STATEMENT OF APPEAL IN SUPPORT OF ABATEMENT
OF TRUST FUND RECOVERY PENALTY
CLIENT’S NAME
Submitted by:
Student’s name, Student Attorney
Georgia State University College of Law
Philip C. Cook Low-Income Taxpayer Clinic
P.O. Box 4037, Atlanta, GA 30302-4037
Ph. (404) 413-9230
Fax (404) 413-9229
E-Mail: taxclinic@gsulaw.gsu.edu
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TABLE OF CONTENTS
Relief Requested ............................................................................................................... 1
Procedural Background of Tax Matter ............................................................................... 1
Statement of Facts ............................................................................................................ 3
Applicable Law .................................................................................................................. 6
Application of the Law to the Facts ................................................................................... 10
Conclusion ........................................................................................................................ 12
(i)
TABLE OF EXHIBITS
A. Statement of Appeal in Support of Abatement
B. Power of Attorney
C. Dispute of Determination, Request for Appeal Conference
D. Notice of Federal Tax Lien dated _____
E. Income Documentation: Indigent Healthcare, Wage and Income
Transcripts for tax years _______, U.S. Census ___________
American Community Survey of YY Town, and State Tax Sale
Proposal
F. Bankruptcy Documentation
G. Testimonial Letter dated ___________
H. Company X Information
(ii)
RELIEF REQUESTED
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The first sentence is a critical sentence to set the tone of the memorandum
Include name of the company from which the liability arises and the tax periods.
Ask for relief and state briefly why
TAXPAYER’S NAME respectfully requests the Internal Revenue Service to
reconsider its assessment of a Trust Fund Recovery Penalty (“TFRP”) under Code
section 6672 for Company X’s unpaid trust fund taxes for the four quarters of 2006 and
2007. Ms. TAXPAYER was neither a responsible person nor acted willfully in failing to
pay over the trust fund taxes.
PROCEDURAL BACKGROUND OF TAX MATTER
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Set out here procedurally how she learned of the tax
List the specific amounts and periods at issue and type of tax.
Outline what procedural steps have occurred and if the tax is assessed.
Identify where the case is in the procedure of the IRS.
Discuss any jurisdictional issues resulting from the failure of IRS or the client
to follow the proper procedure such as mailing issues.
Ms. TAXPAYER is a single mother of two with limited education and business
knowledge who worked in clerical positions all her life. When Ms. TAXPAYER filed her
2008 income tax return she was informed that her refund was offset against trust fund
recovery penalties assessed against her as a responsible person of Company X. The
company had failed to pay the trust fund portion of the Withholding and Federal
Insurance Contribution Act taxes (“FICA”) for the four quarters of 2006 and 2007 as
listed in Table 1, below.
Table 1: Company X's trust fund obligation, per quarter.
Quarter
Amount
3/31/2006
$16,592.48
6/30/2006
$14,835.21
9/30/2006
$12,234.19
12/31/2006
$11,855.84
3/31/2007
$12,328.37
6/30/2007
$7,687.03
9/30/2007
$6,837.03
12/31/2007
$4,666.16
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Shortly after she learned of the offset, she contacted the Service by phone and
explained that her supervisor, Mr. XXX, was the owner of X COMPANY and she held
only a clerical position with the company. [See Exhibit 0 Request for Appeals
Conference, 0 Notice of Federal Tax Lien].
On February 23, 2010, Ms. TAXPAYER requested the assistance of the Taxpayer
Advocate Service and she was assigned to Ms. YYY. In March 2010, Mr. ZZZ, a local
attorney, agreed to provide pro bono legal services to help Ms. TAXPAYER resolve her
tax issues. With Mr. ZZZ’s help Ms. TAXPAYER provided several documents requested
by Ms. YYY. Ms. TAXPAYER mailed a copy of the Articles of Incorporation, as well as
the I.R.S. bankruptcy claim document. In May 2010, she filed Form 843 for each quarter
of 2006 and 2007 with a statement of explanation that she was not an owner or
manager of Company X and made no managerial decisions. In June 2010, Mr. ZZZ
forwarded a letter from Mr. XXX affirming that Ms. TAXPAYER was an employee with
only clerical duties and the existence of a repayment plan established by the
Bankruptcy Court for his unpaid trust fund taxes. Mr. XXX sent various bankruptcy
documents. After the Service denied Ms. TAXPAYER’s claim, she requested an
Appeals Conference in September 2010. The case has been assigned to the Appeals
Office in Atlanta. [See Exhibits: 0 Request for Appeals Conference, 0 Mr. XXX’s
Bankruptcy Documents and I.R.S. Proof of Priority Claim, 0 Mr. XXX’s Testimonial
Letter, 0 Company X’s company information]. Subsequently, the IRS assessed the
above periods and filed a Notice of Federal Tax Lien.
