I am going to take a break from 2010 and Estate Tax Stories and devote my next tale to the 100% penalty under Section 6672 of the Internal Revenue Code of 1986. A similar penalty is also present in almost every state tax statute. Usually a corporation affords its owners, employees, and officers complete immunity for corporate debts and acts. However, once the Federal Government started having employers withhold taxes at the source and State Governments started collecting taxes on sales and also having income taxes withheld, they noticed that corporations would simply not pay the taxes and then go bankrupt leaving everyone holding the bag but the officers and directors of the Corporation who diverted the funds. So they put in statutes which hold personally responsible employees, officers and directors responsible for INTENTIONALLY failing to pay over withholding taxes. The key word is of course intentionally. In this case ignorance of the law or ignorance of the facts is an excuse. Therefore, an owner who has an employee or a partner embezzle money or lie about paying the taxes, may and I emphasize may, get off the hook. An owner who didn’t know about the rule (the common law of stupid) might be relieved of personal liability. The rule is that a conscious choice must be made to prefer another over paying the withholding taxes. This leads to some rather interesting results as some tax tales will show.
Epilogue
January 1, 2011
After a valiant fight, Jack Jenkins died at 4 a.m.
September 1, 2011
“It’s ashame you had to pay all those taxes Sally. If only he had gotten to ‘I do’ before the heart attack”, Lawyer Dobbins remarked. “Actually, he did. Do you remember that trip we took to Washington, D.C. last fall?” Sally asked. “ Yes” replied the lawyer. “Here is the hotel registration, he listed us as Mr. and Mrs. Jack Jenkins at the Hyatt Hotel in D.C.. D.C. is a common-law marriage state and according to this legal opinion I got from a D.C. lawyer, we were married. He held me out as his wife. At that point I had been divorced from Beau. Please file the return claiming the spousal rights”, Sally asked. “That’s great news, they’ll be no taxes until you die, Sally”, the lawyer answered.
March 1, 2011
Brian Peterson was handed an estate tax return to review. It was for a guy named Jack Jenkins. He checked the assets, the appraisals, the arithmatic, and approved the return. He never questioned the marital deduction since there was a joint tax return on file for the last year of life of the decedent. He sent the file up for a closing letter and the return showed zero taxes due and owing. “I can see this guy did no planning. He left everything to his wife”, he thought.
WRITER’S COMMENT. This is one of those stories that as I started writing it, took on a life of its own and I could have had it go on for a few more weeks and probably will continue to write on this tale off-line. Clearly the moral here is that when the Government creates an incentive by handing out money, some evil minded people are going to try and get the money. Tomorrow a new tax tale on a different tax topic.
A night to remember
December 31, 2010
It was the social event of the season. Jack Jenkins was going to get married right after midnight. It was clear that he and Sally were meant for each other. As they danced the evening away and toasted in the New Year. But Jack wasn’t looking his usual happy go lucky self. He looked like he might have the flu. More than one person asked him are you okay? At 12:15 a.m., as the guests were seated to await the Bridal Entrance, a commotion occurred in one of the anterooms. “Dr. Reynolds can you come into the sitting room, its Jack?”, said a friend. Dr. Reynolds sprinted into the sitting room. Jack was unconscious on the floor, his face ashen. The doctor felt for a pulse and there was none. “Call 911 and I need the defribrillator machine.” A waiter ran down to the golf locker room and procured the machine which was kept for golfers who wanted to get in one last round of golf, and ran it up to the sitting room. The doctor applied the paddles. Nothing happened. He upped the amps, nothing happened. He tried again he got a faint pulse. At that point the ambulance arrived and Jack was taken in critical condition to the hospital.
Bonus News. Virginia Tax Amnesty
Please be aware that Virginia has an amnesty program for unpaid income taxes which expires December 5, 2009. If you are delinquent with Virginia and have not gotten any notice, give them a call. You will need to have filed all unfiled returns to take advantage of this program. 50% of all interest is forgiven and all penalties. Now is the time to act.
Beau knows Jail
Detective Black returned to the hospital, “is he able to talk, yet?” “Yes, but only briefly”, the doctor answered.
“Good evening Mr. Beaudine, I’m Detective Black, I’m sorry about the handcuffs on your bed, but well, you tried to kill a man.” The detective then proceeded to read him his Miranda warning. “I want a lawyer”, Beaudine answered. “As I understand it you have the funds to hire one, since your victim gave you $200,000.” “So, you have your mouthpiece available tomorrow so that I can interview you”. “I’m not gonna answer any questions”, Beaudine responded. “Smart man”, the detective replied. “That will make it real easy to get your butt to jail for 25 to life. You have a nice day, now.”
December 15, 2010
No charges were brought against Jack Jenkins. Beau Beaudine was convicted of attempted murder after a long and rancorous trial. He was sentenced to 25 years to life. Sally got a divorce from Beau and of course custody of the children. Jack, Jr. received an interesting note in the mail. “You are hereby invited to the wedding of Jack Jenkins, Sr. and Sally Beaudine on January 1, 2011 at 12:30 a.m. at the Montgomery Golf and Country Club.”