. The Scooter Company, owned equally by Julie (chair of the board of directors)

Question

. The Scooter Company, owned equally by Julie (chair of the board of directors) and Jeff (company president), is in very difficult financial straits. Last month, Jeff used the $100,000 withheld from employee pay­checks for federal payroll and income taxes to pay off a creditor who threatened to cut off all supplies. To keep the company afloat, Jeff used these government funds willfully for the operations of the business, but even that effort was not enough. The company missed the next two payrolls, and today other creditors took action to shut down Scooter altogether. From whom and for how much will the IRS assess taxes and penal­ties in the matter?

Explanation / Answer

Since the “S” company is taxpayer, IRS should access taxes and penalties from the company. Therefore, it charges indirectly to Ju and Je because of their owning rights to the company.

Amount of taxes = $100,000

Penalties would be charged for delaying 2 months.

Amount of penalties = (Tax × 5%) × Number of months delayed

                                  = ($100,000 × 5%) × 2

                                  = $10,000

Total taxes and penalties = $100,000 + $10,000 = $110,000

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