In April 2011, Mr. ZZZ requested the assistance of the Philip C. Cook Low-Income
Taxpayer Clinic on Ms. TAXPAYER’s behalf. [See Exhibit 0 Power of Attorney].
Through informal discussions about the matter with the Settlement Officer of Atlanta
Appeals, it appears that the client was sent several notices which were returned
unopened. There is a discrepancy regarding the U.S. Postal Service’s delivery of the
Notice of Proposed Civil Penalty, sent via certified mail by the IRS. According to Ms.
TAXPAYER’s account transcripts, the IRS sent CP 015B Notices in early October and
late September of 2008. Also, CP 49 Notices were sent on the date of filing, February
16, 2009. However, she does not recall any notification from the Postal Service of its
attempts to deliver the certified IRS Notice. Additionally, the IRS’s certified Notice was
returned by the Postal Service unopened with a “05-10” return date and no year of
reference. The returned letter has Postal notations indicating that two deliveries were
attempted to Ms. TAXPAYER’s residential address on “04-25” and “04-30.” However,
these dates are several months after the letter was issued by the IRS.
The Settlement Officer has agreed to consider Ms. TAXPAYER’s appeal request as
timely. While Ms. TAXPAYER may not have properly appealed each of the eight
quarters timely, please consider this the taxpayer’s request to appeal the denial of the
formal and informal claim for each period.
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STATEMENT OF FACTS
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In this section, lay out the facts of the case, starting with the most important
facts you described in the first sentence of the memo.
Be sure to provide and refer to exhibits to support your facts. Cite as, “[See
Exhibit ____ which is ____.]”
As discussed below, you are trying to establish that the taxpayer had neither
a position of responsibility in the company nor knowledge that the withheld
taxes were not paid. You may develop this by discussing:
o The taxpayer’s role and job duties. Remember, job titles can be
misleading (e.g., the office manager of a small company may really
have only clerical responsibilities and no discretion in financial
matters).
o Use the taxpayer’s education, prior work experience, and subsequent
work history to illustrate that they were unlikely to hold a position of
responsibility in a business.
o If possible, discuss the reason why the withholdings were not paid to
the government (e.g., the business was failing) and who was
responsible for managing the payment decisions at that time.
o If any other individuals have accepted responsibility for the Trust Fund
Recovery, identify that individual and describe the repayment plan
(e.g., through bankruptcy).
After graduating High School in 1992, Ms. TAXPAYER attended a community
college close to home. However, she never graduated, so her employment has
generally involved clerical positions, such as her work under Company X. She has often
been unable to find gainful employment in her rural community, so she relies on tax
credits and unemployment income to survive. Currently, Ms. TAXPAYER earns $8.50
per hour working for a local finance company with the positional title of “Assistant
Manager.” However, her duties are ministerial, assisting the manager by filing
paperwork and collecting delinquent loan payments from clients.
As the sole wage-earner for her two children, she relies on the Earned Income Tax
Credit to supplement her family’s poverty-level income. Her children are 14 and 7 years
of age. She has always lived in X County which is a rural low income county in middle
Georgia. She has no assets. She lives in a 20 year-old rented trailer in need of repair on
the outskirts of the Y, a town of 1,638 people where only 5.6% of residents have a
bachelor’s degrees and a median family income of $23,906. Forty-one percent of
families are below the poverty line. [See Exhibits: (E) Ms. TAXPAYER’s income
documentation and Census information for YY Town]. X County lies in the X Division of
the X District of Georgia in the Eleventh Federal Circuit.
