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Limited Financial Authority is No Protection from Liability

Saul Brenner, CPA, J.D., LL.M. 12.28.2015 | eVisor

A federal court ruled in Waterhouse v. U.S. 1 that a shareholder with limited financial authority could still be liable for payroll tax deficiency. 

In the matter, two shareholders had equal stakes in a corporation.  They agreed that the president would take care of finances with field operations in the hands of the vice president.  However, the vice president had check writing authority and had signed checks to the corporation's creditors. He did this while aware that the corporation had a payroll tax deficiency.

The court noted that, under U.S.C. §6672, a person required to collect, account for, and pay tax who willfully fails to collect or account for the tax is liable and can be penalized.  In the court's view, the vice president was a "responsible person" within §6672 and could be held liable for the tax deficiency.    

1 Waterhouse v. U.S., 116 AFTR 2nd 2015-5350, Code Sec(s) 6672, (Ct Fed Cl), 07/23/2015

Questions? Contact your Berdon advisor or Saul Brenner, CPA, J.D., LL.M.  at 212.331.7630 | sbrenner@berdonllp.com 

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