Designing Transition Services Agreement Payroll Tax True up Reconciliation Schedules
True up schedules reconcile provisional payroll withholdings against statutory FICA caps, SUTA rate variances, and trailing equity across TSA cutover dates.
Internal Revenue Code Section 6672
Meaning
Statutory provision imposing personal liability on individuals who fail to collect or pay over employment taxes ensures the collection of trust fund penalties. Applying internal revenue code section 6672 allows the government to look past the corporate veil to the specific officers responsible for financial decisions. The penalty equals the full amount of the unpaid tax and is not dischargeable in most bankruptcy cases.
It targets the portion of payroll taxes withheld from employees which the company failed to remit to the treasury.
Corporate Person
Corporate officers and directors with the authority to sign checks or decide which creditors are paid fall under the scope of this rule. Determination of status under internal revenue code section 6672 focuses on the actual control an individual exerts over the business bank account.
Proving Standard
Proving a conscious decision to favor other creditors over the government is required to trigger the penalty. This element does not require a showing of evil intent or a plan to defraud the treasury.
Administrative Process
Administrative procedures begin with an interview to determine who managed the funds during the period of delinquency. If the agency finds a match, it issues a formal notice of the intent to assess the penalty against the individual. The resulting debt follows the individual even if the corporation is dissolved or enters liquidation.