Ms. TAXPAYER’s trust fund recovery penalty arose from her position as the
owner’s secretary and payroll clerk for Company X. In the summer of 2005, she was
hired as the secretary of Mr. XXX, the owner of Company X. The office space consisted
of three offices. Ms. TAXPAYER’s office was next to the front door with a glass window
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so she could greet people as the receptionist. The owner and his wife used the other
two offices. Although Ms. TAXPAYER’s positional title was “office manager,” she
managed no employees and worked under the owner’s control. After July 2006 when
the other secretary quit, Ms. TAXPAYER and Mr. XXX, the owner, were the only two
people in the office, except when Mr. XXX had to handle business in-person, such as
visiting clients, supervising employees, meeting with bankers, or other day-to-day
operations. Only at this time did Ms. TAXPAYER assume the previous secretary’s
duties as payroll clerk.
Ms. TAXPAYER’s duties consisted of “managing” the daily administrative tasks of
the owner, such as answering the phone, filing paperwork, entering data, sorting mail
and other basic tasks. When she was initially hired, the owner verbally directed her
step-by-step through the Quickbooks setup wizard. Each week after, Ms. TAXPAYER
sat at her desk and typed the employee and vendor information into the Quickbooks
database per the owner’ instructions. Ms. TAXPAYER cannot recall the month, but in
the summer of 2005, the owner hired a local computer technician to setup a Quickbooks
profile for the then secretary. [See Exhibits: 0 Request for Appeals Conference, 0 Mr.
XXX Testimonial Letter, 0 Company X Information].
The owner operated a logging company with a work crew of 5-6 loggers and a
supervisor who cut and loaded logs onto trucks. The owner contracted with truck drivers
for the company, paying each trucker a fixed amount. Ms. TAXPAYER’s typical work
day at Company X consisted of mundane tasks. She opened the office with her key at
8:00 a.m. and began sorting files. Throughout the day, she answered the phone and
took all her instructions from the owner while he was in or out of the office. When the
mail arrived, Ms. TAXPAYER placed it into the “in” basket without opening it. After the
owner opened and reviewed the mail, he returned the bills to Ms. TAXPAYER. She then
sorted the bills into chronological order by due date and placed them on the owner’
desk. He would determine which bills to pay. The owner either paid the bills himself or
told Ms. TAXPAYER how much to pay specific creditors when he was unavailable.
Each Friday (payday), Ms. TAXPAYER logged onto Quickbooks, selected the
company’s profile, and clicked each payee’s name. All forms and checks automatically
printed via Quickbooks using the information entered into the database. Most logging
crew employees were salaried, so Quickbooks automatically calculated the tax
withholding and net pay. If there were any issues (e.g., a worker was sick for a day), Mr.
XXX gave specific instructions what to do each time. For Company X’s non-salary
logging workers, Mr. XXX told Ms. TAXPAYER how many hours to input for each
employee. Ms. TAXPAYER then typed this information into Quickbooks, which
automatically calculated the tax and amount of payment. After Ms. TAXPAYER input the
information, she clicked a button and the software printed computer checks for each
payroll check. Mr. XXX would either sign the checks himself or instruct Ms. TAXPAYER
to sign them.
Each Thursday, Ms. TAXPAYER would drive to Company X’s plant to collect the
hourly employees’ time cards for that week. The time stamps were in military time, so
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Ms. TAXPAYER converted the hours into standard hours. She then wrote and circled
the converted hours on each card. Ms. TAXPAYER drove back to the office and gave
the time cards to the owner, who adjusted the hours for any errors or management
reasons. Mr. XXX then returned the cards to Ms. TAXPAYER who typed the approved
hours into each employee’s Quickbooks profile and printed the automatic checks. Ms.
TAXPAYER remembers that Mr. XXX had her use a stamp of his signature at times, but
she does not recall whether she actually signed checks with her name. Additionally, Ms.
TAXPAYER does not recall how many or which bank account signature cards he had
her sign. She also does not recall signing any important documents, such as business
tax returns or organizational paperwork.
