Statement of Appeal in Support of Abatement
of Trust Fund Recovery Penalty
CLIENT’S NAME
Submitted by:
Student’s name, Student Attorney
Georgia State University College of Law
Philip C. Cook Low-Income Taxpayer Clinic
P.O. Box 4037, Atlanta, GA 30302-4037
Ph. (404) 413-9230
Fax (404) 413-9229
E-Mail:
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Table of Contents
Relief Requested 1
Procedural Background of Tax Matter 1
Statement of Facts 2
Applicable Law 5
Application of the Law to the Facts 10
Conclusion 12
Table of Exhibits
A. Statement of Appeal in Support of Abatement
B. Power of Attorney
C. Dispute of Determination, Request for Appeal Conference
D. Notice of Federal Tax Lien dated _____
E. Income Documentation: Indigent Healthcare, Wage and Income Transcripts for tax years ______, U.S. Census ______American Community Survey of YY Town, and State Tax Sale Proposal
F. Bankruptcy Documentation
G. Testimonial Letter dated ______
H. Company X Information
(ii)
Relief Requested
· The first sentence is a critical sentence to set the tone of the memorandum
· Include name of the company from which the liability arises and the tax periods.
· Ask for relief and state briefly why
TAXPAYER’S NAME respectfully requests the Internal Revenue Service to reconsider its assessment of a Trust Fund Recovery Penalty (“TFRP”) under Code section 6672 for Company X’s unpaid trust fund taxes for the four quarters of 2006 and 2007. Ms. TAXPAYER was neither a responsible person nor acted willfully in failing to pay over the trust fund taxes.
Procedural Background of Tax Matter
· Set out here procedurally how she learned of the tax
· List the specific amounts and periods at issue and type of tax.
· Outline what procedural steps have occurred and if the tax is assessed.
· Identify where the case is in the procedure of the IRS.
· Discuss any jurisdictional issues resulting from the failure of IRS or the client to follow the proper procedure such as mailing issues.
Ms. TAXPAYER is a single mother of two with limited education and business knowledge who worked in clerical positions all her life. When Ms. TAXPAYER filed her 2008 income tax return she was informed that her refund was offset against trust fund recovery penalties assessed against her as a responsible person of Company X. The company had failed to pay the trust fund portion of the Withholding and Federal Insurance Contribution Act taxes (“FICA”) for the four quarters of 2006 and 2007 as listed in Table 1, below.
Table 1: Company X's trust fund obligation, per quarter.
Quarter / Amount3/31/2006 / $16,592.48
6/30/2006 / $14,835.21
9/30/2006 / $12,234.19
12/31/2006 / $11,855.84
3/31/2007 / $12,328.37
6/30/2007 / $7,687.03
9/30/2007 / $6,837.03
12/31/2007 / $4,666.16
Shortly after she learned of the offset, she contacted the Service by phone and explained that her supervisor, Mr. XXX, was the owner of X COMPANY and she held only a clerical position with the company. [See Exhibit (C) Request for Appeals Conference, (D) Notice of Federal Tax Lien].
On February 23, 2010, Ms. TAXPAYER requested the assistance of the Taxpayer Advocate Service and she was assigned to Ms. YYY. In March 2010, Mr. ZZZ, a local attorney, agreed to provide pro bono legal services to help Ms. TAXPAYER resolve her tax issues. With Mr. ZZZ’s help Ms. TAXPAYER provided several documents requested by Ms. YYY. Ms. TAXPAYER mailed a copy of the Articles of Incorporation, as well as the I.R.S. bankruptcy claim document. In May 2010, she filed Form 843 for each quarter of 2006 and 2007 with a statement of explanation that she was not an owner or manager of Company X and made no managerial decisions. In June 2010, Mr. ZZZ forwarded a letter from Mr. XXX affirming that Ms. TAXPAYER was an employee with only clerical duties and the existence of a repayment plan established by the Bankruptcy Court for his unpaid trust fund taxes. Mr. XXX sent various bankruptcy documents. After the Service denied Ms. TAXPAYER’s claim, she requested an Appeals Conference in September 2010. The case has been assigned to the Appeals Office in Atlanta. [See Exhibits: (C) Request for Appeals Conference, (F) Mr. XXX’s Bankruptcy Documents and I.R.S. Proof of Priority Claim, (G) Mr. XXX’s Testimonial Letter, (H) Company X’s company information]. Subsequently, the IRS assessed the above periods and filed a Notice of Federal Tax Lien.
