Academic journal article Journal of Accountancy

Tax Court Denies Trust Fund Recovery Penalties Assessed against Restaurant 'Gofer'

Academic journal article Journal of Accountancy

Tax Court Denies Trust Fund Recovery Penalties Assessed against Restaurant 'Gofer'

Article excerpt

Despite making a few payments and performing incidental tasks and errands for the business, a man is held not responsible for its unpaid payroll taxes.

A regular visitor to a restaurant who performed occasional chores that included writing some checks and even signing a few was not a "responsible person" liable for the business's unpaid payroll taxes, the Tax Court held.

Facts: Beginning in 2006, Charles D. Shaffran Sr. visited Sunset Charlie's, a beachside restaurant in Miramar Beach, Fla., two or three days a week for several hours. While there, he mostly socialized but sometimes acted as a "gofer," running errands for the owner, Paul Roberts, and Shaffran's son, Carlos D. Shaffran, a manager. The elder Shaffran also occasionally trained bartenders and received deliveries. For some of the restaurant's expenses, he made payments with checks he wrote out and Roberts or Carlos Shaffran signed. These checks included some made out to himself, in partial repayment of a $6,500 loan he and his wife had made to the business. In one two-week period during 2006 while Roberts and Carlos Shaffran were unavailable, Charles Shaffran also signed four checks, which the bank honored even though he was not an authorized signatory.

However, Charles Shaffran was not an employee, officer, or director of the business and was not involved in preparing or reviewing its financial records and returns. He had no role in hiring or firing employees or involvement in payroll transactions.

The restaurant struggled financially, and in 2008 it was evicted from its building and ceased business. It also failed to pay creditors on time and failed to pay payroll taxes to the IRS for one quarter of 2006, all of 2007, and one quarter of 2008.

In 2011, an IRS revenue officer investigated Sunset Charlie's for nonpayment of employment taxes. The manager of the building where it had operated mistakenly identified Charles Shaffran as the restaurant's bookkeeper, and the revenue officer mistook him as the signer of checks that had actually been signed by his son. …

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