Ms. TAXPAYER quit Company X in December 2008. She relied on unemployment
income for parts of 2009 and 2010. She was hired as a temporary Census Bureau
worker in 2009. She was hired as a secretary for another office shortly after her Census
job ended. Her duties involved answering phones, filing documents, and other
ministerial tasks. She was fired in September 2010, but her current employer hired her
the month after to file documents, enter data, and collect on delinquent personal loans.

The following paragraph describes the organization and structure of a series of
companies formed by the owner of the company at issue. In this case, it was
important because the Client was named as a type of organizer for the company.
Since the facts here are complicated and may not apply in your case, discuss
this issue with a supervising attorney.
Ms. TAXPAYER signed as the organizer authorized to deliver the initial
incorporation documents of Company X to the Georgia Secretary of State. Her role is
best understood in light of Mr. XXX’s multiple businesses. Mr. XXX is a sophisticated
businessperson who was an operations manager in Canada until the early 2000s. His
former work included the supervision of over 100 employees for a four-unit nuclear
power facility. Afterward, Mr. XXX and his wife, created a sophisticated arrangement of
four companies to limit their liability, which in 2007 consisted of Company X, Company
Y, Company Z, and Partnership X. Although information is limited, the companies
appear to include only Mr. and/or Mrs. XXX as the officers, managers, and owners.
Company X was initially registered in Georgia as an LLC listing Mr. XXX as the filer,
registered agent, President, and CEO. Mr. and Mrs. XXX were also listed as the
managers with their signatures authorizing the organization of the company as the
Officers. Mrs. XXX signed as the Vice President and Secretary-Treasurer.
Company X was officially dissolved in 2010. There are no available records
regarding the unincorporated business entity Company Y. Company Z was incorporated
in Delaware and lists Mr. and Mrs. XXX as the sole shareholders with a 70% and 30%
stake respectively. Mr. XXX signed as the principal officer. Company Z’s Articles of
Incorporation when registered in Georgia in 2001 show the incorporator was Ms. AAA
and the CPA was Mr. BBB. The Articles of Incorporation listed Mr. XXX as the
registered agent. The 2009–2011 filings for Company Z show that Mrs. XXX is now the
CEO, with Mr. XXX as the CFO, Secretary, and Agent. Although Partnership X was
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registered and dissolved within a few months in 2002, Mr. XXX’s bankruptcy documents
list 70% ownership in all four companies, ~$70,000 in a 401(k) retirement account, and
over one million dollars in term and whole life insurance policies. [See Exhibits: 0 Mr.
XXX Bankruptcy Documentation, 0 Mr. XXX Company Information].
APPLICABLE LAW
Trust Fund Recovery Penalty
Section 6672 of the Internal Revenue Code provides an alternate means of
recovering unpaid trust fund taxes from an individual(s) when the tax cannot be
collected from the business that failed to pay it. The overriding purpose of the statute is
“to cut through the shield of organizational form and impose liability upon those actually
responsible” for paying the tax. Pac. Nat. Ins. Co., 422 F.2d 26, 31 (CA-9 1970). The
trust fund recovery penalty (“TFRP” or “100% penalty”) is not an amount assessed in
addition to unpaid trust fund taxes. Rather, the penalty equals the “total amount of the
tax evaded, or not collected, or not accounted for and paid over.” I.R.C. § 6672(a).
However, the penalty amount only includes the unpaid taxes of third parties “other than
the person who is required to collect, account for, and pay over such taxes.” Reg. §
301.6672-1. Although “trust fund” implies the taxes must be held in trust (e.g., I.R.C. §
7501), a literal trust is not required because available funds are a debt owed to the
government that should have higher priority than other creditors. See Slodov, 436 U.S.
238 (1978), 78-1 USTC ¶ 9447.
Notice
The Service must notify a taxpayer of a proposed civil penalty assessment at least
60 days prior to imposing the penalty. I.R.C. § 6672(b). The Service is required to send
the notice to the last known address, but is permitted to deliver the notice in-person. Id.
Although actual receipt is not required, the Service carries the burden of showing timely
delivery was attempted. Bonaventura, 2009 WL 6042178 (N.D. Ga. 2009) aff'd by, 2011
WL 2162038 (CA-11, 2011). However, Congress stressed the importance of such a
notice to enable an earlier resolution for taxpayers, which “[i]n some cases, personal
delivery may better assure that the recipient actually receives notice.” S. Rep. 105-174
at 66 (P.L. 105-206).
