We’ve all been there, when the facts are bad enough to bury your case right from the start. And today I’ve got sympathy for that hardworking lawyer who furnishes “honest tax representation at reasonable rates,” Eric William Johnson. He’s up against, among others John (“Scholar John”) Schmittdiel, Esq., star of my blogpost “Go To the Head of the Class,” 3/26/14.

Eric William’s client, Xibitmax, LLC, 2017 T. C. Memo. 133, filed 7/5/17, was a wee bit casual about filing Forms 941 for 10 quarters, and ponying up the money withheld from employees for FICA-FUTA-ITW.  These are non-assessables, so de novo review by Judge Nega. But that doesn’t help.

JP is Xibitmax’s sole shareholder and officer. Xibitmax makes trade show displays. JP spends much time on the road, so he hires an employee with no background in payroll taxes to do the Forms 941, and doesn’t look too closely when these don’t get filed or the withholding paid.

True, the economy tanks while this is going on, but Judge Nega isn’t interested. “[JP] testified that, on at least one occasion, he directed his employee not to remit–to ‘defer’–payment of petitioner’s employment and trust fund taxes.  This was done in early 2009 while petitioner was facing cashflow problems during a national economic recession.  Later that year, however, he instructed his employee to resume making timely payments on petitioner’s tax obligations, but the payments never resumed.

“During all periods at issue petitioner continued to withhold employment taxes from the paychecks of its employees and continued to pay its vendors and creditors.  Although he had access to, and would frequently review, petitioner’s only bank account, Mr. Powell never noticed, or chose to overlook, the fact that petitioner’s employment and trust fund tax payments were not being drawn from its account.” 2017 T. C. Memo. 133, at pp. 11-12.

It’s a tough case. Late filing and nonpaying chops sustained.