Under IRC section 6672, the IRS can collect unpaid payroll taxes from anyone responsible for collecting or paying withheld income and employment taxes, and such person willfully fails to collect or pay them to the IRS.
In 1998, William Pintner hired Buddy Light Accounting & Tax Services to perform certain duties for GC Affordable Dining, Inc. (GCAD). Such duties ultimately included managing payroll and accounts payable, calculating employee withholding tax liability, preparing Form 941 federal withholding reports, and making federal withholding tax deposits. In his deposition, Barry Light testified that he oversaw the payroll operation for GCAD and completed the day-to-day work, while his brother, Buddy Light, assisted from time to time. With regard to the payroll process, the Light brothers would get the payroll information from each individual store and input it into the software system, issue checks, and calculate GCAD’s withholding tax deposit. The Light brothers initiated this process by accessing the computer servers for each GCAD store and retrieving the relevant employee information. After the Light brothers calculated the compensation owed to each employee and the federal withholding taxes owed for the payroll period, they were responsible for issuing employee payroll checks and transferring the requisite withholding tax amount owed to the Internal Revenue Service. Payment to the IRS was due within one week after each pay period ended.
For purposes of making federal withholding tax payments, GCAD provided the Light brothers with direct access to GCAD’s operating account and authorized the Light brothers to complete an electronic transfer of funds directly from GCAD’s account to the IRS. In this regard, GCAD granted the Light brothers general authorization to pay the withholding taxes such that they did not need the signature of or any specific authorization from, any person at GCAD in order to complete the electronic transfer of funds to the IRS. Based on this payroll process, the Light brothers were the first people to know the amount of federal withholding taxes owed by GCAD for each pay period, and were also the first people to know whether, and to what extent, such amount was paid.