Two-Prong Test
Two elements must be met before imposing personal liability for a trust fund
recovery penalty. Thosteson, 331 F.3d 1294, 1298 (CA-11 2003); See I.R.C. § 6672(a).
First, the individual must have been a “responsible person” who was under a duty to
collect, account for or pay the trust fund tax at issue. Id.; See Slodov, at 246, n. 7; See
also I.R.C. § 6671(b) (defining a “person”). Second, the responsible person must have
“willfully” failed to collect or truthfully account for and pay over the tax, or who willfully
attempted to evade payment of the tax. Id.
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1st Prong, Responsible Person
An employee who is not an owner, officer, or manager may be deemed a
responsible person if authorized and able to control business funds. See I.R.C. §§
6671(b), 6672(a). The determination of responsibility “is a matter of status, duty and
authority, not knowledge.” Mazo, 591 F.2d 1151, 1156 (CA-5 1979). Although exclusive
control by only one person is not required, a responsible person must possess
“significant control” over the disbursement of funds. Howard, 711 F.2d 729, 734 (CA-5
1983). The Service must determine which person(s) with control also possess the
“ultimate authority… to compel or prohibit the allocation of corporate funds.” Godfrey,
748 F.2d 1568, 1575, 1576 (CA-Fed. 1984). A person may only be liable for the
quarter(s) the individual was deemed to be a responsible person “during the tax
quarters at issue.” Dougherty, 18 Cl. Ct. 335, 346 (1989) aff'd, 914 F.2d 271 (CA-Fed.
1990). Courts assess several factors to determine a person’s authority and control. The
most relevant factors in the Eleventh Circuit are “the holding of corporate office, control
over financial affairs, the authority to disburse corporate funds, stock ownership, and the
ability to hire and fire employees.” Thibodeau, 828 F.2d 1499, 1503 (CA-11 1987).
However, more than one factor is typically required to deem a person responsible.
Wells, 1993 WL 540480 (M.D. Ga. 1993); See Internal Revenue Manual 5.7.3.3.1.1 (0413-2006) (“Signatory authority may be merely a convenience.”). Thus, ministerial acts
do not result in individual liability without the ability to decide and control the
disbursement of company funds.
Responsible persons typically possess a high status in the company, such as
corporate officer, owner/operator, or manager. Although a high-level position often
satisfies the requisite duty, the individual must possess the authority to exercise or
delegate discretionary control over company funds or financial affairs. See Hornsby,
588 F.2d 952 (CA-5 1965), 79-1 USTC ¶ 9188 (ruling the delegation of control is the
equivalent of exercising authority). The Eleventh Circuit Court in Thosteson held a
company shareholder and vice president was responsible because of his official status
in the company, authority to hire and fire employees, and ability to write corporate
checks using his sole discretion. 331 F.3d 1294 (CA-11 2003). Similarly in Thibodeau,
the Eleventh Circuit Court ruled a corporate director was a responsible person by ruling
the combination of relevant factors showed the director exercised significant control.
828 F.2d 1499, 1503 (CA-11 1987). There the taxpayer managed the office, which
included selling, securing financing, writing checks and other managerial decisions,
despite his claim that he signed checks and documents without reviewing them. Id.; See
also Mazo, 591 F.2d 1151, 1156 (CA-5 1979) (holding a general manager was a
responsible person because of his control over the company’s day-to-day operations
and discretionary check-signing authority).
Some courts have ruled employees with significant control over company funds
were responsible, despite not being an owner, officer or operations manager. In
Hochstein, a non-owner employee with check-signing authority held the position of
controller in a corporation. 900 F.2d 543, 547 (CA-2 1990). There, the employee was
deemed a responsible person despite his partial restriction over funds disbursement
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because he exercised discretion in deciding which creditors to disburse the approved
amount of funds to. Id. In Georgia, a non-owner financial consultant was hired to
restructure a company’s debt and finances. Wells, 1993 WL 540480 (M.D. Ga. Sept. 28,
1993). The court in Wells held the consultant was a responsible person because he
possessed substantial discretionary control regardless of whether he chose to exercise
his authority. Id.
