Discussion:Single Member LLC responsibility for delinquent payroll taxes

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Discussion Forum Index --> Advanced Tax Questions --> Single Member LLC responsibility for delinquent payroll taxes
Discussion Forum Index --> Tax Questions --> Single Member LLC responsibility for delinquent payroll taxes

Vman (talk|edits) said:

12 May 2008
I was told by an IRS Officer that a single member (Sch C) LLC (SMLLC) member is 100% responsible for all payroll tax liabilities.

Since I dont get into this area all too often, I was surprised that the rules for the "100 percent penalty" for other types of entities do not apply.

She maintained these rules only hold fast for LLC's that are classified as an partnership (2 members).

Not that I am doubting the IRS, but does this sound accurate?

If so, the SMLLC has no advantage in regards to avoiding the non trust fund tax liablities.

Thank You for your input!

TheTinCook (talk|edits) said:

12 May 2008
Got to think about this one. The regulations treat certain disregarded entities as seperate entities for excise and payroll taxes. Was there a seperate EIN in the LLC's name?

It's not like it really matters since your client gets screwed to the wall by ยง6672 penalties since your client is the 100% responsible person. Which is probally what the RO meant.

SunGod (talk|edits) said:

12 May 2008
Vman - the IRS officer is not right. A sole owner of a company is a responsible person. See United States v. Kraljevich; No. 02-40316

Michaelstar (talk|edits) said:

12 May 2008
While I do not have any sites for this - I have recently read in a couple of places that this is in fact true. Hopefully someone will come along and provide you with a recent court case as back up but SMLLC's provide no protection from liabilities associated with payroll taxes.

Death&Taxes (talk|edits) said:

12 May 2008
TC is probably referring to Proposed Reg 301.7701-2 and Proposed Reg 1.34-1, but as he notes, the owner is still the responsible party for the taxes withheld.

TheTinCook (talk|edits) said:

12 May 2008
Shoot, I was trying to remember where I read that. That must be it. Thanks D&T.

Skasselea (talk|edits) said:

13 May 2008
There is some confusion in some of the posts in this thread. The original post is saying that the Trust Fund Penalty does not apply and the individual taxpayer is responsible for the non-trust fund portion as well. Some of the other posts then state that "your client" is the respnsible for the 6672 which is NOT what the RO is saying.


Essentially, the Revenue Officer is saying that a single member LLC is treated in the same manner a sole proprietor is treated for payroll taxes and the Trust Fund Recovery Penalty does not have to be asserted.


I believe that is correct assuming that the single member LLC has made no corporate election. The LLC is disregarded for Federal tax purposes and the single member has primary responsibility for all liabilities arising from the LLC's business. Therefore, it is not necessary for the IRS to assess the Trust Fund Recovery Penalty because the single member is already responsible for all payroll taxes.

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