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To encourage prompt payment of withholding, lessee of tangible personal property and/or public accommodation taxes, the General Assembly passes a law that provides for the trust fund recovery penalty. This 100% penalty is used as a tool for collection of these taxes.
If you are a responsible person, we can apply this penalty against you immediately after you do not pay trust fund taxes in response to a notice and demand for payment. Also, we can apply this penalty regardless of whether you are out of business or without assets.
Figuring The Penalty Amount The amount of the penalty is equal to the unpaid tax.
This person may be:
In some situations the responsible person may be a person who is not directly affiliated with the delinquent business. For example, the penalty may be assessed against an official or employee of a bank or other financial institution who has the authority to direct the financial affairs of the business and:
For willfulness to exist, the responsible person must:
Willfulness does not imply that you had acted for personal gain. For instance, the courts ruled in one case that the actions of a corporate officer, in permitting withheld taxes to be used for operating expenses of the business (whether at the officer’s direction or with his tacit approval) is sufficient evidence of willfulness that the trust fund recovery penalty can be charged to that officer.
In addition, if any employer meets payrolls, we can infer that sufficient funds were available to pay the tax, regardless of whether the funds were actually set aside or otherwise specifically identified for tax purposes.