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BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 808
Experience:  Owner of a CPA firm
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Transfer liability for minimum funding, 4971(a) and (b)

Customer Question

Can the liability for the minimum funding, 4971(a) and (b) and penalties and interest that the IRS is just now proposing be transferred to the only officer/employee of an employee plan for a corporation that is out of business as of 5/31/2008 and has no assets? Please also give me the IRS reference for your answer. Thank you.
Submitted: 3 years ago via Cornell Legal Info Institute.
Category: Tax
Expert:  BK-CPA replied 3 years ago.

Hello and thank you for your question.

 

Unfortunately, yes, their can be personal liability. This is a creation of the courts based on piercing the corporate veil.

 

See here:

 

http://www.thelaborers.net/court_cases/erisa.htm

 

"Recently, courts have held that personal liability can be imposed on corporate officers for delinquent contributions owed by the corporation to multiemployer plans or for withdrawal from such a plan, established under ERISA. 5"

 

n5 "See, e.g., Alman v. Servall Manufacturing Co., No. 82-0746-MA, slip op. at 3 (D. Mass. Apr. 9, 1984) (holding that ERISA's definition of employer encompasses corporate officer who directly controlled administration of benefit plan), see notes 78-81, 117-20 and accompanying text infra; Massachusetts State Carpenters Pension Fund v. Atlantic Diving, 635 F. Supp. 9 (D. Mass. 1984) (same), see notes 82-89, 121-27 and accompanying text infra; Combs v. P & M Coal Co., No. 84-560, slip op. at 2 (D. D.C. Feb. 6, 1985) (same), see notes 90-94 and accompanying text infra."

 

 

...

Also, consider here:

 

https://litigation-essentials.lexisnexis.com/webcd/app?action=DocumentDisplay&crawlid=1&doctype=cite&docid=52+Brooklyn+L.+Rev.+1211&srctype=smi&srcid=3B15&key=21a44e49cb5970b71bf68651ff08a0ef

 

....

 

I hope this information is helpful. Thank you again for your question!

Customer: replied 3 years ago.
Thank you for your answer. I couldn't get into the LexisNexis links, but I will read the first case tomorrow. My client is the owner and only employee so if the IRS requires him to pay the underfunding they've calculated it will go to him anyway, so that is not a problem. I'm concerned with whether the IRS, by their guidelines can also transfer liability for the penalties and interest that go along with it - 4971(a), 4971(b) and penalties 6651(a)(1)(2) and interest. If they cannot, there is no reason to spend time defending the proposed underfunding assessments. If they can, my client will require representation to appeal the entire assessment.
Expert:  BK-CPA replied 3 years ago.
I'm going to opt out on this one so other experts can get involved too if they see the question and have some information, but will opt back in if I find something good for you. Thank you again until then!
Customer: replied 3 years ago.
I didn't receive a complete answer to my question. I appreciate the time you spent for the information on the transfer of liability for the contributions, however, no one responded to the penalties and interest issue which is a larger part of the potential liability. I'm hoping to hear from a manager in IRS Collection today to resolve that question.

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