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If the IRS deems someone a responsible person and assesses the trust fund recovery penalty, the individual can appeal that determination and potentially fight the decision in court. Reviewing courts will consider several factors in determining who are responsible persons. Several of the most common factors are as follows:
- Language in corporate bylaws and other relevant documents
- Which individuals have the ability to sign checks
- Which individuals are authorized to determine which creditors to pay first and when to pay bills
- If there was a necessary co-signer on company checks
- Who signed the payroll tax returns
- Who provided operating capital
- Who are owners, corporate officers, or managing partners
- Who has the authority to hire and fire employees
- Who prepares and administers payroll
- Who manages the companies daily operations and/or controlled the company’s finances
Reviewing courts will weigh these and other relevant factors when assessing the validity of the IRS decision to consider an individual a responsible person.
