The old legal principle that the employer is responsible for the malfeasance of the employee, known to the expensively-schooled as the doctrine of “respondeat superior” (let the master answer for the servant), gets turned around when trust funds like FICA and FUTA, and the TFRPs concomitant therewith, are concerned.

Case in point: Solucorp, Ltd., 2013 T. C. Memo. 118, filed 5/2/13. Solucorp is the Canadian parent of EPS Envtl., Inc., whose checkered history is told elsewhere in Tax Court annals. EPS didn’t remit withheld trust funds, and while EPS’ troubles were wending their way through Tax Court, IRS fired off 1153s for the TFRPs to Solucorp , which asked for IRS to wait until EPS’ troubles were resolved.

IRS gave Solucorp levy notices, and Solucorp petitioned, saying IRS should have waited before going after Solucorp.

No, says Judge Wells. “Petitioner contends that the Appeals Office abused its discretion by not suspending collection action pending the outcome of the EPS proceeding before this Court. Specifically, petitioner contends that respondent’s collection action, determination, and motion for summary judgment were premature until the EPS proceeding was fully adjudicated. We disagree. Section 6672(a) imposes a penalty on persons, other than the employer, who are responsible for withholding taxes (trust fund taxes). ‘[L]iability under section 6672(a) is not derived from, or dependent upon, an employer’s outstanding [trust fund] tax [withholding] obligation. Rather, the section imposes a penalty upon persons who fail to perform a specified statutory task.’ Bradley v. United States, 936 F.2d 707, 710 (2d Cir. 1991). The liability imposed on responsible persons pursuant to section 6672 is separate and distinct from the employer’s liability for trust fund taxes. Consequently, the Commissioner is not required to attempt to collect the underlying trust fund taxes from the employer before attempting to collect the section 6672 penalty against a responsible person. Petitioner’s liabilities for section 6672 penalties are separate and distinct from EPS’ Form 941 tax liabilities. Accordingly, the Appeals Office did not abuse its discretion in sustaining collection actions against petitioner for its outstanding TFRPs for the periods in issue.” 2013 T. C. Memo. 118, at pp. 11-12 (Citations and footnote omitted).

Takeaway- Pay those withheld taxes, or face the consequences.