Employee Forced to Pay Employer Taxes and Penalty | USTaxAid

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Employee Forced to Pay Employer Taxes and Penalty

Written by Diane Kennedy, CPA on November 20, 2021

A recent Tax Court cases gave the bad news to the hospital employee. She was liable for the hospital’s unpaid payroll taxes PLUS she had to pay the 100% penalty.

The facts weren’t quite as clear cut, but it should be noted that the employee was not an owner or Director of the hospital. She was just an employee who processed the invoices.

The hospital ran into financial trouble and a suit was filed with the court to freeze bank accounts. As part of the court action, the hospital was ordered to only pay certain payments that were approved by the creditor. She had check-signing authority. And apparently, she didn’t pay anyone she shouldn’t. She simply didn’t pay the payroll taxes because there wasn’t enough money.

And now she is personally responsible for the payroll taxes plus the penalty.

If you are ever “given” check signing authority, think twice if you aren’t an owner of the business. It really isn’t a privilege and, in fact, you could be signing on for responsibility if the business doesn’t pay its bills.

Personally, I would never do it if I didn’t have ownership or control of the business. It’s way too risky, as this hospital employee just discovered. (Cashaw, TC Memo, 2021-123)

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