That’s the story Rodney A. Taylor, T. C. Memo. 2024-23, filed 3/25/24, tells CSTJ Lewis (“Quite A Name”) Carluzzo. “According to petitioner, his successes in management consulting and other professional endeavors are attributable to his interpersonal skills. He claims to suffer from a learning disability with respect to mathematics, but he is otherwise competent to conduct his personal and business affairs. Throughout his professional career he delegated many business and sometimes personal financial responsibilities to employees and accountants….” T. C. Memo. 2024-23, at p. 2.

Despite this handicap, Rod runs a multimillion-dollar management consulting and executive search outfit (Company), of which he is CEO and sole shareholder. Unhappily, his less-than-trusty CPA takes a couple million (hi, Judge Holmes) from Company’s cookie jar without paying the FICA/FUTA/ITW Company owes. You can guess the rest.

Rod claims his mathematical ineptitude renders him an irresponsible person or officer for Section 6672 TFRPs. Notwithstanding, Rod keeps Company running while suing insurers and the defaulting CPA, collecting cash and not paying the FICA etc. Rod also claims IRS sent the notice of TFRPs to the wrong address.

“The essential question is whether the person had sufficient control over a taxpayer’s affairs to ensure the payment of the taxpayer’s employment taxes. The indicia of that control held by a responsible person include ‘the holding of corporate office, control over financial affairs, the authority to disburse corporate funds, stock ownership, and the ability to hire and fire employees.’ In considering an individual’s status, duty, and authority, the test is one of substance, and the focus of the inquiry does not involve a mechanical application of any particular list of factors. The inquiry must focus on actual authority to control, not on trivial duties.” T. C. Memo. 20240-23, at pp. 5-6. (Citations omitted).

It’s what could you do, not what did you do. Rod was the boss. He ran the show. He claims it’s the CPA’s fault, not his innumerate self. CSTJ Lew won’t wear it. “The focus, however, is on his authority to control Company’s obligations to pay its employment taxes, not on whether he personally took responsibility for that duty. Considering his position with Company and taking into account his decisions to disburse Company funds to pay for items other than Company’s employment tax liabilities, we find that petitioner was a person described in section 6672(a) for purposes of Company’s outstanding employment tax liabilities.” T. C. Memo. 2024-23, at p. 6. (Citation omitted).

As for the last-known address, that was the one on the updated Form 433-A Rod furnished to a RO. T. C. Memo. 2024-23, at p. 8.

Btw, Rod paid himself a $77K bonus from the settlement he got out of the defaulting CPA, while not paying the FICA etc. Bad idea.

OTOH, Kathleen M. Stegman, T. C. Memo. 2024-24, filed 3/25/24, certainly could handle numbers. Her problem is, she couldn’t bring herself to pay taxes on the numbers she and her corporation got. Kathleen went down in USDCDKS for tax fraud. It’s the usual fact-driven corporation-pays-personal-expenses, phony invoices, cash dealings, stiff-arming IRS at Exam, so I’ll spare you and me. The issue here is that the AUSA blew it, trying to pin the corporation’s taxes on Kathleen.

Judge Elizabeth Crewson Paris judge-‘splains: “… the federal district court acquitted Ms. Stegman of evasion of corporate tax on the grounds that the indictment and the jury instructions were flawed in attributing to Ms. Stegman the loss due and owing by the corporation. The prosecutors did not put on evidence to pierce the corporate veil, so the indictment and the jury instructions attributed the tax to the wrong legal person.” T. C. Memo. 2024-24, at p. 4.

No doubt that there was proof of tax evasion beyond a reasonable doubt on the trial; but the wrong person was charged in the indictment, raising Fifth Amendment issues. On appeal, 10 Cir. went over that in extenso.

So Kathleen gets hit only for her own stuff. I doubt the IRS will get much joy from the corp. Maybe try Section 6901 transferee?