A responsible person must have the duty and power to ensure the trust fund taxes
are paid. Although an individual with a high status in the company (e.g., officer or
owner) may delegate authority to a lower status employee, the delegator maintains
responsibility through the power to revoke delegation. See Roth, 779 F.2d 1567 (CA-11,
1986), 86-1 USTC ¶9172. Likewise, an employee delegated discretionary authority may
be jointly liable as a responsible person. See Hochstein, 900 F.2d 543. Thus, the
question of responsibility often hinges on whether a person with control and sufficient
status was authorized to exercise discretion over the disbursement of funds or
management of daily operations. Despite a high-status, the Federal Circuit Court ruled
that a Chief Financial Officer with check signing authority was not responsible.
Schroeder, S85-208, 1989 WL 104776 (N.D. Ind. 1989). The court reasoned he did not
manage company operations and his signing authority was limited to another officer’s
instruction. Id. Likewise in De Alto, the court held a non-owner Vice President with nondiscretionary check-signing authority was not a responsible person regardless of his
high-status and supervision of the company’s accounting staff. 40 Fed. Cl. 868 (1998).
In that case, the court found that the owner “exercised an iron grip on the operations of
the company” and also possessed check-signing authority. Id. at 874. Thus, the court
held the controller’s management status as a supervisor was sufficient, but his nondiscretionary signing authority made him powerless to “ensure that payments were
directed to the IRS.” Id. at 875. In contrast, the Eleventh Circuit Court held a Vice
President with check-signing authority who handled daily operations was a responsible
person even though he was instructed to not pay the withheld taxes. Roth, 779 F.2d
1567 (CA-11 1986). The court reasoned that since the taxpayer had been paying taxes
from the account beforehand, he did not “shed his status” by simply following orders. Id.
at 1572.
The Service’s policy for low-status, non-owner employees is the delegation of actual
authority coupled with the ability to control disbursement. This includes the ability to
make decisions on behalf of the company, rather than acting under the dominion of
another employee. Internal Revenue Manual 1.2.14.1.3 (6/9/2003) (Policy Statement 514). Additionally, a non-owner employee’s payments to creditors must be based on the
employee’s independent decisions, rather than following the instructions of a supervisor
or owner. Internal Revenue Manual 5.7.3.3.1.2 (4/13/2006). For instance, a non-owner
bookkeeper with check-signing authority who pays the bills according to the Treasurer’s
instructions is not a responsible person because the ministerial acts are performed
under the direction of another. Id. Likewise, a clerical secretary’s signing of tax returns
and payroll checks is ministerial when signed under the dominion of another. Id.
Furthermore, if insufficient information is available for the Service to show the individual
is a responsible person, then the individual is not responsible unless the individual
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“intentionally makes information unavailable to impede the investigation.” Internal
Revenue Manual 1.2.14.1.3 (6/9/2003) (Policy Statement P-5-14). Thus, policy dictates
that a non-owner employee’s ministerial and clerical acts are not indicia of responsibility
when the employee lacks the ability of independent judgment.
2nd Prong, Willfulness
If the individual is deemed a responsible person, then the individual must have
willfully failed the duty of ensuring the trust fund taxes were collected and paid. I.R.C. §
6672(a). Willful is generally defined as a “voluntary, conscious and intentional act.”
Thibodeau, 828 F.2d at 1505. Unlike establishing responsibility, the individual must
have had “knowledge of payments to other creditors” and knowledge of the unpaid
taxes. Id. The court in Thibodeau held that the facts showed the officer knew the funds
withheld for taxes were used for company operations. Id. There, the officer’s signatures
were required to pay creditors from the corporate account, which showed the officer’s
preference to use funds to pay creditors or company expenses instead of the
government. Id. In Thosteson, another Eleventh Circuit Court case, the taxpayer was a
shareholder and vice president of the corporation was deemed a responsible person
who willfully failed his duties by signing corporate checks to creditors under his sole
authority instead of using the funds to pay the taxes that he knew were owed.
Thosteson, 331 F.3d 1294.