In April 2011, Mr. ZZZ requested the assistance of the Philip C. Cook Low-Income Taxpayer Clinic on Ms. TAXPAYER’s behalf. [See Exhibit (B) Power of Attorney].
Through informal discussions about the matter with the Settlement Officer of Atlanta Appeals, it appears that the client was sent several notices which were returned unopened. There is a discrepancy regarding the U.S. Postal Service’s delivery of the Notice of Proposed Civil Penalty, sent via certified mail by the IRS. According to Ms. TAXPAYER’s account transcripts, the IRS sent CP 015B Notices in early October and late September of 2008. Also, CP 49 Notices were sent on the date of filing, February 16, 2009. However, she does not recall any notification from the Postal Service of its attempts to deliver the certified IRS Notice. Additionally, the IRS’s certified Notice was returned by the Postal Service unopened with a “05-10” return date and no year of reference. The returned letter has Postal notations indicating that two deliveries were attempted to Ms. TAXPAYER’s residential address on “04-25” and “04-30.” However, these dates are several months after the letter was issued by the IRS.
The Settlement Officer has agreed to consider Ms. TAXPAYER’s appeal request as timely. While Ms. TAXPAYER may not have properly appealed each of the eight quarters timely, please consider this the taxpayer’s request to appeal the denial of the formal and informal claim for each period.
Statement of Facts
· In this section, lay out the facts of the case, starting with the most important facts you described in the first sentence of the memo.
· Be sure to provide and refer to exhibits to support your facts. Cite as, “[See Exhibit ____ which is ____.]”
· As discussed below, you are trying to establish that the taxpayer had neither a position of responsibility in the company nor knowledge that the withheld taxes were not paid. You may develop this by discussing:
o The taxpayer’s role and job duties. Remember, job titles can be misleading (e.g., the office manager of a small company may really have only clerical responsibilities and no discretion in financial matters).
o Use the taxpayer’s education, prior work experience, and subsequent work history to illustrate that they were unlikely to hold a position of responsibility in a business.
o If possible, discuss the reason why the withholdings were not paid to the government (e.g., the business was failing) and who was responsible for managing the payment decisions at that time.
o If any other individuals have accepted responsibility for the Trust Fund Recovery, identify that individual and describe the repayment plan (e.g., through bankruptcy).
After graduating High School in 1992, Ms. TAXPAYER attended a community college close to home. However, she never graduated, so her employment has generally involved clerical positions, such as her work under Company X. She has often been unable to find gainful employment in her rural community, so she relies on tax credits and unemployment income to survive. Currently, Ms. TAXPAYER earns $8.50 per hour working for a local finance company with the positional title of “Assistant Manager.” However, her duties are ministerial, assisting the manager by filing paperwork and collecting delinquent loan payments from clients.
As the sole wage-earner for her two children, she relies on the Earned Income Tax Credit to supplement her family’s poverty-level income. Her children are 14 and 7 years of age. She has always lived in X County which is a rural low income county in middle Georgia. She has no assets. She lives in a 20 year-old rented trailer in need of repair on the outskirts of the Y, a town of 1,638 people where only 5.6% of residents have a bachelor’s degrees and a median family income of $23,906. Forty-one percent of families are below the poverty line. [See Exhibits: (E) Ms. TAXPAYER’s income documentation and Census information for YY Town]. X County lies in the X Division of the X District of Georgia in the Eleventh Federal Circuit.
