Lean Corporation was incorporated in 2011 by Bruce Smith, who has served as an officer and member of the Board of Directors. Carl Jones has served as the secretary-treasurer of the company as a convenience to his friend Bruce. Carl acted as a part-time bookkeeper but did not run the everyday business affairs and paid only the bills he was instructed to pay. Carl was an authorized signatory for the corporate bank accounts but had no final control over expenditures.

Beginning in the last quarter of 2015, the company failed to pay all of the taxes withheld from employees and the employer’s share of FICA taxes to the IRS. Despite this delinquency, the corporation continued to pay other creditors, including its employees, in preference to the IRS.

In January, 2017 Lean Corporation entered into an installment agreement with the IRS to stay current on its withholding tax deposits and to make payments on the past due balance until paid in full. The company subsequently defaulted on the agreement in April 2017. During this period, Bruce Smith was serving as chief financial officer and was a member of the board of directors. He had the authority to make policy decisions. He was responsible for negotiating the installment agreement with the IRS and the decision to default on the agreement.

Who is liable for the penalty for the nonpayment of the payroll tax withholdings?

A partial list of research sources is:

• Sec. 6672

• Ernest W. Carlson v. U.S., 67 AFTR 2d 91-1104, 91-1 USTC ¶50,262 (D.C. UT, 1991)