The Service’s policy is for the officer to establish the individual was or should have
been aware of the taxes not being paid. Internal Revenue Manual 5.7.3.3.2 (11-122010). Furthermore, the presence or lack of a delegation of authority where the
delegator relinquishes control is relevant to the willfulness of the individual. Internal
Revenue Manual 5.7.3.3.1.1 (04-13-2006).

This discussion may not be necessary for your case (refer to the note, in the Fact
section above, about the need to discuss the formation of companies in this
case.
Georgia Company Formation
Initial formation of an LLC in the state of Georgia requires Articles of Organization to
be delivered to the Secretary of the State. O.C.G.A. § 14-11-203. The LLC is formed
once the Secretary of the State files the necessary documents upon delivery, which
includes the Articles of Organization. § 14-11-203(c), (d). The Articles may include the
managers and officers of the company, but must include the contact information for the
registered agent, the company office, the and the organizers. § 14-11-205; § 14-11203(a). All documents required “to be delivered to the Secretary of State for filing” may
be executed by a member, manager, fiduciary, or “any organizer if the limited liability
company has been formed but it has no members or managers.” § 14-11-205(a)(1)–(4).
However, an organizer may be a non-member that is authorized to deliver
organizational documents to the Secretary of the State. § 14-11-203(b).
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Formation of a corporation in Georgia mirrors much of the administrative
requirements as an LLC. See generally, O.C.G.A. § 14-2. However, the term
“incorporator” is used in lieu of the term “organizer.” § 14-1-120(f)(2) (The filing
document for the corporation must be executed, if “the corporation has not been
formed, by an executor”).
APPLICATION OF THE LAW TO THE FACTS

Provide an analysis of the facts in light of the law discussed above. Do not refer
to new facts in this section.
Ms. TAXPAYER held the low-status of non-owner employee under the dominion of
Mr. XXX. She never possessed the requisite duty because Mr. XXX did not delegate
discretionary authority over company funds to Ms. TAXPAYER and Mr. XXX calculated
the cash flow privately. Although she had physical control over business funds via her
check signing authorization, she lacked the requisite control and authority because Mr.
and Mrs. Jones never authorized her to use independent judgment to pay creditors.
Thus, Ms. TAXPAYER was not a responsible person under Section 6672 for Company
X.
Applicable Quarters
Ms. TAXPAYER became the payroll clerk for Company X in July of 2006. As
provided in Dougherty, Ms. TAXPAYER’s potential civil penalty is limited to quarters
where it was possible for her to be responsible. Since only the third and fourth quarters
of 2006 and four quarters of 2007 are relevant quarters, a civil penalty for the first two
quarters of Grange Specialty’s 2006 tax year should not be assessed against her.
Low Status
Ms. TAXPAYER was hired by Mr. XXX as his personal office secretary under the
title “office manager.” However, she was the only employee aside from Mr. XXX in his
“office.” Unlike the officer in Thibodeau, who managed the business’s day-to-day affairs
(e.g., negotiations, sales, deciding whom to pay), Ms. TAXPAYER only “managed” the
ministerial functions of the office per Mr. XXX’s instructions. Indeed, Ms. TAXPAYER
was not listed as a manager or officer in the Articles of Organization for Company X.
Although Ms. TAXPAYER may have signed as an organizer of Company X for its
Articles of Organization, an organizer under Georgia law is merely a person authorized
to deliver organizational documents to the Secretary of the State before the LLC is
formed. This is analogous to the incorporator of Mr. XXX’s other companies, Ms. AAA.
The delivery of documents is a ministerial task, unlike that of a registered agent, officer,
owner, or manager. Additionally, her title is not that of a general or operational manager,
controller, or Vice President, unlike the responsible persons of the above-described
cases. Thus, Ms. TAXPAYER’s low status as a non-owner employee is not indicia of
responsibility and a strong showing of discretionary authority over funds disbursement is
required.
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Lack of Authority and Discretionary Control
Ms. TAXPAYER’s situation is analogous to that of the two examples in Internal
Revenue Manual 5.7.3.3.1.2, which explained how a bookkeeper performing data entry
and a secretary with non-discretionary signing authority were not responsible. Ms.
