14.   Penalties and Interest

Table of Contents

    Penalties and interest may result from any of the following acts.

    • Failing to collect and pay over tax as the collecting agent (see Trust fund recovery penalty, later).

    • Failing to keep adequate records.

    • Failing to file returns.

    • Failing to pay taxes.

    • Filing returns late.

    • Filing false or fraudulent returns.

    • Paying taxes late.

    • Failing to make deposits.

    • Depositing taxes late.

    • Making false statements relating to tax.

    • Failing to register.

    • Misrepresenting that tax is excluded from the price of an article.

    Failure to register.   The penalty for failure to register if you are required to register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register.

    Claims.   There are criminal penalties for false or fraudulent claims. In addition, any person who files a refund claim, discussed earlier, for an excessive amount (without reasonable cause) may have to pay a penalty. An excessive amount is the amount claimed that is more than the allowable amount. The penalty is the greater of two times the excessive amount or $10.

    Trust fund recovery penalty.   If you provide taxable communications, air transportation services, or indoor tanning services, you have to collect excise taxes (as discussed earlier) from those persons who pay you for those services. You must pay over these taxes to the U.S. Government.

      If you willfully fail to collect or pay over these taxes, or if you evade or defeat them in any way, the trust fund recovery penalty may apply. Willfully means voluntarily, consciously, and intentionally. The trust fund recovery penalty equals 100% of the taxes not collected or not paid over to the U.S. Government.

      The trust fund recovery penalty may be imposed on any person responsible for collecting, accounting for, and paying over these taxes. If this person knows that these required actions are not taking place for whatever reason, the person is acting willfully. Paying other expenses of the business instead of paying the taxes is willful behavior.

      A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, or any other person who had responsibility for certain aspects of the business and financial affairs of the employer (or business). This may include accountants, trustees in bankruptcy, members of a board, banks, insurance companies, or sureties. The responsible person could even be another corporation—in other words, anyone who has the duty and the ability to direct, account for, or pay over the money. Having signature power on the business checking account could be a significant factor in determining responsibility.


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