Sheila Persons was the controller and vice-president of Finance at Textron Elect

Question

Sheila Persons was the controller and vice-president of Finance at Textron Electronics from 1998 to October 2013, but all checks over $500 had to be jointly signed by Sheila and the president, Bud Baker. In 2012, Textron began having cash-flow and payroll difficulties, then the president, decided to stop paying the payroll taxes to the federal government and only pay the payroll and inventory acquisitions. Sheila counseled Bud against his decision not to pay taxes, and her objections also are duly recorded in the minutes of the meetings of the Board of Directors (the five management personnel). He ignored her advice, and continued to not pay taxes. Finally, in October 2013, the cash flow completely dried up, and Textron had to close. At this point, the IRS noted that the company owed $350,000 in withheld, but unpaid taxes. Bud and most of the other officers became personally bankrupt except Sheila because she is a wise money manager, and has a sizable personal net worth. Accordingly, the IRS has assessed the 100 percent penalty of Section 6672 against her. She has been billed by the IRS for the full $350,000.

Whether Sheila should pay for the $350,000 which is 100 percent penalty of unpaid taxes?(list the code and regulations)

Explanation / Answer

NO. As per mention section 6672 following exceptions are as follow:

(a)General rule

Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 or part II of subchapter A of chapter 68 for any offense to which this section is applicable.

(b)Preliminary notice requirement(1)In general

No penalty shall be imposed under subsection (a) unless the Secretary notifies the taxpayer in writing by mail to an address as determined under section 6212(b) or in person that the taxpayer shall be subject to an assessment of such penalty.

(2)Timing of notice

The mailing of the notice described in paragraph (1) (or, in the case of such a notice delivered in person, such delivery) shall precede any notice and demand of any penalty under subsection (a) by at least 60 days.

(3)Statute of limitationsIf a notice described in paragraph (1) with respect to any penalty is mailed or delivered in person before the expiration of the period provided by section 6501 for the assessment of such penalty (determined without regard to this paragraph), the period provided by such section for the assessment of such penalty shall not expire before the later of—(A)

the date 90 days after the date on which such notice was mailed or delivered in person, or

(B)

if there is a timely protest of the proposed assessment, the date 30 days after the Secretary makes a final administrative determination with respect to such protest.

(4)Exception for jeopardy

This subsection shall not apply if the Secretary finds that the collection of the penalty is in jeopardy.

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