responsible party has taken to ensure its Federal employment tax obligations have been met after becoming aware of the tax delinquencies; and


• Whether fraud or deception was used to conceal the nonpayment of tax from detection by the responsible person.


Here is the instruction which the district judge gave:

Liability is imposed on a responsible person, under Section 6672, only if the person willfully fails to collect, account for, or pay over withheld taxes.

“Willfulness, ” within the meaning of Section 6672, requires a voluntary, conscious and intentional act to prefer other creditors over the United States. Liability does not depend on the presence of an evil motive or specific intent to deprive the government of revenue.

In fact, conduct motivated by a reasonable cause may, nonetheless, be willful.

Rather, a responsible person acts willfully whenever he permits funds of the corporation to be paid to other creditors when he is aware that withholding taxes due the government have not been paid.

In other words, when a responsible person does not use his authority to see that the withholding taxes are paid, but rather permits the corporation to continue its operation, paying suppliers and other creditors, his conduct is willful.

Further, even in the absence of express knowledge of a default and payment of withholding taxes, willfulness, for the purpose of Section 6672, exists where a responsible person pays other creditors with a reckless disregard as to whether trust fund taxes have been paid over to the government.

For this purpose, recklessness is established if the party, first, clearly ought to have known that; second, there was a grave risk that withholding taxes were not being paid, and if, three, he was in a position to find out for certain very easily.

Recklessness is also established if a responsible person fails to investigate or correct mismanagement after being notified of a default in the payment of withholding tax.

Need help with any IRS matter, free consults available.