TAXPAYER possessed check-signing authority for some accounts and she may have
signed other forms or documents, but she only did so upon Mr. XXX direct and specific
instructions for convenience. Indeed, she was never given the authority or legal ability to
use her own discretion in making business decisions. Instead, Mr. XXX instructed her
when and how much to pay specific creditor, like the taxpayers in Schroeder and De
Alto who were held not responsible. Moreover, Ms. TAXPAYER did not possess the
high-status of the taxpayers in either of those cases. Ms. TAXPAYER’s signing authority
was only used by Mr. XXX as a matter of convenience because he never delegated his
discretionary authority and maintained dominion and control over her. Since her check
signing authority was non-discretionary and for convenience, under I.R.S. policy and
case law her limited authority is not indicia of responsibility.
Ms. TAXPAYER’s check-signing authority gave her no discretionary control over
funds disbursement. This is unlike the “controller” in Hochstein who was allocated
funds, but independently decided how the allotted funds were disbursed to creditors.
Like the taxpayer in De Alto and the I.R.M. bookkeeper example, Ms. TAXPAYER
merely input the hours for each employee according to how many hours Mr. XXX told
her the employees had worked. Quickbooks automatically calculated the amount of
each paycheck net of taxes and Ms. TAXPAYER simply clicked a button to print the
payroll checks. She only signed checks when instructed to do so, which a majority of
courts hold, including the Eleventh Circuit, and under the Service’s policy is insufficient
authority. Furthermore, Ms. TAXPAYER had never been authorized to pay any taxes, in
contrast to the high-status Vice President in Roth. Thus, her signing authority did not
reach the level of the taxpayers in Hochstein, Mazo, or Wells, but was instead a mere
formality for Mr. XXX’s convenience.
When the mail arrived, Ms. TAXPAYER did not assess and decide which bills were
paid, unlike the taxpayer in Hochstein. She merely placed all mail in the “in” box and Mr.
XXX opened the mail and gave the bills to Ms. TAXPAYER. Her only duty was to sort
them in chronological order so that Mr. XXX could decide who to pay based on cash
flow calculated from his private ledger. Although Ms. TAXPAYER signed and/or wrote
checks for certain bills when Mr. XXX was not present, she only paid creditors
according to Mr. XXX’s specific instructions, including how much and to whom.
Therefore, Ms. TAXPAYER is not a responsible person.
Notice
Ms. TAXPAYER lives in the outskirts of a very rural area. The Service attempted to
deliver a notice of its proposed assessment to Ms. TAXPAYER’s address, as shown by
its possession of the unopened certified letter returned by the Postal Service. However,
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the dates noted by the Postal Service on the letter indicate only that two delivery
attempts were made without refusal by Ms. TAXPAYER. Although the Service met its
bare requirements in its attempt to serve notice, Ms. TAXPAYER’s low-status
employment and impoverished living conditions is a situation where personal delivery
should have been made. Indeed, Ms. TAXPAYER does not recall receiving any notice
by the Postal Service of its delivery attempts.
Public Policy
It is against public policy to assess such a harsh penalty against a person living in
abject poverty. Ms. TAXPAYER is an indigent who receives food stamps and lives in a
dilapidated trailer with her two children who are on Medicaid. She is the sole income
provider, yet her family of three lives below the poverty line for a one-person household.
Although she works, her low level of income forces her to rely on the Earned Income
Tax Credit to fulfill her families basic living needs. Without abatement, all tax credits will
continue to be applied towards the repayment of Mr. XXX’s unpaid trust fund taxes,
which she never had the authority to pay using Mr. XXX’s company funds. By assessing
such a penalty against Ms. TAXPAYER, her family has and will continue to remain
heavily impoverished.
In Summary
As a non-owner employee, Ms. TAXPAYER was not a responsible person because
never had significant control or discretionary authority over the disbursement of funds.
As the above facts demonstrate, Ms. TAXPAYER never possessed the willfulness
under the statute as she did not have the authority or responsibility.
CONCLUSION
Based on the circumstances described above, Ms. TAXPAYER respectfully
requests the Internal Revenue Service to abate the Trust Fund Recovery Penalty
assessed against her for all quarters of tax years 2006 and 2007 related to Company X.
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