Ms. TAXPAYER’s trust fund recovery penalty arose from her position as the owner’s secretary and payroll clerk for Company X. In the summer of 2005, she was hired as the secretary of Mr. XXX, the owner of Company X. The office space consisted of three offices. Ms. TAXPAYER’s office was next to the front door with a glass window so she could greet people as the receptionist. The owner and his wife used the other two offices. Although Ms. TAXPAYER’s positional title was “office manager,” she managed no employees and worked under the owner’s control. After July 2006 when the other secretary quit, Ms. TAXPAYER and Mr. XXX, the owner, were the only two people in the office, except when Mr. XXX had to handle business in-person, such as visiting clients, supervising employees, meeting with bankers, or other day-to-day operations. Only at this time did Ms. TAXPAYER assume the previous secretary’s duties as payroll clerk.
Ms. TAXPAYER’s duties consisted of “managing” the daily administrative tasks of the owner, such as answering the phone, filing paperwork, entering data, sorting mail and other basic tasks. When she was initially hired, the owner verbally directed her step-by-step through the Quickbooks setup wizard. Each week after, Ms. TAXPAYER sat at her desk and typed the employee and vendor information into the Quickbooks database per the owner’ instructions. Ms. TAXPAYER cannot recall the month, but in the summer of 2005, the owner hired a local computer technician to setup a Quickbooks profile for the then secretary. [See Exhibits: (C) Request for Appeals Conference, (G) Mr. XXX Testimonial Letter, (H) Company X Information].
The owner operated a logging company with a work crew of 5-6 loggers and a supervisor who cut and loaded logs onto trucks. The owner contracted with truck drivers for the company, paying each trucker a fixed amount. Ms. TAXPAYER’s typical work day at Company X consisted of mundane tasks. She opened the office with her key at 8:00 a.m. and began sorting files. Throughout the day, she answered the phone and took all her instructions from the owner while he was in or out of the office. When the mail arrived, Ms. TAXPAYER placed it into the “in” basket without opening it. After the owner opened and reviewed the mail, he returned the bills to Ms. TAXPAYER. She then sorted the bills into chronological order by due date and placed them on the owner’ desk. He would determine which bills to pay. The owner either paid the bills himself or told Ms. TAXPAYER how much to pay specific creditors when he was unavailable.
Each Friday (payday), Ms. TAXPAYER logged onto Quickbooks, selected the company’s profile, and clicked each payee’s name. All forms and checks automatically printed via Quickbooks using the information entered into the database. Most logging crew employees were salaried, so Quickbooks automatically calculated the tax withholding and net pay. If there were any issues (e.g., a worker was sick for a day), Mr. XXX gave specific instructions what to do each time. For Company X’s non-salary logging workers, Mr. XXX told Ms. TAXPAYER how many hours to input for each employee. Ms. TAXPAYER then typed this information into Quickbooks, which automatically calculated the tax and amount of payment. After Ms. TAXPAYER input the information, she clicked a button and the software printed computer checks for each payroll check. Mr. XXX would either sign the checks himself or instruct Ms. TAXPAYER to sign them.
Each Thursday, Ms. TAXPAYER would drive to Company X’s plant to collect the hourly employees’ time cards for that week. The time stamps were in military time, so Ms. TAXPAYER converted the hours into standard hours. She then wrote and circled the converted hours on each card. Ms. TAXPAYER drove back to the office and gave the time cards to the owner, who adjusted the hours for any errors or management reasons. Mr. XXX then returned the cards to Ms. TAXPAYER who typed the approved hours into each employee’s Quickbooks profile and printed the automatic checks. Ms. TAXPAYER remembers that Mr. XXX had her use a stamp of his signature at times, but she does not recall whether she actually signed checks with her name. Additionally, Ms. TAXPAYER does not recall how many or which bank account signature cards he had her sign. She also does not recall signing any important documents, such as business tax returns or organizational paperwork.
Ms. TAXPAYER quit Company X in December 2008. She relied on unemployment income for parts of 2009 and 2010. She was hired as a temporary Census Bureau worker in 2009. She was hired as a secretary for another office shortly after her Census job ended. Her duties involved answering phones, filing documents, and other ministerial tasks. She was fired in September 2010, but her current employer hired her the month after to file documents, enter data, and collect on delinquent personal loans.
· The following paragraph describes the organization and structure of a series of companies formed by the owner of the company at issue. In this case, it was important because the Client was named as a type of organizer for the company. Since the facts here are complicated and may not apply in your case, discuss this issue with a supervising attorney.