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September 2, 2017

The Trust Fund Recovery Penalty and Non-Owner Employees

Filed under: Trust Fund Recovery Penalty — Administrator @ 12:28 pm

The Trust Fund Recovery Penalty and Non-Owner Employees:

Internal Revenue Manual RM 1.2.14.1.3, Policy Statement 5-14 (Formerly P-5-60), states individuals performing ministerial acts without exercising independent judgment will not be deemed responsible. In general, non-owner employees who act solely under the dominion and control of others, and who are not in a position to make independent decisions on behalf of the business entity, will not be assessed the Trust Fund Recovery Penalty. Non-owner employees are those who do not own any stock, interest, or other entrepreneurial stake in the company that employs them.

Ministerial acts are performed under the supervision of someone else and do not require independent judgment or decision-making ability.

The IRS gives the following Example:

The bookkeeper of a company is not an owner and is not related to an owner. She has check signing authority and pays all of the bills the treasurer gives her. She is not permitted to pay any other bills, and when there are not sufficient funds in the bank account to pay all of the bills, she must ask the treasurer which bills to pay. The bookkeeper is performing a ministerial act and should generally not be held responsible for the Trust Fund Recovery Penalty.

Read more about the Trust Fund Recovery Penalty and the interview form 4180 here

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