Personal liability for employee withholding taxes

Accountants in industry or those who serve in a managerial or bookkeeping capacity for their clients may be considered "responsible parties" for entities that fail to remit withheld taxes to the IRS. As a responsible party, they are personally liable for a 100% penalty for such taxes. Who is a responsible party is determined largely by the courts, and they have developed a number of characteristics for identification. Landmark cases establishing the characteristics include: White v. US (1967), Gustin v. US (1989), Watson v. US (1984), Howard v. US (1983), and Schroeder v. US (1990). The characteristics include: 1. ultimate authority for the decision not to pay the trust fund taxes, 2. effective power to pay the taxes, 3. check signing authority, and 4. an officer or director of the corporation. Knowing these characteristics, accountants can take steps to avoid being a responsible party and paying this onerous penalty.