Fill and Sign the Jury Instruction 10106 Section 6672 Penalty Form

10.6 Tax Refund Suits § 6672 Penalty In the present case, the [name corporation], [withheld] [failed to withhold] from the wages and salaries paid to its employees during the periods involved, federal income taxes and social security taxes totaling $       . The corporation failed to pay to the Government the amount [withheld] [that should have been withheld] as it was required to do under the law; and it then became insolvent and had no funds from which the Government could collect the withholding taxes. To assure that withholding taxes are eventually paid to the Government when the employer fails to pay, Congress has enacted a law stating that any person associated with a corporation who had the personal duty and responsibility in the operation of the business to see to it that the taxes were paid to the Government, and who willfully failed to do so, is personally liable in the form of a penalty for the amount of withholding taxes not paid over. The penalty provided by law is generally referred to as the 100% penalty since the amount of the penalty is equal to the amount of the taxes that were not paid. Thus, the penalty is merely a means of collecting the withholding taxes not paid over, and enables the Government to be made whole. The employer in this case was a corporation and, as stated previously, it can only act through its officers, directors, and employees. Every corporation that is an employer must have some person who has the duty or responsibility of withholding and paying over those taxes that the law requires the corporation to withhold and remit to the Government. There may be more than one responsible person, but there is always at least one. Thus, there may be more than one person liable for the 100% penalty. The Government contends in this instance that the Plaintiff was one of the persons responsible to collect, truthfully account for and pay over the taxes that were supposed to be withheld. The Government also contends that the failure of the Plaintiff to pay over those taxes was willful. The Government has the burden of proving, by a preponderance of the evidence, that the Plaintiff was a “responsible person.” If the Government meets that burden by showing that the Plaintiff was responsible, then the burden of proof is shifted to the Plaintiff to prove that [he] [she] did not “willfully” fail to collect and pay over the withholding taxes. [In the verdict form that I will explain in a moment, you will be asked to answer a series of questions concerning each of these factual issues.] The first issue for you to decide, therefore, is whether the Plaintiff was a “responsible person.” The term responsible person includes any person who is connected with the corporation-employer in a way that such person has the power to see that the taxes are paid, or the power to make final decisions concerning the corporation, or who determines which creditors are to be paid and when they are to be paid. The term responsible person may include corporate officers, employees, members of the board of directors or stockholders. The meaning of the term is very broad and is not limited to the person who actually prepares the payroll checks or the tax returns. The responsible person need not even be authorized to draw checks for the corporation so long as that person has the power to decide who will get such checks. In other words, the responsible person is any person who can effectively control the finances, or determine which bills should or should not be paid. If you find that the Plaintiff was not a responsible person, then you will not consider any other issue. On the other hand, if you conclude that the Plaintiff was a responsible person, you must then decide whether the Plaintiff acted "willfully" in failing to pay the withholding taxes to the Government. For purposes of this case the term "willfully" means only that the act of failing to pay over the taxes was voluntarily, consciously, and intentionally done. If the responsible person voluntarily, consciously, and intentionally used the trust funds that were withheld, or caused them to be used, for purposes other than payment of taxes, that person is deemed to have acted willfully. It is not necessary that the Plaintiff had an intent to defraud or to deprive the United States of the taxes, nor is it necessary that the Plaintiff had a bad motive or design; it is enough if the Plaintiff made a deliberate choice to pay other creditors instead of paying the Government. This means that if you find that the Plaintiff decided to use corporate funds to pay suppliers, employees' net take home salaries, rent, or any creditor other than the Government, and did so at a time when withholding taxes were due and owing to the Government, then you must find that the Plaintiff acted willfully in failing to see that the withholding taxes were paid. It is no excuse that the responsible person, in good faith, hoped to pay the taxes at a later time, or even that such person relied upon the advice and information furnished by regularly employed accountants and/or attorneys. 10.6 Tax Refund Suits § 6672 Penalty SPECIAL INTERROGATORIES TO THE JURY Do you find from a preponderance of the evidence: 1. That the Plaintiff was a “responsible person” (as defined in the Court’s instructions)? Answer Yes or No [Note: If you answered No to Question No. 1 you need not answer the remaining question.] 2. That the Plaintiff’s failure to pay over the withholding taxes was not “willful” (as defined in the Court’s instructions)? Answer Yes or No SO SAY WE ALL Foreperson DATED:       ANNOTATIONS AND COMMENTS The former Fifth Circuit and the Eleventh Circuit have defined “willfully” as meaning, in general, “a voluntary, conscious, and intentional act, such as payment of other creditors in preference to the United States, although bad motive or evil intent need not be shown.” Mazo v. United States, 591 F.2d 1151, 1154 (5th Cir. 1979). The willfulness requirement is met if the responsible person shows a “reckless disregard of a known or obvious risk that trust funds may not be remitted to the government such as by failing to investigate or to correct mismanagement after being notified that withholding taxes have not been duly remitted.” Id.; see also George v. United States, 819 F.2d 1008 (11th Cir. 1987); Malloy v. United States. 17 F.3d 329 (11th Cir. 1994). Under no circumstances does the delegation of the obligation to pay the taxes absolve a responsible person of liability. George, 819 F.2d at 1012. Thibodeau v. United States, 828 F.2d 1499, 1505-06 (11th Cir. 1987) (“The responsible officer’s actions before the due date for payment of the withheld taxes satisfies the “willfulness” requirement under § 6672 when the responsible officer . . . knows that the withheld funds are being used for other corporate purposes, regardless of his expectation that sufficient funds will be on hand on the due date for payment over to the government.”). The shifting burden of proof concept is derived from Mazo, George and Thibodeau, supra.